Seaboard Stock Exchange's Emerging E-Commerce Initiative

Seaboard Stock Exchange’s Emerging E-Commerce Initiative

Linda V. Knight Theresa A. Steinbach Diane M. Graf IDEA GROUP PUBLISHING

Seaboard Stock Exchange’s Emerging E-Commerce Initiative

IDEA GROUP PUBLISHING

1331 E. Chocolate Avenue, Hershey PA 17033-1117, USA Tel: 717/533-8845; Fax 717/533-8661; URL-http://www.idea-group.com

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g n i h s i l b u P p u o r G a e Seaboard Stock Exchange’s d I t h g i r opy CEmerging E-Commerce Initiative g n i h s i l b u P up o r G a e d I t h g i r y EXECUTIVE Cop SUMMARY g n i h s i l b u P p u o r G a e BACKGROUND d I t h g i r y Cop g n i h lis b u P p u o r G a e d I t h g i r y p Co Linda V. Knight and Theresa A. Steinbach DePaul University, USA Diane M. Graf Northern Illinois University, USA

While 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 accelerating the rate of disintermediation and the entrance of new competitors into Seaboard’s market. Against this backdrop, Seaboard’s e-commerce initiative has emerged. Tension between control and experimentation surfaces as the association attempts to incorporate emerging technology while maintaining its traditional way of doing business. The organization struggles to merge new technology with existing IT strategy while internal entrepreneurs strive to shape a Web development methodology and define an appropriate role for standards and controls in an emerging technology environment.

Seaboard 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 group of eight businessmen meeting informally in a garden outside of Rock Island, New Hampshire, to buy and sell local stocks. For decades, Seaboard remained, in the words of one manager, “a sleepy little regional exchange,” until the mid-1970s when it made a strategic decision to become a national exchange. Since that time, Seaboard has expanded to approximately 500 traders handling a wide variety of stock and bond products. The exchange continues its heritage of face-to-face trading in an open arena to this day. Traders meet on an open floor and use hand signals to convey the quantity of a particular stock or bond that they would like to buy or sell. Bids to buy and offers to sell are made by open outcry. When the highest bid meets the lowest offer, the two traders each write down the trade on 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 relative position in the world is slipping. As Exhibit 1 shows, trading volume, which had been relatively steady from the earliest days, took a major swing upward in the 1970s when Seaboard decided to “go national.” Copyright © Idea Group Publishing. Copying without written permission of Idea Group Publishing is prohibited.

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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’s trading volume mean that its member/traders, who charge customers for each trade they execute, are earning less. This situation has triggered a drop in the price of a seat on the exchange. Declines in the price of a Seaboard Stock Exchange seat mean that when members decide to retire or cash out, they reap far fewer dollars than previously (Arvedlund, 2000). The price of a Seaboard seat has dropped from a record high of $905,000 in the late 1980s to $322,000 in late 2000. Seaboard’s membership is concerned about these declines, and has recently moved to trim staff in order to cut costs. These cost cutting measures can be expected to increase cash flow for the organization when it comes to paying its 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-profit association. The members own their own seats, have trading rights on the exchange, and manage the organization through the system of committees shown in Exhibit 3. Members also elect the Board of Directors and President. Further, since they are present every trading day, they play an active role in the day-to-day operations of the organization. The exchange employs a staff of about six hundred employees, one-third of whom are in the Information Technology department. The primary responsibility of all staff is to support the trading floor and keep it running smoothly. According to Vance Fernandez, Vice President of Information Technology, “Working at Seaboard means having five hundred bosses. Staff at all levels, including the President, will drop everything if a member calls with a request.” For example, when a member decided that he wanted a statistical analysis of recent energy stock prices, Fernandez immediately reassigned 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 making wise 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 than being paid out as dividends or profits to the member/owners. Profits that had been saved in prior years are now being depleted as Seaboard’s annual income drops below that needed to maintain its fixed costs. Seaboard’s current economic dilemma, and the increasing domestic and foreign competition,

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Exhibit 1: Seaboard Stock Exchange Trading Volume 350,000,000

