International Review of Public Administration

ISSN: 1229-4659 (Print) 2331-7795 (Online) Journal homepage: https://www.tandfonline.com/loi/rrpa20

Development of An E-Government Service Model:

A Business Model Approach

Kyoung Jun Lee & Joon-Hyung Hong

To cite this article: Kyoung Jun Lee & Joon-Hyung Hong (2002) Development of An E-
Government Service Model: A Business Model Approach, International Review of Public
Administration, 7:2, 109-118, DOI: 10.1080/12294659.2002.10805010

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© International Review of Public Administration 109
2002, Vol. 7, No. 2

DEVELOPMENT OF AN E-GOVERNMENT SERVICE MODEL:

A BUSINESS MODEL APPROACH

KYOUNG JUN LEE

Graduate School of Public Administration, Seoul National University

JOON-HYUNG HONG
Graduate School of Public Administration, Seoul National University

Most discussions on electronic government have provided ad hoc guidelines. For a system-
atic framework for e-government service, this article adopts a business model approach and
develops an e-government service model. Based on the analysis of business model researches
and a comparison between e-business and e-government service, the paper defines and identi-
fies the characteristics of the components of an e-government service model. These compo-
nents are objectives, value proposition, service offering, activity configuration, and financial
sustainability. Based on this framework, the authors perform a case analysis of the electronic
services in the offices of the presidents of Korea and the U.S.A.

E-government is defined as the transformation of the the business model approach to e-government service,
internal and external processes of governments by infor- we will define an e-government service model and thus
mation and communications technologies. On the other identify the characteristics of the components of an e-
hand, e-government service is about using technology to government service model.
enhance access to and delivery of government informa- Since the Internet receives much attention as a key
tion and services to citizens, business partners, employ- business platform, the term ‘business model’ is used
ees, agencies, and government entities. This definition much more frequently than before. The Internet enables
of e-government service emphasizes the concept of ser- a wider range of new business models with its universal-
vice using information and communication technologies ity, time moderation effect, and infinite virtual capacity
at its core. In this paper, we focus on the service part of (Afuah and Tucci 2002). The old so-called ‘brick-and-
e-government and differentiate between the term ‘e-gov- mortar’ companies were forced to change their existing
ernment service’ and the term ‘e-government.’ To better business models to new business models. While the
describe the concept, the term ‘electronic service of gov- computerization and digital networking within organiza-
ernment’ is more precise than ‘e-government service;’ tions in the early 1990s demanded business process
however, for convenience and brevity, we use the latter reengineering, the business-to-business and business-to-
term in this paper. consumer digital networking with Internet has called for
There are many discussions on e-government ser- innovative business models and a framework for analyz-
vice, but most provide ad hoc guidelines and lack sys- ing them.
tematic approaches. In e-business, both practitioners and The business model framework essentially exists to
academics have emphasized the ‘business model’ as a design a new business or plan the transformation of an
useful construct and methodology for the successful existing business. In addition, a business model is a
design and implementation of an e-business. This paper guide to evaluating a business by generating critical
also adopts the ‘business model’ approach. By applying business model questions. Finally, a business model can
110 Development of an E-Government Service Model Vol. 7, No. 2

