e‐commerce adoption support and advice for uk smes

E-commerce adoptionsupport and advice forUK SMEs

Mike Simpson and

Anthony J. Docherty

The authors

Mike Simpson is a Lecturer in Business Studies at SheffieldUniversity Management School, Sheffield, UK.Anthony J. Docherty is Head of Continuum Consulting,York, UK.

Keywords

Electronic commerce, Small to medium-sized enterprises,United Kingdom

Abstract

The small business sector of the UK economy is extremelyimportant and the government expends considerable resourcesin providing support services for this sector. This paperinvestigated the reasons why SMEs move from traditionalcommerce to e-commerce, the efficacy of the support servicesand the barriers encountered by SMEs adopting e-commerce.The research methodology involved literature review andinterviews with SMEs’ owner-managers and a UK Onlinebusiness adviser. It was found that at least two “e-commercestars” used by the government to promote its support serviceshad in fact not used those services. The historical relationshipproblems between Business Link and SMEs were still causingproblems. Cost was not seen as an inhibitor to adoptinge-commerce. Some evidence was emerging that e-commercemay be able to save failing or struggling businesses. Otherunexpected outcomes were that e-commerce had social benefitsfor SMEs’ owners in reducing working hours yet still increasedsales.

Electronic access

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Introduction

Electronic business and electronic commerce

present many opportunities for businesses to

improve their performance (Tetteh and Burn,

2001). While there are now some two thirds of

businesses online and further growth is forecast

(UK Online, 2002) it is the larger companies who

are the most active with almost twice as many

e-commerce activities as small and medium-sized

enterprises (SMEs) (Haig, 2002). The UK

government acknowledges that there is a slow take-

up of e-commerce amongst SMEs, particularly

amongst micro-businesses (UK Online, 2002).

The main reasons cited are ignorance about

e-commerce benefits and a shortage of the

appropriate skills (DTI, 2002a). Many UK SMEs

may be left behind while the larger companies

advance and dominate in the e-commerce world.

The work reported here was considered timely in

that it set out to reach an understanding about how

UK SMEs prepare for e-commerce. In addition,

the advice and support that is available to SMEs

was examined in order to establish what further

assistance, if any, was required.

It should be noted that there is a difference

between e-commerce and e-business in terms of

business benefits, extent of organisational change

and sophistication in that e-commerce is part of

e-business (Searle, 2001). Searle (2001) also

shows that in the e-adoption ladder model

(originally suggested by Cisco Led Information

Age Partnership) e-commerce is firmly positioned

as less sophisticated than e-business (see also

Martin and Matlay, 2001). Thus e-commerce is

the buying and selling of goods and services on the

Internet and provides the ability to perform

transactions involving the exchange of goods or

services between two or more parties using

electronic tools and techniques. In addition,

e-commerce is a means of trading involving the use

of electronics, principally through the Internet, for

the buying/selling process, including advertising,

invitations to treat and the negotiation and

conclusion of contracts and performance (DTI,

2001a).

Whereas e-business has a much wider

integrative purpose within an organisation, linking

business systems together and is more

sophisticated than e-commerce (DTI, 2001a).

According to the DTI (2001a) e-business

describes a greater degree of integration of

communications technologies with business

processes and management practices, often

conducted via the Internet. It has implications that

are inward as well as outward facing. Often

e-business involves the use of the Web (Internet,

Intranet and Extranet) to conduct business,

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q Emerald Group Publishing Limited · ISSN 1462-6004

DOI 10.1108/14626000410551573

315

including buying and selling, connects key players

to critical business systems and allows access to the

information they need. According to the DTI

(2001a) business transactions over the Web can be

divided into two categories: business to consumer

(B2C) which is mainly on-line transactions with

consumers such as retailing and business to

business (B2B) which refers to transactions

between businesses. B2B solutions increase the

support between businesses while reducing the

need for telephone calls and faxes. Daniel (2003)

also points out that there is a hierarchy of

e-commerce integration and that the benefits to

the firm increased with advanced integration.

However, it could be argued that at the higher

levels of integration this is more like e-business as

defined by the DTI (2001a) than e-commerce.

Other researchers use the terms e-commerce and

e-business interchangeably (e.g. Ramsey et al.,

2003). In practice e-business may link to or

incorporate other systems such as Enterprise

Resource Planning (ERP) or Customer

Relationship Management (CRM) systems.

Whereas e-commerce may only log and track

transactions which then have to be dealt with

manually.

It is widely recognised that there are major

hurdles and problems facing SMEs wishing to

adopt e-commerce and many reviews tackle these

areas. However, some of the major issues involve

SMEs’ owner-managers appreciation (or lack of it)

of business strategy, marketing and

internationalisation (Ramsey et al., 2003). This is

not helped by the almost missionary approach

taken by the UK government in trying to get SMEs

to go online (UKGovernment, 2001; DTI, 2002b,

c). This research aimed to take a more rational

approach in determining the reasons why SMEs

adopt e-commerce (e-business is likely to be the

next stage), where SMEs obtain advice and to

ascertain the critical success factors for

e-commerce adoption. The issue of e-business

adoption by SMEs was not tackled as this was

thought to require a greater degree of

sophistication on the part of SMEs. However,

much of the literature seems to cover and confuse

the adoption of information and communication

technology (ICT) with e-commerce and

e-business. This confusion has made it more

difficult to obtain meaningful results.

Aims and objectives

The aims and objectives of this study were to:. Determine why some SMEs move from

traditional commerce to e-commerce.. Determine the barriers facing SMEs adopting

e-commerce.

. Determine where SMEs obtain e-commerce

advice and support and whether this advice is

appropriate to their needs. The objective was

to discover the efficacy of public sector

business support agencies such as Business

Link and UK Online for Business.. Determine the critical success factors for

e-commerce adoption. The objective being to

ascertain the extent to which any theoretical

e-commerce frameworks can be practicable

for SMEs.

This study aimed to examine areas previously

overlooked by other researchers. These areas were

intended to form the basis for further exploratory

study.

Methodology

This work is based on an exploratory research

project and used data triangulation to augment an

initially qualitative and inductive approach. The

views of e-commerce practitioners, e-business

advisers for small firms and academics were

sought. Primary data were obtained via interviews

with e-commerce practitioners and e-business

advisors and secondary data from literature review,

government statistics and independent surveys.