Seaboard Stock Exchange Trading Volume

300,000,000 250,000,000 200,000,000 150,000,000 100,000,000

Note that years prior to 1995 are in 5 year increments

50,000,000 0

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

1996

1997

1998

1999

2000

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Exhibit 2: Seaboard Stock Exchange Organizational Structure

Chairman and Board of Directors

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M

M

M

Approximately five hundred M M owner/members rule exchange M M M through committees M M M M M M M M M M M M

M

M

M

President

V.P., I.T. Vance Fernandez

Application

Development

Director

V.P. Marketing

Operations Director, Roger Fields

V.P., Corporate Communications Paula Reese

Marketing Manager, Todd Lawson

Manager of Web

Development,

Karen Greene

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

Exhibit 3: Seaboard Stock Exchange Governing Committees • • • • •

Executive Committee Finance & Audit Committee Floor Procedures Committee Human Resources Committee Marketing Committee

• • • • •

Membership & Admission Committee Nominating & Elections Committee Product Development Committee Strategic Planning Committee Technology & Automation Committee

*Other Vice Presidents

*Other Departments

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

SETTING THE STAGE

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Strategic 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 cost of approximately $36 million. The floor is supported by an extensive network of fault-recovery mainframe computers, an ATM network capable of carrying voice and data, and a massive telephone communication system. This advanced technology supports the traditional open outcry trading system 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 beyond evening 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 it provides “unprecedented connectivity” at minimal cost (Wall Street and Technology, 2000). It is estimated within the industry that an electronic trade costs less than half as much as a traditional trade to execute. Proponents of traditional trading floors, on the other hand, praise their ability to provide unbiased 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 and market 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 opened exchanges that are totally electronic from the first trading day. Thus a small developing country like Singapore with a brand new stock exchange sometimes has a more modern wireless technology infrastructure than Seaboard or its traditional United States counterparts. Such foreign exchanges are not direct competitors because they are trading different stocks. However, all exchanges compete for the same investor dollars. Additionally, some competing United States exchanges have begun moving into other parts of the world through partnerships (Wagley, 2000). A further threat to existing exchanges comes from electronic communications networks (ECNs) (Latimore, 1999). ECNs, using Internet technologies, connect buyers directly to sellers without any intermediaries. In December 1998, the Securities and Exchange Commission (SEC) passed Regulation ATS, which grants Alternative Trading 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 trading volume in just three years, and are now targeting other stock market segments (Carroll, Lux and Schack, 2000). Seaboard’s members generally view electronic trading, ECNs and new high-tech foreign exchanges as encumbered by an inability to leverage the trading insights that Seaboard members employ to get their customers the best prices.

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The Information Technology Department at Seaboard is divided into two departments, Application Development and Operations. The Operations area includes the data center, network support, and microcomputer support teams. The Application Development area, responsible for all new system development and maintenance programming, is divided into four teams: floor support, order processing, regulatory systems and financial systems. Application Development makes regular use of consultants from top-name consulting firms, particularly for the early stages of new system development, and when employing new technologies for the first time. The area has defined a strict methodology for how new development is to be approached, with ample upfront planning and an

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emphasis on approvals at strategic points in the development process. This methodology, the Planned System 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 unexpected member criticism late in the development process.

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CASE DESCRIPTION

Early Web Development Efforts

Seaboard’s first experience with Web development came in 1993, when a small group of microcomputer installation technicians became interested in the Internet. As one member of the group explained, “We didn’t have any experience building systems of any kind, but we had extra time available to experiment.” Most of the group’s first site consisted of profiles and personal Web pages of the PC specialists themselves, coupled with a loose collection of pages about the mission, 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 Board System. Butler’s BBS made historical financial data on the most heavily traded stocks available to the general public 24/7. Looking back on that time from the year 2000, Butler said, “I was once a small trader myself, and I appreciate the position of the little guy. If we can help him out with some free data, why not? Of course, I thought making this data available would be good for Seaboard’s image, too.” Roger Fields, the IT Operations Director, recalled later that this time period “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’s president picked up on the trend, issuing a directive to create a Web presence for the organization by the end of 1994. The exchange president stated privately at the time “Although there is no member support for using the Internet for electronic trading, the technology still might be important someday in this business.” He then authorized the funding necessary for two microcomputer specialists to officially spend five to ten percent of their time on this project. The two developers, anxious to get a site working as soon as possible, concentrated their efforts upon “begging” various departments for content, and then translating that content into HTML as quickly as possible. In the year 2000, when Fields looked back on the site, he described it as “ a basic form of brochureware, with clickable links for the organization’s mission, history and goals.” This site, shown in Exhibit 6, combined with a somewhat expanded version of the original intranet and BBS, represented the organization’s secondgeneration 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)