be a basis for employee communication and motivation and substitutes (profit site), the value that a firm offers
(Magretta 2002). A good business model can become a its customers (customer value), it’s target customers, the
powerful tool for improving execution. scope of products/services it offers and to which cus-
tomers (scope), its sources of revenue (revenue source),
the price it puts on the value offered its customers (pric -
RESEARCHES ON BUSINESS MODELS ing), the activities it must perform in offering that value
(connected activities), the basis of theses capabilities
There is no agreement on the definition and scope of (capabilities), what a firm must do to sustain the advan-
a business model. Timmers (1998) defines a business tages it has (sustainability), how well it can implement
model as: 1) an architecture for product, service and these components of the business model (implementa -
information flow, with a description of the various busi- tion), and the relationship between its revenues and the
ness actors and their roles; 2) a description of the poten- underlying costs of generating those revenues (cost
tial benefits for the various business actors; and 3) a structure).
description of the sources of revenues. Mahadevan As seen above, there is no consensus on the defini-
(2000) suggests three business model building blocks: tion of a business model. Research into business models
value streams, revenue streams and logistical streams, has been inspired by the recent spread of the Internet;
and claims that a business model is a unique blend of the consequently, the research itself is still embryonic.
three. The value stream identifies the value proposition Porter (2001) points out the risk of using the ‘business
for the buyers, sellers, and the market makers. The rev- model’ concept at this early stage. Amit and Zott (2001)
enue stream is a plan for assuring revenue generation for also agree that the theoretical foundations of the busi-
the business. The logistical stream addresses various ness model concept are not yet fully developed, and that
issues related to the design of the supply chain for the business model concepts in the nonacademic literature
business. suffer from ambiguity, contradiction, and misconcep-
Rayport and Jaworski (2001) define a business tion. They suggest, however, that no single entrepre-
model as four choices on (1) a value proposition or a neurship or strategic management theory can fully
value cluster for targeted customers, (2) a marketspace explain the value creation potential of e-businesses, and
offering - which could be products, services, informa- consequently an integration of theoretical perspectives
tion or all three, (3) a unique, defendable resource sys- on value creation is needed. To enable such integration,
tem, and (4) a financial model. The value proposition they offer the business model construct as a unit of
defines the choice of target segment, the focus of cus- analysis for future research on value creation. Amit and
tomer benefits, and a rationale for a firm’s delivering the Zott define a business model as the design of transaction
benefit package significantly better than its competitors content, structure, and governance to create value
can. The marketspace offering entails a precise articula- through the exploitation of business opportunities. New
tion of the products, services, and information provided value can be created by the ways in which transactions
by the firm. The resource system supports the specific are enabled, and that a firm’s business model is an
set of capabilities and resources that the firm will engage important locus of innovation and a crucial source of
in to deliver the offering in a unique way. The financial value creation for the firm, its suppliers, partners, and
model is the various ways that the firm proposes to gen- customers.
erate revenue, enhance value, and grow. From a technology management perspective, Ches-
Afuah and Tucci (2002) suggest the components of a brough and Rosenbloom (2002) state that a business
business model are profit site, customer value, scope, model is composed of 1) value proposition (i.e., the
pricing, revenue source, connected activities, implemen- value created for users by the offering based on the tech-
tation, capabilities, sustainability, and cost structure. nology), 2) market segment (i.e., the users to whom the
They define a business model as the method by which a technology is useful and for what purpose), 3) value
firm builds and uses its resources to offer its customers chain structure (within the firm required to create and
better value than its competitors, and make a profit by distribute the offering), 4) cost structure and profit
doing so. A business model describes the location of a potential (of producing the offering, given the value
firm in a value configuration vis-à-vis its suppliers, cus- proposition and value chain structure chosen), 5) value
tomers, rivals, potential new entrants, complementors, network positioning (i.e. the position of the firm within
December 2002 Kyoung Jun Lee and Joon-Hyung Hong 111

Table 1. Appoximate mapping of business model definitions

Mahadevan Amit & Zott Timmers Afuah & Tucci Rayport & Chesbrough &
(2000) (2001) (1998) (2002) Jaworski (2001) Rosenbloom (2002)
- Logistics - Transaction - Architecture for the product, - Scope - Marketspace - Value network
Stream structure service and information flows offering positioning
- Actors and their roles
- Value - Transaction - Potential benefits for actors - Customer value - Value - Market segment
Stream content - Profit Site proposition - Value proposition
- Revenue - Transaction - Sources of revenues - Revenue source - Financial model - Cost structure and
Stream governance and profits - Pricing profit potential
- Sustainability
- Cost structure
N.A. N.A. N.A. - Implementation - Resource system - Value chain
- Capabilities structure
- Connected activities
N.A. N.A. N.A. N.A. N.A. - Competitive
strategy
(N.A.: Not available or applied)