This paper is largely based on a literature review

and a few in-depth interviews. Government

literature identified a number of government

e-commerce stars, that is companies that were

used as part of the UK Online for Business

campaign to encourage more SMEs to carry out

business online. Two of these companies (The

Classic Car Group and Jack Scaife Butchers Ltd)

were from the Yorkshire region (DTI, 2002d) and

agreed to be interviewed. A third interview was

arranged with a South Yorkshire UK Online for

Business Adviser.

Literature review

The Internet is a force for change, creating new

business economies (Lambert, 2002) and altering

considerably the world’s economies (Rayport and

Jaworski, 2001). The UK government literature

stresses the importance of such new technologies

to the economy as a whole and to SMEs in

particular. Although, Martin and Matlay (2001)

contend that such wide-ranging beliefs over the

Internet have yet to be supported by any empirical

evidence. Tidd et al. (2001) consider the Internet

to be one of the “defining symbols” of twenty-first

century innovation that has transformed our

conceptual notions of how we value knowledge to

E-commerce adoption support and advice for UK SMEs

Mike Simpson and Anthony J. Docherty


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create a new e-economy. This is a departure from

the post-industrial business age that is typified by

physical goods, towards a knowledge led economy

where service, information and intelligence are the

main currencies (Rayport and Jaworski, 2001).

There have always been “new economies”

(Clayton, 2002). What makes this innovation

different are four distinct characteristics:

immediate access to world-wide markets of

information; better speed to market; the

transformation of business processes; and the shift

in the balance of power between suppliers and

customers as information becomes more widely

available.

The new e-economy

Booz Allen Hamilton (2002) define the new

e-economy as a dynamic system of interactions

between a nation’s citizens, businesses and

government that capitalise upon online technology

to achieve a social or economic good (Booz Allen

Hamilton, 2002). Thus e-commerce is often

categorised as either business-to-business (B2B), a

paper free swapping of business information over

the Internet, or as business-to-consumer (B2C)

where businesses sell products or services online

(Lim, 2001). Rayport and Jaworski (2001) suggest

two other categories, that of Consumer-to-

Consumer (C2C) and Consumer-to-Business

(C2B). Lambert (2002) delineates e-business from

e-commerce by defining e-business as all aspects of

a business where technology is important.

Timmers (1999) along with Rayport and Jaworski

(2001) see e-commerce as either the undertaking

of business electronically or as an electronic go-

between trading partners. Denby (2001) however,

states that the terms e-business and e-commerce

are nothing more than business and commerce

with an “e” on the front. An examination of the

UK government’s promotional literature accepts

that there are many ways to define e-commerce but

offers two definitions of its own. The first is a broad

definition to include e-mail and fax services and

defines e-commerce as the exchange of

information across electronic networks (DTI,

2001a). The second definition uses the narrower

“transactional” definition to incorporate online

trading and specifically the buying and selling of

goods and services over electronic networks,

whether between businesses or between businesses

and consumers (DTI, 2002e).

Rayport and Jaworski (2001) suggest the

concept of the “twenty-four-seven” store to denote

the continuous availability (and access) to the

virtual store. Kalakota and Robinson (2001)

discuss how the digital revolution has emancipated

information from the conventional confinements

of information asymmetry (Cunningham, 2000).

Kalakota and Robinson (2001) comment on the

impact the Internet has had on the value chain and

the emergence of new distribution channels.

Lambert (2002) questions whether we should see

e-commerce differently claiming that in spite of its

modernity it preserves many of the old rules of

business. Denby (2001) supports that claim by

adding that the business does not have to sacrifice

its traditional qualities or working practices since

e-commerce can only add to these. New business

models are being considered that make shopping a

more convenient and comfortable experience with

lower prices, customised products and integrated

offerings, something that traditional commerce

cannot hope to compete against (Harpin, 2000).

The UK government has ambitions tomake UK

SMEs leaders within the G7 group of countries

where e-commerce is concerned and to create an

environment within the UK that is the most

favourable in the world for electronic trading

(DoH, 2000). Such ambitions are common

amongst governments who often act as role models

for their citizens by becoming early adopters of the

new technology and by setting deadlines when they

anticipate most of their services will be online

(Bodorick et al., 2002). So far 1.9 million small

businesses are connected to the Internet

(surpassing the government’s original 2002 goal of

1.5 million) (DTI, 2002f). Some 30 per cent of

businesses are selling online and there are plans for

all government services to be electronically

available by 2005 (UK Online, 2002). During the

past three years the UK Government has spent

more than any other country (£67 million) on a

comprehensive programme to get UK businesses

online with the added aim of increasing the

e-business readiness of SMEs (Booz Allen

Hamilton, 2002). UK government support is

provided by way of information, advice or training

with few financial incentives, although the UK

government are one of the few countries that do

provide tax incentives for the purchase of ICT

equipment (Booz Allen Hamilton, 2002).

UK Online for Business

In September 2000 the government launched the

UK Online for Business initiative with the aim of

developing the UK as a world leader in e-business.

The UK Online for business service adopts a

multi-channel approach in that it has over one

hundred walk-in centres around the UK, provides

a telephone helpline and offers a Web site with

access to “virtual advisers”. The initiative has been

considered a success for two reasons. It can be

considered a marketing success (it has been heavily

promoted through TV advertising) with almost

half of all UK businesses now aware of a support

service for getting businesses online (UK Online,




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2002) with brand awareness among SMEs

considered high (Booz Allen Hamilton, 2002) and

it appears to meet a practical need for help.

According to government statistics the service has

helped more than 160,000 businesses, answered

38,000 helpline calls, attracted 225,000 unique

users to its Web site and through the “virtual

advisers” network provided on demand advice to

1,000 businesses (Booz Allen Hamilton, 2002).

