seaboard stock exchange's emerging e-commerce initiative

Seaboard Stock Exchange�s Emerging E-Commerce Initiative

IDEA GROUP PUBLISHING

Linda V. KnightTheresa A. Steinbach

Diane M. Graf

Seaboard Stock Exchange’s Emerging E-Commerce Initiative 1

Copyright Idea Group Publishing


Copyright Idea Group PublishingCopyright Idea Group Publishing

Seaboard Stock Exchange’sEmerging E-Commerce Initiative

Linda V. Knight and Theresa A. SteinbachDePaul University, USA

Diane M. GrafNorthern Illinois University, USA

EXECUTIVE SUMMARYWhile Seaboard Stock Exchange remains one of the top stock exchanges in the United States,

its relative position in the world is slipping. E-commerce is threatening the organization by acceleratingthe rate of disintermediation and the entrance of new competitors into Seaboard’s market. Againstthis backdrop, Seaboard’s e-commerce initiative has emerged. Tension between control andexperimentation surfaces as the association attempts to incorporate emerging technology whilemaintaining its traditional way of doing business. The organization struggles to merge new technologywith existing IT strategy while internal entrepreneurs strive to shape a Web development methodologyand define an appropriate role for standards and controls in an emerging technology environment.

BACKGROUNDSeaboard Stock Exchange is recognized worldwide as among the leading exchanges of its type

in the United States in the year 2000. The exchange was founded in the mid-19th century by a groupof eight businessmen meeting informally in a garden outside of Rock Island, New Hampshire, to buyand sell local stocks. For decades, Seaboard remained, in the words of one manager, “a sleepy littleregional exchange,” until the mid-1970s when it made a strategic decision to become a nationalexchange. Since that time, Seaboard has expanded to approximately 500 traders handling a wide varietyof stock and bond products. The exchange continues its heritage of face-to-face trading in an openarena to this day. Traders meet on an open floor and use hand signals to convey the quantity of aparticular stock or bond that they would like to buy or sell. Bids to buy and offers to sell are made byopen outcry. When the highest bid meets the lowest offer, the two traders each write down the tradeon cards that ‘runners’ carry off the floor to be keyed into a computer system.

Although Seaboard remains one of the top stock exchanges in the United States, its relativeposition in the world is slipping. As Exhibit 1 shows, trading volume, which had been relatively steadyfrom the earliest days, took a major swing upward in the 1970s when Seaboard decided to “go national.”

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This dramatic growth continued until 1998. However, volume has been dropping for the last two years.While the worldwide total stock trading market has been growing, Seaboard’s relative market

share has declined, as has the price of a seat on the Seaboard Stock Exchange. Declines in Seaboard’strading volume mean that its member/traders, who charge customers for each trade they execute, areearning less. This situation has triggered a drop in the price of a seat on the exchange. Declines inthe price of a Seaboard Stock Exchange seat mean that when members decide to retire or cash out, theyreap far fewer dollars than previously (Arvedlund, 2000). The price of a Seaboard seat has droppedfrom a record high of $905,000 in the late 1980s to $322,000 in late 2000. Seaboard’s membership isconcerned about these declines, and has recently moved to trim staff in order to cut costs. These costcutting measures can be expected to increase cash flow for the organization when it comes to payingits bills to support the trading floor; however, they will not put dollars in the pockets of its owners,simply because of the way the exchange is structured.

As Exhibit 2 shows, the exchange’s 500 members are active owners of the not-for-profitassociation. The members own their own seats, have trading rights on the exchange, and manage theorganization through the system of committees shown in Exhibit 3. Members also elect the Board ofDirectors and President. Further, since they are present every trading day, they play an active rolein the day-to-day operations of the organization.

The exchange employs a staff of about six hundred employees, one-third of whom are in theInformation Technology department. The primary responsibility of all staff is to support the tradingfloor and keep it running smoothly. According to Vance Fernandez, Vice President of InformationTechnology, “Working at Seaboard means having five hundred bosses. Staff at all levels, includingthe President, will drop everything if a member calls with a request.” For example, when a memberdecided that he wanted a statistical analysis of recent energy stock prices, Fernandez immediatelyreassigned two top people from his most critical project to work on the member’s special request.