the value network linking suppliers and customers existence, main deliverables, sources of uncertainty,
including identification of those with whom the firm evaluation criteria, and perspectives on information and
will potentially complement or compete), 6) competitive knowledge. Both e-business and e-government service
strategy (by which the innovating firm will gain and pursue cost reduction and customer (‘citizen’ in govern-
hold advantage over rivals). Table 1 shows the compari- ment service) satisfaction, but an e-government service
son and approximate mapping between the components is inherently monopolistic and does not pursue profits.
in the above definitions of business model. In addition, the main deliverables of e-government ser-
vice are intangible services, and they are regarded as
public assets rather than as proprietary or commercial
AN E-GOVERNMENT SERVICE MODEL assets. While e-business suffers from the uncertainties of
the market, competitors, and disruptive technologies, the
The business model definitions above cannot be stability of e-government service depends on policy ori-
directly applied to a definition of an e-government ser- entation and political considerations.
vice model. Therefore, we have modified them in con- Combining the business model researches and con-
sideration of the characteristics of e-government service. sidering the differences between e-government service
As summarized in Table 2, e-business and e-govern- and e-business, we derive the components for an e-gov-
ment service differ in their basic structures, reasons for ernment service model: Objectives, Value Proposition,

Table 2. Comparison between e-business and e-government service

e-business e-government service
Basic Structure low entry barrier and fierce competition inherent monopoly
Reason for Existence cost reduction (efficiency) cost reduction (efficiency)
customer satisfaction citizen satisfaction
revenue and profit citizen empowerment
Main Deliverables tangible and intangible product and services intangible service
Source of Uncertainty market, competitors, and disruptive technologies policy orientation or politics
Evaluation Criteria quantitative qualitative
View on information & knowledge proprietary asset and commercial product public goods and assets
112 Development of an E-Government Service Model Vol. 7, No. 2

Table 3. The Five Components of an E-Government Service Model

Components Description
Objectives A set of ultimate goals of a governmental organization delivered through its electronic service
Value Proposition Benefits received to related actors by digitalizing new or existing government services
Service Offering Operational service flows between actors involved in an e-government service to accomplish
its objectives and realize its value proposed
Activity Configuration Arrangement and positioning of internal and external government activities for the fulfillment of
an e-government service
Financial Sustainability Financial scheme for the implementation, operation and sustenance of an e-government service

Service Offering, Activity Configuration, and Financial public service. Because of the multiple agendas that
Sustainability (Table 3). characterize government activities at all levels, the adop-
tion of e-procurement cannot be only about achieving
Objectives efficiencies.

The unique component of an e-government service Value Proposition

model is its ‘objectives.’ They are the ultimate goals of a
governmental organization that are delivered through its The value proposition of an e-government service is
electronic service. The most inherent distinction defined as the benefits that related actors would be
between e-business and e-government service lies in the received by the digitalization of new or existing govern-
objectives. Usually, the objective of an e-business is the ment services. Various actors in e-government service
maximization of profit by the generation of revenue and can be classified as 1) organizations: governmental
cost reduction in exchange for the value offered to its agencies, business entities, interest groups, 2) people:
customers. Therefore, a business model of an e-business government officers, citizens, and politicians, 3) com-
need not specify its objectives. However, an e-govern- munities: communities of citizens, policy advocates, or
ment service does not assume profits, so its main objec- experts, and 4) new actors: virtual agencies (e.g. cross-
tives need to be specified and shared among the e-gov- agency web portal operators) and information technolo-
ernment service initiators. Setting the main objectives of gy or content providers.
e-government service is closely related to the scope of Typical benefits of e-government service include
the service and the citizen-government paradigm (Phang faster service, convenience, affordability, ease of use,
1998). The mapping between the types of e-government and openness (U.K. Cabinet Office 2000b). Even a citi-
service and its main objectives can be summarized as in zen who has to pay a parking fine can receive benefit,
Table 4. i.e., a reduction in the time it takes to pay the fine, by
It is important to recognize that an e-government ser- using a government electronic payment service. An
vice usually has multiple objectives. For example, in important difference between business and government
adopting e-procurement for government, there are poli- service is in the scope of the recipients of the value pro-
cy tensions and the resultant three aims of government posed. While the value proposition of a business is
initiatives (Coulthard and Castleman 2001): 1) increased defined as the benefits to its ‘target’ customers, an e-
efficiency in government business, 2) government as government service pursues universal service to ‘gener-
electronic commerce initiator, and 3) modernization of al’ citizens. Providing universal e-government service to