However, despite UK Online’s marketing

successes, independent studies suggest that it may

be failing SMEs in a number of areas. Firstly,

government has set a target of one million SMEs to

be trading online by the end of 2002 (DTI, 2001b)

however indications show that this target was not

met. While recent figures show a 20 per cent

increase in the number of SMEs actually trading

online, equivalent to an increase of 90,000 it still

falls almost half a million short of the predicted

figure (UK Online, 2002). Secondly, the UK’s

personal computer (PC) penetration rate,

considered a standard metric for measuring

e-commerce readiness, at forty six percent is low in

comparison with most other countries who are

achieving well over fifty per cent (Booz Allen

Hamilton, 2002). However, Martin and Matlay

(2001) recommend caution where reports show a

considerable increase in ownership of equipment

claiming that all that the data is measuring is

hardware purchases not the actual use of ICT

amongst SMEs. Although Martin and Matlay

(2001) accept that it does allow international

comparisons to be made. Thirdly, two common

faults of most government e-policies are: not

heightening the awareness of Internet benefits

among its SMEs but rather that brand recognition

for its services is developed and not having any

effective methods in place to measure the impact of

their e-policies (Booz Allen Hamilton, 2002).

SMEs’ contribution to the new economy

SMEs have an important role to play in a country’s

economy (Beaver, 2002) and that globally they

contribute eighty per cent to a country’s economic

growth (Bodorick et al., 2002). Of the 3.7 million

businesses in the UK 99.2 per cent are defined as

small businesses (Denby, 2001) employing fifty

seven per cent of the workforce (Yeo, 2002). The

growth in Internet access has been spearheaded by

SMEs (NOP/BT, 2002) and almost two thirds of

businesses operating e-commerce sites claim them

to be profitable (Actinic, 2002). However, some

researchers are more sceptical (Martin andMatlay,

2001; Beaver, 2002) claiming that such optimism

is somewhat misguided, arguing instead that such

reports need to be balanced against the dot-coms

that have yet to realise a profit and warning that the

number of commercial successes is likely to be

beaten by the number of failures.

Defining SMEs in the new economy

Martin and Matlay (2001) suggest SMEs are a

“heterogeneous and complex mix of economically

active units”. Most working definitions of SMEs

emanate from the Bolton Committee report of

1971, which defines a small firm as independent,

owner managed and with a small market share.

The Bolton report offered a variety of statistical

definitions, namely that the size of the firm was

relevant to the sector it was in and that in certain

sectors it was more suitable to classify the size of

the firm by the number of employees. The use of so

many definitions has its critics who argue that it

impedes statistical analysis. Such criticism is often

dismissed by claiming that these definitions all

have their different uses (Beaver, 2002). For the

purpose of this study SMEs were defined as

companies with a work force of between 1 and 250

employees (Business Link, 2002).

The reasons for the adoption of e-commerce

by SMEs

The academic literature gives very little

information on why SMEs adopt e-commerce.

However, rather more information can be found

on the broader aspects of information and

communication technology (ICT) adoption and

the use of the Internet in general. Thus, the

reasons for ICT, Internet and e-commerce

adoption by SMEs are complex and often

interrelated. The use of ICT to improve business

competitiveness is recognised in the literature

(Chapman et al., 2000) and indeed SMEs have

been in the vanguard, testing new e-commerce

models in spite of their limited resources (Dongen

et al., 2002). It is thought that much of this early

adoption of the Internet was motivated by a

mixture of management eagerness, the need for

better communications and that for most

businesses it presented an affordable admission

price to world markets prior to establishing more

important business relationships (Chappell et al.,

2002). Although Dixon et al. (2002) found a lack

of any empirical research on the effect of ICTon

SMEs and of the modest amount that there was

much of it involved cross-sectional studies rather

than longitudinal comparisons. The comparative

wealth of research in the area of ICT adoption

(compared to e-commerce) suggests that an

SME’s inherent qualities of size and flatter

organisational structure make them more

predisposed to facilitating innovation (Bodorick

et al., 2002).

According to Tidd et al. (2001) the major

factors for successful innovation are a mixture of




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having a dedicated and motivated individual,

usually the Chief Executive Officer (CEO) and

paying attention to a multitude of good

management activities and attitudes. This includes

the ability to predict and respond to the business

environment and industry changes. In part this

concurs with Cragg et al.’s (2001) view that SMEs

with a CEO with a penchant for Information

Technology (IT) and innovation would be more

likely to adopt IT. Cragg et al. (2001) concluded

that three issues that were likely to have an effect

on the take up of the Internet by SMEs was the

perceived benefits, organisational readiness and

external pressures. However, Dongen et al. (2002)

argue that much of the literature supposes that

ICT adoption is for opportunistic reasons, based

on cost, rather than for strategic reasons. Recent

surveys suggest that the main reason for

e-commerce adoption amongst UK SMEs is to

increase sales (Actinic, 2002) while others

suggest more illusory motivations for adopting

e-commerce:

It may sound obvious but having a web site doesgive people the impression that you are a forwardthinking business (Bradshaw, 2001, p. 23).

Van Beveren and Thomson (2002) point out that

the most cited reasons for e-commerce adoption

tend to be those based upon the company’s size

and their perceived importance of e-commerce to

their business purpose. While Daniel and Myers

(2000) found that as a company grows in size it

becomes more difficult to communicate with

customers and this leads to the adoption of

e-commerce. Further evidence for company size as

a reason for e-commerce adoption can also be

found in recent surveys that indicate a divide

between large and small companies in the adoption

of e-commerce (Actinic, 2002; UKOnline, 2002).

Although the work of Bodorick et al. (2002) did

not focus specifically on SMEs they suggest that

e-commerce readiness and adoption are likely to

vary by industry sector. Martin and Matlay (2001)

found that micro-businesses that focus on

providing business services were more likely to

adopt ICT than similar sized manufacturing firms

while Daniel and Myers (2000) found that the

older the SME the less likely they were to use

e-commerce. Kalakota and Robinson (2001) see

the adoption of e-commerce as more of an external

pressure brought about by a new type of customer

value proposition of what they want, when and

how they want it and at the lowest cost. Daniel

and Myers (2000) and Dongen et al. (2002) found

that responding to competitors was also likely to be

an important driver towards the adoption of

e-commerce.