System Planning

Work Order Request Form Dept. Manager Signature Dept. VP Signature Computer Requirements Committee Authorization Preliminary Investigation

System Analysis

Data Requirements Business Processes Interface Requirements Communications Requirements Systems Requirement Report

System Design

Database Schema Application Schema Interface Schema System Architecture System Design Specification Dept. VP Signature

System

Implementation

Documentation Review Coding Review Quality Assurance Review Test Plan & Testing File Conversion Plan & Conversion

System Support

Work Order Request Dept. Manager Signature Dept. VP Signature Computer Requirements Committee Authorization

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Exhibit 5: Business Press Coverage of E-Commerce

Business Week

Forbes

400 Number of ABI/Inform abstracts mentioning Internet, WWW, ecommerce or ebusiness

200

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Fortune

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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Business Week

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0

0

2

20

88

197

147

179

370

Forbes

0

1

1

3

11

50

103

87

105

196

266 74

g n i h lis b u P p u o r G a e d I t h g i r y p Co g n i h s i l b u P p u Initiative o Expansion of the E-Commerce r G a e d I t h g i r y Cop g n i h lis b u P p u o r G a e d I t h g i r y p Co Fortune

0

0

0

3

15

28

58

75

100

202

173

Year

to their traditional microcomputer support duties. Fields brought in an outside design team to improve the “look and feel” of the site, which up until that time had no graphic artists associated with it. He recalled 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 consultants now began to build relationships with departments elsewhere in the organization, particularly marketing and corporate communications. As Fields explains it now, “When the Web developers first sought relationships with these departments, they were just looking for data for the Web site. As the relationships developed, they realized that these other departments could help us establish a vision for the site. At that point, the Web developers consciously began to seek input on the purpose and goals of the site. That’s also when the first efforts were made to profile potential users of the site by discussing with other departments who was likely to visit the site and why.”

In 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 highly successful small financial service firms during that same timeframe. In each case, once Butler had built up his business, he “sold the company and moved on to new challenges.” Butler describes himself as “someone who likes to read about technology, and experiment with new ideas.” In the 1980s when Seaboard’s statistical analysis was partially hand-generated and partially produced by the mainframe in the form of monumental stacks of computer printouts, Butler began doing his own number-crunching through PC spreadsheet software. When Mosaic and GUI interfaces became prominent in 1995, Butler decided to replace the BBS that he had created in 1993, providing Seaboard’s members with a simpler GUI interface to his online data. Using an $88,000 budget that he had been given by the exchange president, Butler hired one technician, Chester Bromwell to work by his side. Butler then spent the remainder of his seed money on some small hardware purchases. For most of his hardware needs, Butler refurbished 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 path to the restrooms. Butler correctly reasoned that this location would give him contact with most IT

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Exhibit 6: Second Generation Seaboard Consumer Web Site

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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 with Butler and Bromwell about Internet technologies and the future of the Internet at Seaboard. Fields recalls appreciating the hallway’s synergistic generation of ideas and encouraging participation by his staff, “as long as their regular duties were attended to.” Fields’ boss, Vance Fernandez, has a similar recollection. “It was a time of great excitement in the industry, and Sam brought that excitement to our area. There still was no real member interest in the Internet or its potential for electronic trading, outside of Sam of course, so I couldn’t officially support such development, but I was willing to do what I could unofficially. As a whole, the IT line staff were as curious as Sam about the new technology, and freely gave their time and expertise to Sam’s project. There was great excitement and positive energy in Sam’s hallway.” The one exception was Butler’s disagreement with the Director of Application Development concerning the Planned System Development Process. In Butler’s words, “The PSDP was and still is totally unworkable. No wonder those people in IT can never seem to get anything implemented. I didn’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 to provide 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 did not see security as a major issue since many of his users were members. He selected Netscape’s Credit Card SystemTM for payment because it was easy to use and readily available. As Internet technology