Table 4. Types and objectives of e-government services

Type of e-government service Main objective of e-government service
‘efficiency’ e-government service Cost efficiency
‘service’ e-government service Citizen satisfaction
‘democratic’ e-government service Citizen empowerment
December 2002 Kyoung Jun Lee and Joon-Hyung Hong 113

every citizen is an important agenda of e-government readers. In fact, it is not necessary for every agency,
(U.K. Cabinet Office 2000a; U.S. Department of Com- department or government to go through each stage step
merce 2000). The universality of e-government service by step. An agile government could skip to ‘interaction’
affects the technological choice in its implementation. A or even ‘transaction’ and bypass the other stages,
leading-edge technology may not be adopted unless although it is unlikely that any bureaucracy would jump
most of citizens are ready to use it. directly to the ‘high’ level stage. In addition, an agency
or department can run multiple sites in different stages
Service Offering of development.
To avoid misunderstanding we suggest a two-dimen-
The service offering of an e-government service sional model composed of the dimensions ‘process’ and
refers to the operational service flows on the Internet ‘integration’ as opposed to a one-dimensional stage
between the actors that are involved in the service in model. The two dimensions are independent and there-
order to accomplish the objectives and realize the value fore may proceed in parallel simultaneously. The
proposed. One of the useful and frequently used meth- process dimension has three types: ‘publish,’ ‘interact,’
ods to categorize e-government services is a stage model and ‘transact’ (Table 5). The integration dimension has
that distinguishes between published, interactive and three types: ‘interagency integration’ (Landsbergen and
transactional services (U.K. Cabinet Office 2000b). Wolken 2001), ‘on & off integration,’ and ‘virtual inte-
Balutis (2001), and Baum and Di Maio (2000) add gration’ (Table 6). An e-government service may simul-
another stage, ‘transform.’ Layne and Lee (2001) refine taneously have mixed types of processes and integra-
the ‘transform’ stage into the two stages: ‘vertical inte- tions. The process dimension and the integration dimen-
gration’ and ‘horizontal integration,’ and Moon (2002) sion are related to the ‘operational change’ dimension
categorizes the five stages into administrative functions and the ‘institutional change’ dimension in Fountane
(one-way communication, two-way communication, (2001) respectively, though her emphasis is different
transaction, integration) and political functions (political from this paper.
participation).
However, stage models run the risk of misleading

Table 5. E-Government Service Process

Types Typical service instances and examples
Information diffusion and publication: e.g. policy announcement through digital network
Publish
Personalized information: e.g. tax notice, traffic law violation notice through digital network
Information gathering and feedback: e.g. Public poll through digital network
Interact Monitoring: e.g. Policy compliance monitoring using digital network
Sharing: e.g. Knowledge sharing among officers, citizens, and experts
Intermediation: e.g. Matching between two parties by e-government service
Citizen participation and collaboration: e.g. Virtual collaboration between citizen and government
Transact Workflow processing: e.g. petition, patent/passport application through digital network
Transaction of intangibles: e.g. product and service distribution through digital network
Transaction of tangibles: e.g. procurement and asset clearing using digital network

Table 6. E-Government Service Integration

Types Description and Examples
Interagency Integration Agency-oriented integration: e.g. documents diffusion from high-level agency to low-level one
On & Off Integration Integration of offline activities into online: e.g. transforming off-line contact into on-line process
Virtual Integration Recipient-oriented interagency service integration: e.g. one-stop e-government service
114 Development of an E-Government Service Model Vol. 7, No. 2