Timmers (1999) uses Michael Porter’s five

forces model to argue that e-commerce creates

almost perfect competition as barriers to entry are

reduced, transaction costs lowered, customers are

able to obtain better access to information,

customer driven pricing is possible and all with the

minimum of legislation and regulation. In

addition, low entry costs leading to an early return

on investment whilst safeguarding such investment

was seen as a major attraction of e-commerce

(Timmers, 1999). Daniel andMyers (2000) found

that the overall reason for the adoption of

e-commerce by SMEs was to enhance customer

relationships either through improving customer

services, developing the brand, seeking out new

customers or to allow for discourse with

customers. The notion was that these businesses

better understand how competitive differentiation

can be achieved by developing superior customer

relationships. Kalakota and Robinson (2001) have

similar views claiming that through the use of

e-commerce companies can become the best, most

recognisable and also the cheapest. That is,

e-commerce can create opportunities for a

combination of differentiation and cost leadership

strategies to be employed (Campbell-Hunt, 2000).

Cragg et al. (2001) found three types of perceived

benefits namely, relative advantage,

communication (over more traditional methods

such as the telephone) and as a business tool i.e.

something that is a part of everyday business.

UK Online promotes the potential benefits of

e-commerce to businesses on the promise of larger

market penetration, sensitivity to customer needs,

added flexibility and reduced costs. Part of the

promotional push appears to be reminding

businesses of the practical benefits rather than

perceived benefits of e-commerce. For example,

advertising costs can be reduced by having a Web

presence (DTI, 2001b). Cragg et al. (2001, p. 172)

argue that: “Those that have not adopted the

Internet must seek a business benefit, for example

they may pursue advantages over traditional

methods of advertising.”

More pragmatic advice can be found in the

literature targeted at small businesses and which

praises the benefits of e-commerce from both the

business and customer perspectives (Bradshaw,

2001). For example, e-commerce allows

businesses to trade and receive payments online

non-stop and leaves customers satisfied because

the business is always open. In addition,

e-commerce has other benefits such as lowering

the running costs of the business, allowing access

to a wider market and saves time for the customer

who will also feel in control (Bradshaw, 2001). It

has been suggested that some small businesses

only exist because of moving onto the Internet and

the notion of the Internet as a salvation for some

businesses appears to be a relatively new idea




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(Wroe, 2002). Access may be dependent on

location with London SMEs twice as likely to have

a Web site as Yorkshire SMEs (Haig, 2002) due to

having access to Internet links (Martin andMatlay,

2001). However, Daniel et al. (2002) found that

the adoption of e-commerce was similar across

different regions in the UK but that London

companies were realising greater benefits for

particular activities. Table I summarises the

reasons for and barriers to SMEs adopting

e-commerce.

Barriers to e-commerce adoption

The main barriers to e-commerce adoption appear

to be the unwillingness of managers to be

responsible for technological change (Kalakota

and Robinson, 2001). Most businesses do not

want to use the Internet for online trading,

preferring instead to use ICT to augment changes

in how they connect with their customers and

reduce costs through more efficient management

of their internal processes (UK Online, 2002,

p. 14). Ignorance surrounding the technology is

fuelling concerns about security, costs, legislation

and interoperability (Timmers, 1999). There are

also concerns about the complexity of available

e-commerce services (Bodorick et al., 2002;

Dongen et al., 2002). While Bodorick et al. (2002)

identified limited resources as a distinctive

characteristic of SMEs and therefore a barrier for

them to compete in the global e-commerce market,

Cragg et al. (2001) found that a lack of financial

resources was not delaying Internet adoption.

Dongen et al. (2002) reminds us that Internet

adoption does not require high investment costs or

an advanced pre-existing telecommunications

infrastructure. Although, other research suggests

that managers in SMEs did acknowledge that the

valuable resources of time and effort to incorporate

such telecommunications were principal barriers

to the adoption of IT (Chappell and Feindt, 2000,

cited in Dongen et al., 2002)

Darch and Lucas (2002) found several

perceived barriers to the adoption of e-commerce

in Australian SMEs including costs, lack of

awareness of what e-commerce involves, lack of

e-commerce skills, lack of knowledge, lack of help

and lack of time. Secondary issues were inadequate

telecommunications infrastructure, lack of trust

and the relevance of e-commerce to their

particular industry sector. Chappell et al. (2002)

state that a lack of SME bespoke information is

why many SMEs are not taking advantage of the

Internet. Lawson et al. (2003) suggest that the

barriers can be categorised as either technical or

social factors and provides further evidence in

Australian SMEs for lack of skills, knowledge and

poorly trained staff. Most of the barriers identified

by Lawson et al. (2003) were non-technical and

they suggested some ways in which these barriers

may be overcome such as government and industry

associations providing information to raise

Table I A summary of the reasons for and barriers to SMEs adopting e-commerce (not in any particular order)

Reasons for adopting e-commerce Barriers to adopting e-commerce

To improve business competitiveness

To try out new e-commerce models

Management eagerness/motivated CEO

The need for better communications

Admission to world markets

Greater opportunities for innovation in SMEs due to SMEs’ smaller size and flatter

organisational structure

Perceived benefits

Organisational readiness and external pressures

Opportunistic and based on cost

To increase sales

Impression management

Advertising costs can be reduced

Company size and perceived importance of e-commerce to business purpose

To improve communications with customers

External pressures from a new type of customer value proposition

Responding to competitors

Low entry costs

To enhance customer relationships

The Internet as a “lifesaver” for ailing businesses

May reduce working hours for owner-managers in some businesses

The unwillingness of managers to be responsible for technological change

Use of ICT to reduce costs and improve efficiency rather than for trading online

Fear of entry into global markets

Readiness and adoption rates vary by industry sector

The older the SME, the less likely they were to use e-commerce

Integration of legacy systems is difficult

Executive understanding is poor

Ignorance surrounds the technology, fuelling concerns about security, costs,

legislation and interoperability

Lack of profitable business models

Lack of qualified employees

Complexity of available e-commerce services

Limited resources

Costs

Lack of awareness of what is involved

Lack of skills

Lack of knowledge

Lack of help

Lack of time

Inadequate telecommunications infrastructure

Lack of trust

Lack of relevance to their particular industry sector

Lack of SME bespoke information

Wrong type of product or service for e-commerce




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awareness, training, participation in the diffusion

process and working with good quality

consultants. It could be argued that this is exactly

what is happening in the UK but still appears to be

insufficient.