Members earn their incomes primarily from commissions on trades or occasionally from makingwise trades for their private accounts. Since Seaboard is a not-for-profit association of its members,any exchange income beyond that needed to meet costs is banked for future expenses, rather thanbeing paid out as dividends or profits to the member/owners. Profits that had been saved in prior yearsare now being depleted as Seaboard’s annual income drops below that needed to maintain its fixedcosts. Seaboard’s current economic dilemma, and the increasing domestic and foreign competition,

Exhibit 1: Seaboard Stock Exchange Trading Volume

Seaboard Stock Exchange Trading Volume

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 1996 1997 1998 1999 2000

Note that years prior to 1995 are in 5 year increments





V.P., I.T. Vance Fernandez

Application Development Director

Operations Director, Roger Fields

V.P. Marketing

V.P., Corporate Communications Paula Reese

President

*Other Vice Presidents

Approximately five hundred owner/members rule exchange

through committees

MM

MM

MM

MM

MM

MM

MM

MM

MM

MM

MM

MM

Chairman and Board of

Directors

*Other Departments

Manager of Web Development, Karen Greene

Marketing Manager, Todd Lawson

Exhibit 2: Seaboard Stock Exchange Organizational Structure

*Other departments:Legal, Financials, Trading Floor Operations, Physical Plant

Exhibit 3: Seaboard Stock Exchange Governing Committees

• Executive Committee • Membership & Admission Committee• Finance & Audit Committee • Nominating & Elections Committee• Floor Procedures Committee • Product Development Committee• Human Resources Committee • Strategic Planning Committee• Marketing Committee • Technology & Automation Committee





are causing its members to reconsider their organization’s structure. The members have organized acommittee to study the possibility of becoming a publicly held for-profit corporation (Wall Street andTechnology, 1999).

SETTING THE STAGEStrategic Use of Technology at Seaboard

Seaboard is among the top floor-based exchanges in the United States in terms of technology.Seaboard’s trading floor was considered state of the art when it was totally rebuilt in 1995 at a costof approximately $36 million. The floor is supported by an extensive network of fault-recoverymainframe computers, an ATM network capable of carrying voice and data, and a massive telephonecommunication system. This advanced technology supports the traditional open outcry tradingsystem by bringing orders to the floor, and facilitating reporting of trades.

Since 1996, Seaboard has offered electronic trading (Morgan and Perkins, 2000). However,traders, who are also the exchange’s owners, have not supported extending electronic trading beyondevening hours and nontraditional products that do not compete with the traditional trading floor(Osterland, 1998). Industry analysts who support Internet-based electronic trading note that itprovides “unprecedented connectivity” at minimal cost (Wall Street and Technology, 2000). It isestimated within the industry that an electronic trade costs less than half as much as a traditional tradeto execute. Proponents of traditional trading floors, on the other hand, praise their ability to provideunbiased price discovery. Compared to electronic trading, traditional trading floors, it is argued,provide buyers and sellers with the ability to have their trader or broker use his or her judgment andmarket insight to make the trade at the best possible price. Not all industry experts agree (Tsang, 1999;Mosser and Codding, 2000).

Countries without a stock trading tradition, particularly in Europe and Asia, have openedexchanges that are totally electronic from the first trading day. Thus a small developing country likeSingapore with a brand new stock exchange sometimes has a more modern wireless technologyinfrastructure than Seaboard or its traditional United States counterparts. Such foreign exchanges arenot direct competitors because they are trading different stocks. However, all exchanges compete forthe same investor dollars. Additionally, some competing United States exchanges have begun movinginto other parts of the world through partnerships (Wagley, 2000). A further threat to existingexchanges comes from electronic communications networks (ECNs) (Latimore, 1999). ECNs, usingInternet technologies, connect buyers directly to sellers without any intermediaries. In December 1998,the Securities and Exchange Commission (SEC) passed Regulation ATS, which grants AlternativeTrading Systems, such as NexTradeTM, the ability to become full-fledged securities exchanges(McAndrews and Stefanadis, 2000). By cutting prices, ECNs captured 30% of all NASDAQ tradingvolume in just three years, and are now targeting other stock market segments (Carroll, Lux andSchack, 2000). Seaboard’s members generally view electronic trading, ECNs and new high-techforeign exchanges as encumbered by an inability to leverage the trading insights that Seaboardmembers employ to get their customers the best prices.