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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 lost interest in placing it on our site.” About the same time, the Marketing Department became concerned about the wisdom of providing free data to members when similar data was being sold to third parties who then repackaged and marketed it, sometimes to the same members. In Butler’s view, “I had built a great system for member use, and now these staff departments were nitpicking it. It became increasingly difficult to get anything through the approvals. When I couldn’t innovate anymore, I lost interest and turned my site over to the IT department.” At the start of 1997, Fields’ Web developers took over the maintenance and further development of Butler’s project. While Butler had been developing his Web site throughout 1996, Fields’ Web development initiative had also moved forward. In early 1996, Karen Greene transferred into the microcomputer support group from a Seaboard user department where she had automated some traditionally manual functions using Macintosh computers. While Greene’s job was to maintain approximately 250-300 Macintoshes for Seaboard, she found that “things pretty much ran themselves and I had a lot of free time.” Greene used the free time to teach herself about Internet tools and technologies. “The other microcomputer 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 “primarily cat and baby pictures, but we were learning the technology.” Greene’s first Web page was a list of all the departments at Seaboard, which she produced using WordPerfect. Although she was aware of Seaboard’s earlier Web development efforts, Greene sees those primarily as either consumeroriented or member-oriented, and views her first page as “the beginning of Seaboard’s intranet, the first Seaboard site really designed for regular employee use.” As Greene’s internal site grew, it began to attract the attention of others elsewhere in the organization. Paula Reese, Vice President of Corporate Communications, and Greene began communicating about the potential of Internet technologies. Greene told Reese that she did not think that either the intranet that Greene had developed or the earlier consumer-oriented site looked sufficiently professional. Reese readily agreed with Greene’s evaluation. Reese’s vision was to create a brand image for Seaboard on the Internet. According to Reese, “I wanted to reach out to those who don’t understand the stock market. In my mind, visual appeal and ease of navigation were as important to less informed users as informational content.” Together, Reese and Greene began to fine-tune the public site, SeaboardStocks.com, for both content and presentation. Reese was not content with improving the look of the consumer site. In her words, “My vision was to create a one-stop-shop for market information. I wanted Seaboard to be the first place consumers thought of when they wanted market 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 attention of Seaboard’s other senior-level management. Largely because of Reese’s efforts, in late 1996 Greene was promoted to Manager of Web Development, a newly created full-time position. She reported directly to Fields, and was expected to develop an annual strategic plan for the site, prepare a budget and supervise the other Web developer. At first, Greene’s activities still centered on begging other departments 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 during this time. By 1998, Greene obtained permission to hire an experienced graphic artist and Web designer as the second member of her team.

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

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Exhibit 7: Internet Host Growth Internet Domain Survey Host Count Source: Internet Software Consortium (http://www.isc.org/) 120,000,000

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Old Domain Survey Adjusted Count New Domain Survey

40,000,000 20,000,000

0

Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan91 92 93 94 95 96 97 98 99 00 01

composed entirely of volunteer staff members, was considered unofficial and, since it was not composed of members, was not part of the governing structure of the exchange. The size of the committee varied from 10 to 15 staff members, depending on who opted to attend meetings. The group’s focus was to discuss new items of interest in the industry and how Web technology might be employed in those new areas, as well as how new Internet technologies might impact the industry and the exchange’s Web presence. The group began to formulate strategy and set policies as seemed appropriate based upon the results of their discussions. As Greene recalls, “The only area we really steered clear of was electronic trading, which is really up to the members here. Other than that, we examined 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 the period from 1996 to 1998, a new development methodology emerged for use within Greene’s area. Small projects were still done on request, with no real documentation or approval process, but larger ones began to follow a new procedure, as outlined in Exhibit 8. Fields later saw the new procedure as a version of 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 “look and feel.” The three sites generated a combined total of more than one million hits per day, and according to Greene, “Content management was becoming unwieldy. Much of our subject matter was identical on all three sites, yet changes were cumbersome because they had to be done separately for each of the sites.” Throughout the second half of 1998, Reese and Fields worked, with the support of Fernandez, to gain a line item in the 1999 budget for content management and workflow software for Greene’s group (Knorr, 2000). Ownership of the project to convert Seaboard’s Web sites to content management software ultimately fell to the marketing area, through a series of events described below.