Studies have found that the barriers to

e-commerce adoption can vary between large and

small companies and between continents with

large companies in the USA citing integration of

legacy systems and executive understanding as

obstructions while in Europe large companies

perceived the barriers to be trust and security

(Timmers, 1999). SMEs on both sides of the

Atlantic were in agreement about the lack of

profitable business models and while US SMEs

expressed concern about a lack of qualified

employees, European SMEs were more concerned

about the complexities of e-commerce (Timmers,

1999).While the benefits of the Internet are largely

seen as being able to access global markets

Cunningham (2000) states that this inherent

quality can, in itself, act as a barrier preventing

firms from moving over to international

commerce.

Fillis et al. (2003) have devised a conceptual

model of e-business development for SMEs which

appears to incorporate many of the factors

outlined in this paper and which are summarised in

Table I. However, they do point out that SMEs still

have major shortcomings in the area of marketing

(see also Huang and Brown, 1999; O’Brien, 1998;

Simpson and Taylor, 2002).

SMEs’ need for support

The lack of technical skills amongst owner-

managers of SMEs places a heavy reliance on

external advice and support, however, such

support and advice does not necessarily have to be

from experts (Darch and Lucas, 2002). Mole

(2002) suggested that advice users fall into one of

three groups: those who use only one source (for

example accountants); those who use five or more

different suppliers and; those who use a handful of

private clients including Business Link. A major

factor in determining whether external advice will

be sought is the size of the firm, with the smallest

firms the least likely to seek external advice

(Bennett and Robson, 1999; Mole, 2002). The

profitability of the firm is also likely to be an

important indicator as to the type of external

advice the firm is likely to seek with the most

profitable firms seeking private sector advice and

the least profitable using public sector advice

(Mole, 2002). The ability of SMEs to buy-in

external advice is far greater than that of larger

firms but they have a greater unwillingness to do so

(Bennett and Robson, 1999; Chaston and Baker,

1998). Many owners have fervent beliefs about the

uniqueness of their business which leads them to

become doubtful about new advice (Mole, 2002).

Government’s failure to support SMEs

Given the economic importance of SMEs,

government policy is to provide support to SMEs

(Bennett et al., 2001). The challenge for

government is to convince generally reluctant

SME owner-managers of the need to take external

advice and persuade them to actually take that

advice (Hankinson et al., 1997; Hankinson, 2000).

Several government initiatives (support agencies,

advice centres) have been devised to encourage

SMEs to seek advice and stimulate demand for

advice (Bennett and Robson, 1999). These

initiatives are believed to increase the chance of

business success (Beaver, 2002).

The most notable of these UK government

initiatives is Business Link (BL) a support agency

that was developed in 1992 to provide SMEs with

a network of local business advice centres (Bennett

et al., 2001). Although Beaver (2002) criticises this

“one-size-fits all” approach, claiming it does not

consider the differences between firms. To date BL

has rapidly attained a high degree of brand

awareness and usage by SMEs (Bennett et al.,

2001). Essentially not for profit organisations BLs

are expected to seek a commercial direction in

order to be self financing, although funding was

provided primarily by the DTI and the

Department for Employment and Education

(DfEE).

Whilst Beaver (2002) warns that there is strong

evidence that governments are not engaging in

policies that help SMEs, BL is seen as one of most

successful government initiatives of the past

twenty years (Bennett et al., 2001). However, BL

may not be serving the overall needs of SMEs, and

may be the underlying reason why the take up of

BL services by small businesses is so low.While the

reputation of BL is enhanced because of

government assistance, both financial and

regulatory, it suffers from the historic perception

that SME owner-managers hold about public

sector interference. This in turn may persuade

clients to use BLs principally to gain access to

business funding or as their only remaining option

(Bennett and Robson, 1999). Bennett et al. (2001)

mention that although BL has comparable impact

levels to that of other public sector suppliers it lags

significantly behind private sector suppliers. The

government’s continued emphasis on charging fees

was felt to be a strong negative influence on client

satisfaction as clients expect government services

to be either low cost or free (Bennett et al., 2001).

Mole (2002) argues that the charging of such fees

acts as a quality control mechanism.




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Lean (1998) concluded that support for small

businesses has had limited success in affecting

their growth and that there was a need for Business

Links’ approach to be less “dogmatic” in relation

to micro-businesses. Mole (2002) highlighted

further differences about why the take up for BL

services should be so low amongst SMEs by

contradicting some of the findings of Curran and

Blackburn (2000, cited in Mole, 2002) who had

suggested five reasons as to why the take up of BL

services was low. SMEs were not aware of the

service whereas Mole (2002) found evidence to

suggest that awareness of BL amongst SMEs was

high. BL services were expensive and yet Mole

(2002) maintained that most services were free.

There appeared to be poor service delivery but

Mole (2002) suggested that SMEs were unlikely to

be candid about such levels of dissatisfaction in a

survey. However, there was agreement on supplier

distrust and the inability of government agencies to

match SME needs. SME owners distrust

government, often declaring that the government

lacks the skills and experience to give advice about

running their business. SME owner-managers

claim that external agencies fail to understand

their business, although Mole (2002) added that

this last reason may be a deep seated characteristic

of the owner-manager with a psychological need

for autonomy (see also Chaston and Baker, 1998).

SMEs were more likely to use BL if they were an

exporting firm (seeking export advice) or if the

firm had introduced a process innovation that was

both new to the business and to the industry as a

whole, or if they simply had the ability to finance

external resources (Bennett et al., 2001). SMEs

with a higher skilled workforce were more

predisposed to identifying needs and seeking

external assistance although paradoxically firms

with a low skilled workforce may require greater

levels of external advice and help (Bennett et al.,

2001).

The role of personal business advisers

Mole (2002) offers many reasons as to why

Personal Business Advisers (PBAs) may not be as

effective as other private sector advisors. PBAs

were expected to develop long term relationships

with clients yet they lacked the time to develop

such relationships. The nature of their knowledge

and advice was generalist, not sector specific and

while they may have a background in marketing or

finance they could never equal the knowledge the

owner-manager had of their market and industry.