Information Technology Department at SeaboardThe Information Technology Department at Seaboard is divided into two departments, Appli-

cation Development and Operations. The Operations area includes the data center, network support,and microcomputer support teams. The Application Development area, responsible for all new systemdevelopment and maintenance programming, is divided into four teams: floor support, orderprocessing, regulatory systems and financial systems. Application Development makes regular useof consultants from top-name consulting firms, particularly for the early stages of new systemdevelopment, and when employing new technologies for the first time. The area has defined a strictmethodology for how new development is to be approached, with ample upfront planning and an





emphasis on approvals at strategic points in the development process. This methodology, the PlannedSystem Development Process, or PSDP, is depicted in Exhibit 4. Programmers joke about the PSDP,but grudgingly agree that it does a good job of insuring that new projects do not incur unexpectedmember criticism late in the development process.

CASE DESCRIPTIONEarly Web Development Efforts

Seaboard’s first experience with Web development came in 1993, when a small group ofmicrocomputer installation technicians became interested in the Internet. As one member of the groupexplained, “We didn’t have any experience building systems of any kind, but we had extra timeavailable to experiment.” Most of the group’s first site consisted of profiles and personal Webpages of the PC specialists themselves, coupled with a loose collection of pages about themission, services and policies of the microcomputer support group. During this same time period,one of the exchange’s members, Sam Butler, used free software to construct a public Bulletin BoardSystem. Butler’s BBS made historical financial data on the most heavily traded stocks availableto the general public 24/7. Looking back on that time from the year 2000, Butler said, “I was oncea small trader myself, and I appreciate the position of the little guy. If we can help him out withsome free data, why not? Of course, I thought making this data available would be good forSeaboard’s image, too.” Roger Fields, the IT Operations Director, recalled later that this timeperiod “gave people a chance to try out the technology.”

Interest in the World Wide Web was fueled by the development of the MosaicTM browser in 1993.As Exhibit 5 shows, by 1994 the business press as a whole was discovering the Internet. Seaboard’spresident picked up on the trend, issuing a directive to create a Web presence for the organization bythe end of 1994. The exchange president stated privately at the time “Although there is no membersupport for using the Internet for electronic trading, the technology still might be important somedayin this business.” He then authorized the funding necessary for two microcomputer specialists toofficially spend five to ten percent of their time on this project. The two developers, anxious to geta site working as soon as possible, concentrated their efforts upon “begging” various departmentsfor content, and then translating that content into HTML as quickly as possible. In the year 2000, whenFields looked back on the site, he described it as “ a basic form of brochureware, with clickable linksfor the organization’s mission, history and goals.” This site, shown in Exhibit 6, combined with asomewhat expanded version of the original intranet and BBS, represented the organization’s second-generation e-commerce effort.

By mid-1995, two microcomputer technicians were officially given the title of Web Developer,and allowed to spend 50 percent of their time on Web development, with the other 50 percent going

Exhibit 4: Planned System Development Process (PSDP)

Work Order Request Form Data Requirements Database Schema Documentation Review Work Order RequestDept. Manager Signature Business Processes Application Schema Coding Review Dept. Manager SignatureDept. VP Signature Interface Requirements Interface Schema Quality Assurance Review Dept. VP SignatureComputer Requirements Communications System Architecture Test Plan & Testing Computer Requirements Committee Authorization Requirements System Design Specification File Conversion Plan Committee AuthorizationPreliminary Investigation Systems Requirement Report Dept. VP Signature & Conversion