Activity Configuration ANALYSIS OF E-GOVERNMENT

SERVICES BASED ON THE MODEL
The activity configuration of an e-government ser-
vice means the arrangement and positioning of internal Based on the developed model of e-government ser-
and external government activities for the fulfillment of vice, in November 2002 we analyze the electronic ser-
an e-government service, i.e. the production and deliv- vices of two presidential offices: Korea’s Blue House
ery of the service. The set of the connected activities has (www.bluehouse.go.kr) and the U.S.A.’s White House
been normally called a value chain because value is (www.whitehouse.gov). The unique feature of the elec-
added to materials or knowledge as they move up the tronic service of Korea’s Blue House is the Internet
chain (Porter 1985). However, since government agen- Shinmoongo. Utilizing the Internet, it promotes an inter-
cies are closer to service providers than product manu- active conversation between citizens and the govern-
facturers, the mechanical application of the value chain ment and provides a forum for gathering opinion. Using
approach that suits a manufacturing organization is not the bulletin board system, citizens can file an application
appropriate to government service sectors. Therefore, an to appeal a civic decision or report an instance of cor-
e-government service model needs to be analyzed based ruption directly to the Presidential office. The presiden-
on alternative-activity configuration models such as tial office is then assumed to either process the applica-
value shop, value network, and a hybrid of the two (Sta- tion directly or transfer it to other governmental agen-
bell and Fjelstad 1998). Most independent agency ser- cies. Citizens can choose whether their application is
vices are expected to be well-modeled with the value open to public or visible only to the applicant. In the
shop model, and interagency services may be well-ana- thirty-three months from Feb. 2000 to Nov. 2002, there
lyzed using the value network model. were about 158,700 applications.
On the other hand, www.whitehouse.gov of the
Financial Sustainability U.S.A. does not provide a public forum. There are no
public opinions on the site. The site, however, does
The financial sustainability of an e-government ser- allow for an electronic application process for presiden-
vice refers to the financial plan for its implementation, tial appointments and invitations to the President. In
operation and sustenance. While the financial compo- addition, the site gives the e-mail addresses of the Presi-
nent of the business model focuses on revenue and profit dent, the Vice President, the First Lady, etc., as well as
generation, the financial sustainability of an e-govern- general Whitehouse contact information.
ment service model is concerned with the financial flow A comparison of the sites discovered some interest-
only for the sustainability of the service. Funding is ing facts. The Blue House site has a public forum for
known as one of the most important impediments to expressing and sharing citizen’s opinions, but it does
implementing e-government service (University of not provide any official contact information to the presi-
Maryland 2000) because conventional funding mecha- dential office. It appears that bluehouse.go.kr and the
nisms, such as the budget appropriation process, move real world Blue House are isolated from one another.
very slowly in comparison to the rapid pace of technolo- Bluehouse.go.kr looks more open and democratic than
gy. Consequently, government agencies have resorted to whitehouse.gov, but the features of the bluehouse.go.kr
innovative funding approaches to ‘work-around’ the are not well integrated with the main ‘off-line’ activities
existing funding process. For instance, to generate rev- of the presidential office. On the other hand, white -
enue the U.K. government has allowed advertisements house.gov does not support online sharing of the public
on e-government sites. The revenue generation cannot opinions, but does support citizen’s ‘off-line’ interaction
be regarded as an objective of an e-government service, with the presidential office. According to our service
but it can be considered as one of the methods for sus- dimension, bluehouse.go.kr is strong on ‘interaction’
taining it, although there are conflicting views on gener- and whitehouse.gov is strong on ‘on & off integration.’
ating revenue from e-government service (Atkinson and Both e-government services are hybrids of value shop
Ulevich 2000; U.K. Cabinet Office 2000b). and value network, and both are fully supported by their
governments. The results of the comparison are summa-
rized in Table 7.
December 2002 Kyoung Jun Lee and Joon-Hyung Hong 115

Table 7. Comparison of BlueHouse.go.kr (B) and WhiteHouse.gov (W)