The Business Link PBAs were expected to be

independent but this role is often compromised by

the transactional nature of the relationship i.e.

pushing BL services to the client. The self-funding

targets imposed on BL introduced the issue of

moral hazard into the relationship where the PBA

was able to provide support but either lacked the

time or resources to do so properly. In the pursuit

of such targets PBAs were likely to be distracted

from servicing their clients businesses properly.

Mole (2002) also saw difficulties with the

payment structure of the PBAs. Some were

appointed on a self-employed basis while others

were paid on a salaried basis with performance

indicators. This led to the self-employed PBA

targeting the most prosperous firms while the

salaried PBA, on performance indicators, targeted

the firms needed to substantiate their salary, which

were often the high growth firms.

Bennett and Robson (1999) investigated how

advice differed between government agencies and

the market in general and they concluded that two

factors could generate higher impact levels for

SMEs. First, interaction through site visits – “the

stronger intensity of interaction increases the

tailoring of a service to SME needs therefore

improving its quality and potential impact”

(Bennett and Robson, 1999, p. 365). Second, by

SMEs holding greater levels of control either

through a contract or written brief. Bennett et al.

(2001) found that there were three important

components of the BL design that were impairing

its performance. Namely, the local inconsistency of

its management structure; its tendency to focus on

established growth companies (managers are

encouraged to generate repeat business in this

group); and its wide-ranging advice remit (the

concept of a one-stop-shop) based on an apparent

need to simplify the delivery of local business

support services.

Martin and Matlay (2001) are critical of

government small firm support policies in relation

to ICT claiming that they will have limited success

since they do not take into account the

heterogeneous nature of SMEs. Martin and

Matlay (2001) argue that such initiatives are a

blunt instrument and that what is required is much

more sector specific advice and support. They

point to surveys that show a restriction on access to

ICT advice depending on the businesses location.

Businesses in rural areas were less likely to have

access to such advice and more importantly the

specialist support needed to adopt and implement

it. With many rural businesses forced to rely on

their hardware suppliers the inference is that bias

and partial advice creep in.

Darch and Lucas (2002) found that SMEs

looked to government and industry groups for

specialist expert advice on e-commerce. However,

the few that approached government sources

expressed disappointment over the lack of

e-commerce knowledge personnel had. With small

business owners acknowledging that their level of




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technical skill was low Darch and Lucas (2002)

suggest that local intermediaries such as the

Chambers of Commerce or BL are best placed to

influence the take up of e-commerce by SMEs as

often they have daily contact with them. Bennett

et al. (2001) also believed there to be higher levels

of use of BL for non-innovating firms because they

needed it to catch up with more innovative firms.

Mentoring and network services

A notion that appears to be gaining interest among

owner-managers of SMEs is that of having a

network of people or a mentor to whom the owner-

manager can turn to for advice. Many small

business owner-managers often have feelings of

being alone and isolated, even in firms where

husband and wife partnerships are prevalent.

Having a small group of mentors as advisers can be

useful for bringing external experience into the

firm and for providing impartial advice and an

understanding of the market. Thus avoiding

common business mistakes and proving to be more

valuable than local Business Links (Stone, 2002).

Academic approaches to successful

e-commerce

It is unlikely that such advice would be studied by

owner-managers of SMEs given their sceptical

nature (Mole, 2002).

E-commerce approaches and business models

Traditional business models are based around

more tangible properties whereas the business

models of the future are considered to be virtual

and their properties intangible (Kalakota and

Robinson, 2001). In the past many Internet

businesses rushed to market and were

disappointed to learn that simply having an

Internet presence was no guarantee of success

(Kalakota and Robinson, 2001). Themistake most

firms make is to think about the technology first

and then figure out how it is all going to work. To

avoid such pitfalls it is suggested that the firmmust

decide how much outside help is needed to

negotiate the hybrid mix of business, technology,

change processes and the position of the company

and its competitors in the market place

(Cunningham, 2000;Denby, 2001; Chappell et al.,

2002).

Timmers (1999) suggests that eleven business

models exist all of which can be found operating on

the Internet today, including e-shops and e-malls,

and that these models revolve around a number of

common principles indigenous to e-commerce.

These principles include the collection of money;

productivity improvements in business processes;

development and support for new automated

procedures; and altering how you interact with

existing and potential customers.

Strategy and tactics

According to De Kare-Silver (2001) developing a

long term strategic plan is the first step towards

meeting the e-commerce challenge. This view is

endorsed by the UK government who believe that

a well-developed strategy is crucial to growth for

most businesses and that e-commerce businesses

are no exception (DTI, 2002e). However,

according to Chappell et al. (2002) most small

businesses are not able to formally define or

understand their competitive strategy and that

e-commerce can only exacerbate this problem.

Denby (2001) warns owner-managers, that

e-commerce strategies when not managed

properly can either languish, through constraints

on the owner-managers time, or the other extreme

ensues, where strategies expand to fill their time

often at the expense of other business projects.

According to Timmers (1999) the reason why so

much strategic choice is now afforded is down to

the Internet’s characteristics of “openness and

connectivity”, although paradoxically the same

characteristics can also make hiding such

competitive models from competitors almost

impossible. Cunningham (2000) claims the

starting point for the development of a strategy for

e-commerce often rotates around money, whether

that is creating additional revenues, cost

reductions, improved margins or simply remaining

competitive.

Marketing and competition

According to companies already enjoying success

on the Internet, gains were only made once they

had recognised that the world of e-commerce

presents harder marketing challenges (De Kare-

Silver, 2001). While Timmers (1999) suggests that

we can make use of the marketing theory and

business economics that exists today Cunningham

(2000) is not so certain believing that conventional

marketing strategies do not work every time. In

addition, SMEs have problems with both

implementing and understanding marketing

(O’Brien, 1998; Huang and Brown, 1999).

Managing people and processes

The Internet is an agent of change and it impacts

on people and work processes. Cunningham

(2000) sees Internet start up firms as the epitome

of change, free of the restrictive practices of

more traditional business models and asks that

e-commerce organisations look at issues like the

internal culture and howmuch change the firm can

handle. For others e-commerce is about taking

advantage of the technology to transform business

processes where disintermediation (cutting out the




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middleman) and re-intermediation (the firm

becomes the middleman) are competitive tools to

make the value chain more efficient (Bradshaw,

2001).