SystemPlanning

SystemAnalysis

SystemDesign

SystemImplementation

SystemSupport





0

200

400

Year

Number of ABI/Inform abstracts mentioning Internet, WWW, e-commerce or e-business

Business Week Forbes Fortune

Business Week 0 0 0 2 20 88 197 147 179 370 266

Forbes 0 1 1 3 11 50 103 87 105 196 74

Fortune 0 0 0 3 15 28 58 75 100 202 173

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Exhibit 5: Business Press Coverage of E-Commerce

to their traditional microcomputer support duties. Fields brought in an outside design team to improvethe “look and feel” of the site, which up until that time had no graphic artists associated with it. Herecalled that “These three consultants were not very technical—they used a WYSIWYG for editing.Their strength was on the creative end.” Both the two Web developers and the external consultantsnow began to build relationships with departments elsewhere in the organization, particularlymarketing and corporate communications. As Fields explains it now, “When the Web developers firstsought relationships with these departments, they were just looking for data for the Web site. As therelationships developed, they realized that these other departments could help us establish a visionfor the site. At that point, the Web developers consciously began to seek input on the purpose andgoals of the site. That’s also when the first efforts were made to profile potential users of the site bydiscussing with other departments who was likely to visit the site and why.”

Expansion of the E-Commerce InitiativeIn early 1996, Sam Butler became interested in expanding Internet use at Seaboard. Butler had

owned a seat at the exchange for 27 years. He was also an entrepreneur, having started several highlysuccessful small financial service firms during that same timeframe. In each case, once Butler had builtup his business, he “sold the company and moved on to new challenges.” Butler describes himselfas “someone who likes to read about technology, and experiment with new ideas.” In the 1980s whenSeaboard’s statistical analysis was partially hand-generated and partially produced by the mainframein the form of monumental stacks of computer printouts, Butler began doing his own number-crunchingthrough PC spreadsheet software. When Mosaic and GUI interfaces became prominent in 1995, Butlerdecided to replace the BBS that he had created in 1993, providing Seaboard’s members with a simplerGUI interface to his online data. Using an $88,000 budget that he had been given by the exchangepresident, Butler hired one technician, Chester Bromwell to work by his side. Butler then spent theremainder of his seed money on some small hardware purchases. For most of his hardware needs, Butlerrefurbished old equipment being discarded by other exchange departments. Most of his software,including the Apache Web server, was shareware or freeware that he downloaded from the Internet.Since there was no available office space, Butler and Bromwell set up shop in a hallway on the pathto the restrooms. Butler correctly reasoned that this location would give him contact with most IT





Exhibit 6: Second Generation Seaboard Consumer Web Site

employees at least once a day.Butler’s project generated widespread interest among IT personnel. It was not unusual to find

programmers and networking experts standing or even sitting on the floor in the hall, chatting withButler and Bromwell about Internet technologies and the future of the Internet at Seaboard. Fieldsrecalls appreciating the hallway’s synergistic generation of ideas and encouraging participation byhis staff, “as long as their regular duties were attended to.” Fields’ boss, Vance Fernandez, has a similarrecollection. “It was a time of great excitement in the industry, and Sam brought that excitement to ourarea. There still was no real member interest in the Internet or its potential for electronic trading, outsideof Sam of course, so I couldn’t officially support such development, but I was willing to do what I couldunofficially. As a whole, the IT line staff were as curious as Sam about the new technology, and freelygave their time and expertise to Sam’s project. There was great excitement and positive energy in Sam’shallway.” The one exception was Butler’s disagreement with the Director of Application Developmentconcerning the Planned System Development Process. In Butler’s words, “The PSDP was and stillis totally unworkable. No wonder those people in IT can never seem to get anything implemented. Ididn’t have time for that nonsense, so frankly I just didn’t do it. We didn’t need plans or approvals.We needed action.”