In 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 Marketing department. In the IT area, Seaboard’s network infrastructure was being outsourced to a leading provider of Internet infrastructures. As part of the agreement for network services, this firm bundled in 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

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Exhibit 8: Web System Development Process

PreProduction

Work Order Request Form Site Assessment Rough Schedule Request for Client Design Specs Creative Strategy Formulation Present Creative

Creative Production

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Technical Guidelines: Creative Production Flow Chart Creative Sign-Off Requestor Approves Creative

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Technical/ Final Steps

Technical Guidelines: Hosting Coding Report Quality Assurance Report Legal Review & Approval Publish Site

PostProduction

Maintenance Analysis Report Final Site Review

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Committee, led by Fields and Greene, began an in-depth study of the organization’s e-commerce opportunities. They began examining all aspects of Seaboard’s business, not just the competitive marketplace, but also the internal value chain, for opportunities to use Internet technologies for long-range competitive advantage (Rayport and Sviokla, 1995). As possible projects were identified, they were rated in terms of potential value and ease of installation, and prioritized. As of mid-2000, this study was continuing. Meanwhile, by mid-1999, senior-level management was becoming increasingly interested in the impact of technology. As Vance Fernandez describes it, “The Board’s primary technology concern was, as it had been since the 1960s, the issue of support for the trading floor.” Nonetheless, the Board of Directors was aware of the impact of electronic trading on other exchanges. They issued an official statement that, “Although competitors’ electronic trading has reduced trading volume for some other exchanges in different market segments, we do not believe that electronic trading by other exchanges will negatively affect Seaboard’s volume in the foreseeable future.” The board also addressed Seaboard’s growing Internet presence by forming a committee of members to investigate the wisdom of making data available free of charge on the Internet. As one board member explained, “How can we expect to continue to sell this data to third-party repackagers when we are giving it away free to their customers?” Several members, who had not shown any interest in the Internet previously, questioned the Board of Directors in mid-1999 about future plans. Referring to articles in the popular press (see Exhibit 5), they wanted to know what Seaboard’s Internet business plan was. In response to this query, the Board determined that an “e-commerce business plan” for the exchange should be developed. Both budget and staff resources were provided for this effort, which was tied to Reese and Fields’ initiative to gain approval for content management software. At this point, Seaboard’s marketing department became very interested in ownership of the project. In the words of Todd Lawson, a manager in the marketing department, “We in marketing saw the potential of the site, not for just simple corporate communications, but for marketing. Besides, we knew the federal regulations that the site needed to meet and corporate communications didn’t. We were the right ones for the job.” Lawson was placed in charge of the emerging project to align the three sites and bring them together under a single content management 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 research and customer service staff. In Lawson’s words, “We decided that if we were going to move forward, then we needed a smaller group made up only of those of us who dealt regularly with

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customers.” The WMG, led by Lawson, developed a project plan for the content management installation and conversion efforts. This plan was constructed without reference to any development methodology, marking the end of the Web System Development Plan’s use at Seaboard. The IT department, including specifically Greene’s Web development area, was not involved during these initial planning stages, and corporate communications played just a minor role, since neither area was included in the WMG. However, because Greene and Reese were both involved in the WIC, they did receive periodic progress reports. In January 2000, the process of aligning the consumer, member and employee Seaboard sites began with a market research study. The Web Marketing Group held focus groups with members of the exchange, and determined that the content of the three Seaboard sites was good, but that the Web pages were arranged poorly, non-intuitive and difficult to navigate. Based on this, the WMG determined that the next step was to interview design firms. Three design firms were chosen by the WMG to present their concepts. The competing firms’ presentation sites were judged by the WMG on 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 the best combination of price, experience and structure.” One of the outcomes of the marketing department initiative was a determination that there should be cohesion between the three sites and they should all be accessible through a single gateway. This was consistent with the earlier conclusions of Reese and Fields, when they gained approval for content management software. The Web structure shown in Exhibit 9 was designed by the chosen Internet design firm. This firm provided the artwork and the coding for the top two layers, before delivering the site to Greene for 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 retained ownership of the initiative. Greene warned Lawson that the changes in the site’s “look and feel” were dramatic, and it seemed to her that some users would feel disoriented and would complain. Lawson however was concerned primarily 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. Most of the complaints centered on change, along with the fact that old bookmarks no longer worked in the new navigation scheme, and the search function was not fully available yet. Over time, however, users adjusted to the new navigation and the search feature was fully implemented. Now maintenance and enhancements are determined by the WMG. Lawson and Greene keep track of outstanding maintenance projects through an electronic spreadsheet and communicate as needed through email.