Technologies

There appears to be a scarcity of technology

knowledge amongst SMEs. According to Kalakota

and Robinson (2001) the same dilemma exists in

the larger corporations with most executives

remaining oblivious to emergent technologies

when such knowledge should be critical for their

firms’ survival (see also Cragg et al., 2001).

According to Kalakota and Robinson (2001)

managers should determine how they can use the

new technology to create new value propositions

for the customer and this is seen as an important

factor for success in entering the world of

e-commerce. Cunningham (2000) states that firms

should not become besotted with the technology

alone but that there should be a sound business

case for using it preferably with a technology plan

incorporated into the business plan.

Implementation

De Kare-Silver (2001) emphasises that whatever

strategy is selected the important thing is to ensure

its implementation is thorough, determined and

well funded.

Evaluation

Chappell et al. (2002) recommends that SMEs

involved in e-commerce continually assess their

own strengths and weaknesses using

benchmarking to make comparisons with

competitors. In a study of successful SMEs,

Chappell et al. (2002) found that a common set of

best practices in e-commerce were present, the

implication being that the deployment of these best

practices can greatly improve the success of

e-commerce in SMEs. E-commerce can provide

high returns on investment (Cunningham, 2000)

and “hard” benefits should be measured in terms

of financial impact while other “soft” benefits such

as the effect e-commerce can have on an

organisation cannot be measured in such fiscal

ways.

Strategic partnerships

Denby (2001) states that, no business can exist in a

vacuum especially Internet businesses and that

through the development of partnerships (from the

basic buyer/seller relationship through to more

complex suppliers/logistics partnerships) can the

foundations for commercial success be laid.

Rayport and Jaworski (2001) consider it is

unrealistic for any company to have all the

resources needed to provide value to its target

market and state that a firm should be sensible

about what its capabilities are and more

importantly where they are deficient, for only then

will they be able to identify where partnership help

is needed.

Results and discussion

The reasons for adopting e-commerce in the

Classic Car Group and Jack Scaife Butchers Ltd

were different. Jack Scaife’s Chris Battle reported

that traditional advertising was expensive and

inefficient and that his two young daughters were

aware of the Internet and provided an internal

pressure for adoption. This contrasts with the

literature where external pressure is thought to be

more prevalent (Kalakota and Robinson, 2001).

Cost savings could be made and was a clear

motivator for adopting e-commerce (Dongen et al.,

2002). The Classic Car Group gave a similar

reason with internal pressure coming from the

managing director’s son. However, their

motivation was seen as an extension of their

marketing and as a way of marketing the business

(see Van Beveren and Thomson, 2002).

Perceived benefits and barriers for

e-commerce adoption

The market for Jack Scaife’s products had become

global as a consequence of adopting e-commerce

but there was no way to predict this in the

beginning. However, the Classic Car Group were

somewhat optimistic: “We were expecting

hundreds of emails on that first Monday only it

didn’t happen.” The company had to learn about

search engines and establishing the company name

with them and then reach more people for a lower

cost. It took 18months for Jack Scaife to realise the

benefits but further intervention was needed and

they re-examined and redesigned their Web site.

The unexpected social benefit was a change in

working hours from early mornings (5.00am) and

long days (until 7.00pm) to a return to more

normal hours of work.

The barriers to Internet adoption are thought to

be ignorance about the technology (Timmers,

1999) and limited resources (Bodorick et al.,

2002). There was no evidence that these or any

other barriers were present or were holding these

companies back and both companies were well

aware of their shortcomings in relation to the

technology and these were overcome by using

internal family contacts. Cost was not seen as an

inhibitor since both companies were already

spending large sums of money on advertising and

establishing the Web site was no more than one

month’s advertising spend.

The reasons why some SMEs are more

successful than others were suggested by the

e-Business Adviser as: individual circumstances,

individual motivations, commitment to the




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technology and that some people have the

appropriate business for it. It was suggested that

some businesses fitted well with e-commerce,

particularly personal services, foods, certain

manufacturers and crafts, whereas in other

businesses e-commerce does not fit well. Hughes

et al. (2003) supports the view that suitability of

the product for sale was seen by SMEs as a major

characteristic contributing to success.

E-commerce advice and support

The lack of technical skills in SMEs means that

more reliance is placed on external advice and

support although not necessarily from experts

(Darch and Lucas, 2002). In both the companies

investigated technical skills were deficient but they

were overcome by using internal support from

family or friends. Jack Scaife did it themselves with

only a little help on the hardware required.

Whereas The Classic Car Group used an outside

company for the technical work and the strategy

was developed within the company. Yet both these

companies were used in the government literature

as “e-commerce stars” and used in the government

campaigns to encourage take up of the service

provided through Business Link (DTI, 2002d).

This would imply that they have had some external

advice from government sources and this was

clearly not the case. In addition, The Classic Car

Group did have some visits from Business Link

about e-commerce but the company felt they did

not need them and thought they were “. . . one step

ahead of them already”. Diane Smith, MD, The

Classic Car Group.

Both companies were aware of the services

offered by Business Link but had not felt the need

to use these services and were only going to use the

services for activities unrelated to e-commerce

such as moving into new premises. However, help

would have been very useful in the beginning:

“Yes, the first few years were wasted”. Chris Battle,

MD, Jack Scaife Butcher Ltd. However, the UK

online business advisor suggested that the gulf

between SMEs and Business Link was due largely

to lack of time to form client relationships and

produce tailored solutions to a large potential

market of ten thousand small companies. In

addition, the notion that these business advisors

lacked the skills was justified to some extent in that

many e-business/e-commerce advisors for UK

Online were simply former Personal Business

Advisers for Business Link. These criticisms are

also supported by the academic literature (Bennett

and Robson, 1999; Bennett et al., 2001; Martin

and Matlay, 2001). It was pointed out that a lot of

general matters could be dealt with via paper

leaflets or via the Web and this accounts for the

large amount of literature produced by the DTI

regarding e-commerce and the success of the Web

portal. However, the UK Online Advisor

suggested that busy SMEs’ owner-managers did

not have the time or the inclination to read reports

on Web sites and that SMEs were often managed

by practical people who want instant answers to

their problems.