In mid-1996, Butler and Bromwell implemented StockScene.com. The site was designed toprovide members with time-delayed quotes, individualized trading reports and a chat room. In addition,it included content from ten outside industry sources. Revenue was generated from advertising,coupled with online sales of current exchange information to the members and the public. Butler didnot see security as a major issue since many of his users were members. He selected Netscape’s CreditCard SystemTM for payment because it was easy to use and readily available. As Internet technology





advanced, so did Butler’s ambition for StockScene. In late 1996, he built ‘SS (Seaboard Stock Exchange)Internet Radio’ with Internet-only access.

As StockScene.com grew in importance, other departments at Seaboard began to take notice.By late 1996, the Legal Department began setting policies governing the sale of real-time exchange data,and it also set up an approval process for advertisements on any exchange site. In Butler’s words,“Legal was killing the advertising on the site. By the time they approved an ad, the client had lostinterest in placing it on our site.” About the same time, the Marketing Department became concernedabout the wisdom of providing free data to members when similar data was being sold to third partieswho then repackaged and marketed it, sometimes to the same members. In Butler’s view, “I had builta great system for member use, and now these staff departments were nitpicking it. It becameincreasingly difficult to get anything through the approvals. When I couldn’t innovate anymore, I lostinterest and turned my site over to the IT department.” At the start of 1997, Fields’ Web developerstook over the maintenance and further development of Butler’s project.

While Butler had been developing his Web site throughout 1996, Fields’ Web developmentinitiative had also moved forward. In early 1996, Karen Greene transferred into the microcomputersupport group from a Seaboard user department where she had automated some traditionally manualfunctions using Macintosh computers. While Greene’s job was to maintain approximately 250-300Macintoshes for Seaboard, she found that “things pretty much ran themselves and I had a lot of freetime.” Greene used the free time to teach herself about Internet tools and technologies. “The othermicrocomputer technician and I were just experimenting without any official approval, although Roger(Fields) did know what we were doing.” Greene describes the site developed at that time as “primarilycat and baby pictures, but we were learning the technology.” Greene’s first Web page was a list ofall the departments at Seaboard, which she produced using WordPerfect. Although she was awareof Seaboard’s earlier Web development efforts, Greene sees those primarily as either consumer-oriented or member-oriented, and views her first page as “the beginning of Seaboard’s intranet, thefirst Seaboard site really designed for regular employee use.”

As Greene’s internal site grew, it began to attract the attention of others elsewhere in theorganization. Paula Reese, Vice President of Corporate Communications, and Greene began commu-nicating about the potential of Internet technologies. Greene told Reese that she did not think thateither the intranet that Greene had developed or the earlier consumer-oriented site looked sufficientlyprofessional. Reese readily agreed with Greene’s evaluation. Reese’s vision was to create a brandimage for Seaboard on the Internet. According to Reese, “I wanted to reach out to those who don’tunderstand the stock market. In my mind, visual appeal and ease of navigation were as important toless informed users as informational content.” Together, Reese and Greene began to fine-tune thepublic site, SeaboardStocks.com, for both content and presentation. Reese was not content withimproving the look of the consumer site. In her words, “My vision was to create a one-stop-shop formarket information. I wanted Seaboard to be the first place consumers thought of when they wantedmarket information. So, I started to build relationships with search engines, journals, and newsletters,with the goal of enticing them to link to Seaboard on their sites.” This approach caught the attentionof Seaboard’s other senior-level management. Largely because of Reese’s efforts, in late 1996 Greenewas promoted to Manager of Web Development, a newly created full-time position. She reporteddirectly to Fields, and was expected to develop an annual strategic plan for the site, prepare a budgetand supervise the other Web developer. At first, Greene’s activities still centered on begging otherdepartments for content, but over the next several years, this situation changed. As Exhibit 7 shows,Internet usage was steadily rising, and Seaboard employees also increased use of their intranet duringthis time. By 1998, Greene obtained permission to hire an experienced graphic artist and Web designeras the second member of her team.