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Seaboard’s e-commerce innovators view the future differently. Karen Greene stresses the progress that has been made, “Look how far we have come. We have a huge Web presence, and we are 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 a different 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 Lawson agrees that much progress has been made, “The WMG has done an excellent job with the Seaboard Web presence thus far. We just need to keep developing its marketing potential, while insuring that we 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 central to the future. In Fields’ words, “We have a great opportunity here, with these consultants, to really look at the entire business from the standpoint of leveraging technology. I’d like to see this e-business plan 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 Welcome & Disclaimer

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Home Page

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Headlines Press Releases

Market Information

About Us

Ticker Quotes StockScene

Tour the Floor Members History FAQ SSManifest

Events Calendar

Conferences & Workshops Seminars & Educational

Library

Online Publications Regulations Links of Interest

Share Your Views

Chat Central

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emphasis on e-commerce is misplaced, “All the e-commerce development we have done is minor in impact compared to what Internet-based electronic trading could do.” As for Sam Butler, he is planning his retirement, “I want to enjoy my grandchildren. I am too old to play the role of innovator here anymore. 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 the Internet activity at both Seaboard and its competitors’ sites. In Reese’s words, “I believe that Seaboard’s Web site is now impressive. With added graphics, it provides users with a virtual tour of the exchange floor, timely financial information and useful financial links. At long last, the financial news industry is raving about Seaboard.com. That is very rewarding to me personally. However, when I look back over the years, I see a lot of things I’d like to change. I can’t help but believe that we could have gone faster, farther. When I consider what some of Seaboard’s competitors are doing on the Internet, I see missed opportunities. We should be expanding into retail services: e-quotes, epayments, even e-trading. I just don’t see that happening here anytime soon.” Reese has begun talking with executive placement firms.

Beath, 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), 133141. Bhide, A. (1994l). How entrepreneurs craft strategies that work. Harvard Business Review, 72:2, 150161. Cash, J.I. Jr. (1994). A Call to Disorder. InformationWeek, 498, 80. Cash, J.I. Jr. (1994). The Art of the Possible. InformationWeek, 504, 112. Christensen, C. (1997). The innovator’s dilemma: When new technologies cause great firms to fail. Boston, MA: Harvard Business School Press. Christensen, C. and Overdorf, M. (2000). Meeting the challenge of disruptive change. Harvard Business Review, 78(2), 66-76. Clair, C. (2000). Several exchanges becoming for-profit ventures. Pensions and Investments, 28(24), 61. Evans, P., & Wurster, T. (1999). Getting real about virtual commerce. Harvard Business Review, 77(6), 84-94.

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Gallaugher, J. (1999). Challenging the new conventional wisdom of net commerce strategies. Communications of the ACM, 42(7), 27-29. Ghosh, S. (1998, March/April). Making business sense of the Internet. Harvard Business Review, 76(2), 126-135. Henderson, J.C. and Venkatraman, N. (1999). Strategic alignment: Leveraging information technology for transforming organizations. IBM Systems Journal, 38(2-3), 472-484. Rahman, S. M. & Raisinghani, M. (2000). Electronic commerce: Opportunity and challenges. Hershey, PA: Idea Group Publishing. Roberts, T. L., Gibson, M. L., & Fields, K. T. (1999, July-September). System development methodology implementation: Perceived aspects of importance. Information Resources Management Journal, 12(3), 27-38. Scharl, A. (2000). Evolutionary Web Development. London: Springer. Sherrell, L.B. and Chen, L. (2001, April). The W Life Cycle Model and Associated Methodology for Corporate Web Site Development. Communications of the Association for Information Systems, 5(7). TradeNet. http://www.tradeweb.com/abouttradeweb/Introduction.htm. Accessed August 7, 2001. Venkatraman, N. (2000, Spring). Five steps to a dot.com strategy: How to find footing on the web. Sloan Management Review, 41(3), 15-28. Wall Street and Technology (2000, November). Evolving Exchanges. 18(11), 14-20.