The case study companies also commented

upon the funding of support services. Both felt that

the way they were funded was dysfunctional and

that the services offered were expensive. There

were conflicting targets within these support

services such as income generation or number of

companies seen, or depth of support targets and

these conflicts were known by the SMEs. Yet

according to our interview with a UK Online

Business Advisor the market tends to be lots of

quick enquiries and then a few requiring deep

assistance over a day and a half or more and then

the time has to be charged at a subsidised rate.

However, in areas with Objective One status (such

as South Yorkshire) companies question the need

to charge when there is so much grant money

available. The reason given for this approach was

that it was partly to do with the perceived value of

the work and the perception of the value of time to

the company being different to the perception of

the value of time by the support agency.

Academic approaches to e-commerce

The practical relevance of the academic

literature to SMEs was found to be negligible and

showed a lack of knowledge about technology and

e-commerce among SMEs. The time SMEs’

owner-managers spent reading business books was

small. The e-commerce interviewees spent more

time analysing their own data from hits on their

web sites or simply devising their own ideas on how

to be more effective with their e-commerce

activities. The SMEs were unable to describe their

e-commerce strategy other than to say they wanted

to make more money via the Web site and this is in

general agreement with the literature (Chappell

et al., 2002; Denby, 2001). The SMEs did feel that

e-commerce had given them greater opportunities

than they would have had. In fact it would appear

that both companies would have had a difficult

time surviving and the Internet probably gave

them an opportunity to turn a failing business

around (Wroe, 2002). However, the business

advisor was less than convinced by this argument

and suggested that other, entrepreneurial

characteristics of the own-managers were more

important in determining the success of the

business.




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Conclusions

The reasons why SMEs adopt e-commerce appear

to be numerous (see Table I). Most of the reasons

outlined in this paper appear to involve financial

benefits for the SMEs albeit described under

various headings. During this study a number of

other reasons emerged but they did not appear in

the literature. In addition, there was a lack of

evidence of the impact of government support

services despite the high levels of awareness

created by the huge amount spent on these

initiatives. The case studies revealed that internal

pressure from family (particularly from children)

and friends rather than external competitive

pressures were a major factor in adopting

e-commerce. E-commerce adoption appeared to

be able to rescue struggling businesses (Wroe,

2002). Social benefits, through reduced working

hours for owner-managers, may in some cases be

considered a real business benefit as it could

reduce the workload of SME owner-managers and

allow more time for reflective thought. This was a

new finding.

The literature in this area presumes that most

firms are embarking on e-commerce and does not

seem to consider those firms who either have no

intention of adopting e-commerce or have yet to

discover the Internet. Some firms may have

products that are unsuitable for selling via the

Internet (Hughes et al., 2003). This situation

may be presenting a one-sided argument for

e-commerce adoption and we believe that a more

balanced view should be adopted taking account of

the suitability of products and services for sale

using e-commerce.

The effectiveness of public sector e-commerce

support services for SMEs appeared to suffer from

historical relationship problems associated with

Business Link and SMEs such as distrust and

scepticism. This may well be plaguing the

government’s new initiative UK Online for

Business and we conclude that the stand-off

between SMEs and government business support

agencies may encourage other third party vendors

to exploit SMEs’ ignorance about the technology.

This may expose SMEs to risks both legal and

financial. The UK government’s policy of driving

SMEs towards the Internet without the long-term

consideration for their survival may actually

increase the number of business failures especially

if the products and services offered are unsuitable

for sale using e-commerce (Hughes et al., 2003).

SMEs are exploring new ways of being supported

such as mentoring services (Stone, 2002) and

these initiatives may be the result of frustration

with the public sector advisory services. The UK

Online for Business initiative may be seen as no

more than a marketing campaign to raise the

awareness of ICT amongst SMEs rather than an

e-commerce advisory support service and may be

missing its target market. SMEs were found to be

in need of support and advice for e-commerce and

government has an opportunity to exploit this

demand but might be reluctant to do so or may be

burdened by the bureaucracy of the old Business

Link formula.

Academic theory for e-commerce was found to

be generally of little practical value to SMEs’

owner-managers. SME owner-managers tend to

be more practical and do not acknowledge formal

business strategies preferring instead to place

reliance on their instincts or intuition. The

majority of the academic work, whilst useful for

corporations, institutions and academics, is

unlikely to have any relevance for SME owner-

managers. The more practical business “recipe”

books may prove useful for stimulating interest in

the technology and in answering some of the more

basic questions but the constraints on the owner-

managers’ time would suggest that many of these

books will not be read. Interestingly, in the USA it

would appear that the popularity of university level

e-commerce courses has declined dramatically

following the collapse of a number of dot-com

businesses (Foster, 2004). At this stage it is unclear

if such a trend will extend to UK university courses

but it would be an interesting area to research.

Matlay and Addis (2003) identified the crucial role

that UK higher education institutions (HEIs) play

in providing consultancy to SMEs and suggested

that post-1992 universities were more likely to be

providers of consultancy to SMEs than

“traditional” and established universities.

White and Daniel (2002) questioned the

success of new Internet start-ups versus large

incumbent conventional retailers simply starting

their own Internet activities as separate “bolt-on”

businesses. However, it does seem likely that

purely e-commerce business models will be less

popular in UK SMEs since these SMEs are often

extending their existing business onto the Internet

rather than starting a business directly on the

Internet purely as a dot-com.

This study concludes that the effectiveness of

e-commerce advice and support for UK SMEs is

poor and may be dangerous in that it may lead to

increased numbers of business failures. Conversely

some evidence exists that suggests that the Internet

might be able to save failing small businesses (with

the right product) (Wroe, 2002) but much more

research needs to be done in this area. The

overlapping issues of ICT adoption, poor or

overlapping definitions of e-commerce and

e-business and the use of these terms

interchangeably in the literature generally confuses




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the area of e-commerce adoption. Despite this

factor the reasons for and barriers to adopting

e-commerce have been extracted and discussed in

the context of SMEs.

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