Increasing FormalizationIn 1998, interested employees formed a Web Initiative Committee (WIC). The committee,





Exhibit 7: Internet Host Growth

composed entirely of volunteer staff members, was considered unofficial and, since it was notcomposed of members, was not part of the governing structure of the exchange. The size of thecommittee varied from 10 to 15 staff members, depending on who opted to attend meetings. Thegroup’s focus was to discuss new items of interest in the industry and how Web technology mightbe employed in those new areas, as well as how new Internet technologies might impact the industryand the exchange’s Web presence. The group began to formulate strategy and set policies as seemedappropriate based upon the results of their discussions. As Greene recalls, “The only area we reallysteered clear of was electronic trading, which is really up to the members here. Other than that, weexamined all aspects of the business and what the Internet could do for us.”

Slowly, Sam Butler’s ‘shoot from the hip’ development methodology was modified. Over theperiod from 1996 to 1998, a new development methodology emerged for use within Greene’s area. Smallprojects were still done on request, with no real documentation or approval process, but larger onesbegan to follow a new procedure, as outlined in Exhibit 8. Fields later saw the new procedure as a versionof the PSDP, “modified for Internet time.”

By 1997, three sites, SSManifest.com (the staff Intranet), StockScene.com (a members-only site)and SeaboardStocks.com (the public site) were being maintained separately, each with its own “lookand feel.” The three sites generated a combined total of more than one million hits per day, andaccording to Greene, “Content management was becoming unwieldy. Much of our subject matter wasidentical on all three sites, yet changes were cumbersome because they had to be done separately foreach of the sites.” Throughout the second half of 1998, Reese and Fields worked, with the supportof Fernandez, to gain a line item in the 1999 budget for content management and workflow softwarefor Greene’s group (Knorr, 2000). Ownership of the project to convert Seaboard’s Web sites to contentmanagement software ultimately fell to the marketing area, through a series of events described below.

An E-Commerce Business PlanIn 1999, two different approaches were taken to Seaboard’s e-commerce business plan, one

through the IT department, and one originating with the Board of Directors and led by the Marketingdepartment. In the IT area, Seaboard’s network infrastructure was being outsourced to a leadingprovider of Internet infrastructures. As part of the agreement for network services, this firm bundledin e-commerce consulting services. Fields was highly instrumental in negotiating this contract,and anxious to work closely with the well-regarded consultants. A subgroup of the Web Initiative

Internet Domain Survey Host Count

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

Jan-91

Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Source: Internet Software Consortium (http://www.isc.org/)

Old Domain SurveyAdjusted Count New Domain Survey





Work Order Request Form Technical Guidelines: Technical Guidelines: Maintenance Analysis ReportSite Assessment Creative Hosting Final Site ReviewRough Schedule Production Flow Chart Coding ReportRequest for Client Creative Sign-Off Quality Assurance Report Design Specs Requestor Approves Creative Legal Review & ApprovalCreative Strategy Publish Site FormulationPresent Creative

Pre-Production

CreativeProduction

Technical/Final Steps

Post-Production

Exhibit 8: Web System Development Process

Committee, led by Fields and Greene, began an in-depth study of the organization’s e-commerceopportunities. They began examining all aspects of Seaboard’s business, not just the competitivemarketplace, but also the internal value chain, for opportunities to use Internet technologies forlong-range competitive advantage (Rayport and Sviokla, 1995). As possible projects wereidentified, they were rated in terms of potential value and ease of installation, and prioritized. Asof mid-2000, this study was continuing.

Meanwhile, by mid-1999, senior-level management was becoming increasingly interested in theimpact of technology. As Vance Fernandez describes it, “The Board’s primary technology concernwas, as it had been since the 1960s, the issue of support for the trading floor.” Nonetheless, the Boardof Directors was aware of the impact of electronic trading on other exchanges. They issued an officialstatement that, “Although competitors’ electronic trading has reduced trading volume for some otherexchanges in different market segments, we do not believe that electronic trading by other exchangeswill negatively affect Seaboard’s volume in the foreseeable future.” The board also addressedSeaboard’s growing Internet presence by forming a committee of members to investigate the wisdomof making data available free of charge on the Internet. As one board member explained, “How canwe expect to continue to sell this data to third-party repackagers when we are giving it away free totheir customers?”