g n i h s i l b u P p u o r G a e d I t h g i r y p o C g n i h s i l b u P up o r G a REFERENCES e d I t h g i r y Cop g n i h s i l b u P p u o r G a e d I t h g i r y Cop g n i h lis b u P p u o r G a e d I t h g i r y p Co Arvedlund, E. E. (2000). New bottom line. Barron’s, 80(12), 26-27. Carroll, M., Lux, H., & Schack, J. (2000). Trading meets the millennium. Institutional Investor, 34:1, 3653. Knorr, E. (2000). Content management crossfire. CIO Magazine, http://www.cio.com/archive/ 120100_et_pundit.html. Accessed August 7, 2001. Latimore, D. (1999, November-December). Of marketts and mania. Financial Executive, 15(6), 24-27. McAndrews, James & Stefanadis, Chris (2000). The Emergence of Electronic Communications Networks in the U.S. Equity Markets. Current Issues in Economics & Finance, 6(12), 1-5. Morgan, C., & Perkins, S. (2000). Electronic exchanges emerge transforming the equities business. Wall Street and Technology, 18(10), 72-74. Mosser, M., & Codding, J. (2000, June). Gentlemen, start your exchanges. Futures, 29(6), 76-80. Osterland, A. (1998, September 7). Electronic trading: A hue and cry in the pits. Business Week, 3594, 82. Rayport, J. F. and Sviokla, J. J. (1995). Exploiting the virtual value chain. Harvard Business Review, 73(6), 75-85. Tsang, R. (1999). Open outcry and electronic trading in futures exchanges. Bank of Canada Review, 150(3), 21-39. Wagley, J. (2000). The battle for overseas listings: The NYSE/Nasdaq duel for listings in Europe and Asia is getting interesting…and more competitive. Investment Dealers’ Digest, 16(21), 16-21 Wall Street and Technology (2000). eCommerce in the U.S. Fixed Income Markets. http:// www.wallstreetandtech.com /story/electronic Trading/WST20000817S0001. Accessed August 7, 2001. Wall Street and Technology (1999). The great auction-issuing share and enticing IT talent. , 17(11), 30-36. Accessed August 7, 2001.

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APPENDIX A: HISTORY OF THE WORLD WIDE WEB Year 1989 1990 1991 1993

Description • Tim Berners-Lee and colleagues at CERN propose the World Wide Web • First commercial provider of dial-up service, The World • First version of HTML • First widely-adopted graphical browser, Mosaic • New York Times estimates there are 20 million Internet users. • The World Wide Web Consortium (W3C), an international group of industry and academic representatives, forms to help insure commonality. • eGlobal Report estimates there are 130.6 million Internet users.

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Linda 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 for E-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 entrepreneur and IT consultant, she has held industry positions in IT management and quality assurance management. In addition to a Ph.D. in computer science from DePaul University, Dr. Knight holds a 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 of traditional and e-commerce systems analysis and design. As owner of an IT consulting firm, she has provided turnkey solutions for small and medium size enterprises in the financial services, municipal government, and health care industries. Ms. Steinbach is currently completing her Ph.D. in computer science from DePaul University. She holds a B.A. in mathematics, an M.B.A in quantitative economics, and an M.S. in information systems from DePaul University. Diane M. Graf is a Visiting Assistant Professor at Northern Illinois University’s College of Business, Operations Management and Information Systems Department teaching both undergraduate and graduate courses in IT management and strategy. Her past administrative positions in both education and business support her teaching and research interests in information technology and group collaboration. In addition to an Ed.D. in management information systems from Northern Illinois University, Dr. Graf holds a B.S. and M.S. in business education from Northern Michigan University.