Several members, who had not shown any interest in the Internet previously, questioned theBoard of Directors in mid-1999 about future plans. Referring to articles in the popular press (see Exhibit5), they wanted to know what Seaboard’s Internet business plan was. In response to this query, theBoard determined that an “e-commerce business plan” for the exchange should be developed. Bothbudget and staff resources were provided for this effort, which was tied to Reese and Fields’ initiativeto gain approval for content management software. At this point, Seaboard’s marketing departmentbecame very interested in ownership of the project. In the words of Todd Lawson, a manager in themarketing department, “We in marketing saw the potential of the site, not for just simple corporatecommunications, but for marketing. Besides, we knew the federal regulations that the site needed tomeet and corporate communications didn’t. We were the right ones for the job.” Lawson was placedin charge of the emerging project to align the three sites and bring them together under a single contentmanagement software umbrella.

Lawson took the initiative in forming a second subgroup of the Web Initiative Committee,the Web Marketing Group (WMG). This group comprised mainly of marketing, marketing researchand customer service staff. In Lawson’s words, “We decided that if we were going to moveforward, then we needed a smaller group made up only of those of us who dealt regularly with





customers.” The WMG, led by Lawson, developed a project plan for the content managementinstallation and conversion efforts. This plan was constructed without reference to anydevelopment methodology, marking the end of the Web System Development Plan’s use atSeaboard. The IT department, including specifically Greene’s Web development area, was notinvolved during these initial planning stages, and corporate communications played just a minorrole, since neither area was included in the WMG. However, because Greene and Reese were bothinvolved in the WIC, they did receive periodic progress reports.

In January 2000, the process of aligning the consumer, member and employee Seaboard sitesbegan with a market research study. The Web Marketing Group held focus groups with members ofthe exchange, and determined that the content of the three Seaboard sites was good, but that the Webpages were arranged poorly, non-intuitive and difficult to navigate. Based on this, the WMGdetermined that the next step was to interview design firms. Three design firms were chosen by theWMG to present their concepts. The competing firms’ presentation sites were judged by the WMGon creativity, navigation, organization and cost. According to Lawson, “Of the three we brought in,one was too heavy on the creative side, another had no process in place. The firm we chose had thebest combination of price, experience and structure.” One of the outcomes of the marketing departmentinitiative was a determination that there should be cohesion between the three sites and they shouldall be accessible through a single gateway. This was consistent with the earlier conclusions of Reeseand Fields, when they gained approval for content management software.

The Web structure shown in Exhibit 9 was designed by the chosen Internet design firm. Thisfirm provided the artwork and the coding for the top two layers, before delivering the site to Greenefor lower level development and implementation. In July 2000, contact with the design firm ceased,and Greene’s IT area took over the production side of the project, while marketing’s Lawson retainedownership of the initiative.

Greene warned Lawson that the changes in the site’s “look and feel” were dramatic, and it seemedto her that some users would feel disoriented and would complain. Lawson however was concernedprimarily with long-range improvements to the site. When the new combined Web site was installed,there was considerable negative reaction from members, internal staff users and external users. Mostof the complaints centered on change, along with the fact that old bookmarks no longer worked in thenew navigation scheme, and the search function was not fully available yet. Over time, however, usersadjusted to the new navigation and the search feature was fully implemented. Now maintenance andenhancements are determined by the WMG. Lawson and Greene keep track of outstandingmaintenance projects through an electronic spreadsheet and communicate as needed through email.

CURRENT CHALLENGES/PROBLEMS FACING THEORGANIZATION

Seaboard’s e-commerce innovators view the future differently. Karen Greene stresses theprogress that has been made, “Look how far we have come. We have a huge Web presence, and weare making maximum internal use of Internet technologies. We have content management software,a growing Web development group with its own budget and at least recognition that we can use adifferent development methodology for the Web, although we don’t really have one in place right now.That is a lot of progress for a conservative organization in just seven years.” Overall, Todd Lawsonagrees that much progress has been made, “The WMG has done an excellent job with the SeaboardWeb presence thus far. We just need to keep developing its marketing potential, while insuring thatwe do not compete with our traditional product base.”

Roger Fields views an e-business plan, like the one his WIC subgroup is working on, as centralto the future. In Fields’ words, “We have a great opportunity here, with these consultants, to reallylook at the entire business from the standpoint of leveraging technology. I’d like to see this e-businessplan completed and used. That is my hope for the future.” Vance Fernandez, however, thinks the





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Exhibit 9: Newly Designed Web Structure, SeaboardStocks.com

emphasis on e-commerce is misplaced, “All the e-commerce development we have done is minor inimpact compared to what Internet-based electronic trading could do.” As for Sam Butler, he is planninghis retirement, “I want to enjoy my grandchildren. I am too old to play the role of innovator hereanymore. But I worry—who will lead the technology initiatives at Seaboard in the future?”

Paula Reese, no longer directly involved with the Seaboard Web site, continues to watch theInternet activity at both Seaboard and its competitors’ sites. In Reese’s words, “I believe thatSeaboard’s Web site is now impressive. With added graphics, it provides users with a virtual tour ofthe exchange floor, timely financial information and useful financial links. At long last, the financialnews industry is raving about Seaboard.com. That is very rewarding to me personally. However, whenI look back over the years, I see a lot of things I’d like to change. I can’t help but believe that we couldhave gone faster, farther. When I consider what some of Seaboard’s competitors are doing on theInternet, I see missed opportunities. We should be expanding into retail services: e-quotes, e-payments, even e-trading. I just don’t see that happening here anytime soon.” Reese has begun talkingwith executive placement firms.

FURTHER READINGBeath, C. M. (1991). Supporting the information technology champion. MIS Quarterly, 15(3), 355-372.Beer, M. and Nohria, N. (2000). Cracking the code of change. Harvard Business Review, 78(3), 133-

141.Bhide, A. (1994l). How entrepreneurs craft strategies that work. Harvard Business Review, 72:2, 150-

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BIOGRAPHICAL SKETCHESLinda V. Knight is Associate Dean of DePaul University’s School of Computer Science,

Telecommunications and Information Systems. She is also Associate Director of CTI’s Institute forE-Commerce. She conducts research and teaches in the area of e-commerce business strategy,development and implementation, and lectures on the topic of e-commerce curricula. An entrepre-neur and IT consultant, she has held industry positions in IT management and quality assurancemanagement. In addition to a Ph.D. in computer science from DePaul University, Dr. Knight holdsa B.A. in mathematics and an M.B.A., both from Dominican University.

Theresa A. Steinbach is an Instructor at DePaul University’s School of Computer Science,Telecommunications and Information Systems. She conducts research and teaches in the area oftraditional and e-commerce systems analysis and design. As owner of an IT consulting firm, she hasprovided turnkey solutions for small and medium size enterprises in the financial services, municipalgovernment, and health care industries. Ms. Steinbach is currently completing her Ph.D. in computerscience from DePaul University. She holds a B.A. in mathematics, an M.B.A in quantitativeeconomics, and an M.S. in information systems from DePaul University.

Diane M. Graf is a Visiting Assistant Professor at Northern Illinois University’s College ofBusiness, Operations Management and Information Systems Department teaching both under-graduate and graduate courses in IT management and strategy. Her past administrative positionsin both education and business support her teaching and research interests in informationtechnology and group collaboration. In addition to an Ed.D. in management information systemsfrom Northern Illinois University, Dr. Graf holds a B.S. and M.S. in business education from NorthernMichigan University.

APPENDIX A: HISTORY OF THE WORLD WIDE WEB

Year Description 1989 • Tim Berners-Lee and colleagues at CERN propose the World Wide

Web 1990 • First commercial provider of dial-up service, The World 1991 • First version of HTML 1993 • First widely-adopted graphical browser, Mosaic

• New York Times estimates there are 20 million Internet users. 1994 • The World Wide Web Consortium (W3C), an international group of

industry and academic representatives, forms to help insure commonality.

1999 • eGlobal Report estimates there are 130.6 million Internet users.

seaboard stock exchange's emerging e-commerce initiative

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