Components of E-government Service Model Evaluation
Objectives Efficiency Both
Citizen satisfaction B>W
Citizen empowerment B>W
Value Proposition Quality service B>W
Cost efficiency & affordability Both
Reduction of time to receive service Both
Convenience improvement Both
Reduction of time spent Both
Improvement of service environment Both
Service Offering Information diffusion and publication Both
(Publish) Personalized information B>W
(Interact) Information gathering and feedback B>W
Monitoring N.A.
Sharing B>W
Intermediation B>W
Citizen participation and collaboration B>W
(Transact) Workflow processing B<W
Transaction of intangibles: N.A.
Transaction of tangibles N.A.
(Interagency Integration) Integration between agencies B>W
(On & Off Integration) Integration of off and on-line activities B<W
(Virtual Integration) Virtual integration of services N.A.
Activity Value chain N.A.
Configuration Value shop Both
Value network Both
Financial Sustainability Fully supported by governments Both
(>: Stronger than, <: Weaker than, Both: applied to both, N.A.: not applied to either)

RELEVANCE OF BUSINESS MODEL approach to e-government service can be classified as

TO E-GOVERNMENT SERVICE being based on the customer paradigm.
Although the customer paradigm is criticized for
Customer-centered public administration is one of neglecting citizens and modeling citizen involvement on
the most prominent paradigms to have emerged in passive consumers who either like or dislike services
recent years (Osborne and Gaebler 1992). According to and who express their views of the government primari-
the customer model, citizens are regarded as ly through complaint or satisfactions surveys (Frederick-
“customers” who become the focus in designing govern- son 1994), it is considered a powerful tool for breaking
ment service delivery. The purpose of government is to the bureaucratic focus of government (Ho 2002). The
produce and deliver quality services to its citizens. The central feature of the customer model - the notion of
effectiveness of a government is therefore determined exchange - can be broadened to accentuate the impor-
by its ability to deliver quality service and to measure tance of administrators’ responsiveness to the public and
and monitor citizen satisfaction. The business model their engagement in various exchanges with customers
116 Development of an E-Government Service Model Vol. 7, No. 2

can enrich citizenship (Alford 1999). using e-government services, the necessity of a virtually
As an alternative to the customer model, the owner integrated government service has been emphasized. It
model, views citizens as owners of government who are is believed that cross agency portals will drive the trans-
proactive in managing the government’s scope and formation of the electronic services of each governmen-
affairs (Schachter 1995). In the value model (Smith and tal agency because the real benefits to citizens come
Huntsman 1997), citizens are not merely owners or con- from citizen-oriented virtual integration, process innova-
sumers. The discussion on which paradigm is more tion and agency-oriented e-government services. In
appropriate to e-government service is beyond the scope order to develop such cross agency portals, the e-gov-
of this paper. That the business model approach to e- ernment service model should consider conflicting
government service belongs to the customer model may objectives, various value propositions to various actors,
justify this approach and, at the same time, may imply mixed types of service processes and their integration, a
its limitation. We expect to see the development of new viable financial sustainability, and complex form of
approaches to e-government service based on the owner activity configuration. We believe the discussion on the
model or the new value model. e-government service model in this paper will contribute
much more to designing and implementing such a virtu-
ally integrated e-government service rather than individ-
CONCLUSIONS ual agency services.

The greatest benefit of the business model approach

to e-government service lies in the efficient and system- NOTES
atic derivation of the definition of the e-government ser-
vice model. Four of its five components (value proposi- * This paper is a revised version of a paper (Lee and Hong
tion, service offering, activity configuration, and finan- 2001) presented in the 3rd International Conference on
cial sustainability) have been inherited and refined from Electronic Commerce held in Vienna, Austria, in 2001.
corresponding business model components. The busi-
ness model approach to e-government service has the
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Electronic Commerce. Vienna, Austria, 2001. vices for the 21st Century. United Kingdom.
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Harvard Business Review May, 86-92. the new millennium: Delivering on the digital
progress and prosperity.
Mahadevan, B. 2000. “Business Models for Internet-
Based e-Commerce.” California Management University of Maryland. 2000. Alternative Funding
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Osborne, D. and Gaebler, T. 1992. Reinventing Gov -
Science at KAIST; MS in Public Administration, SNU)
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is a Visiting Assistant Professor at the Graduate School
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of Public Administration, Seoul National University. He
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has published papers on knowledge-based systems, elec-
Phang, S. 1998. “Taxonomy of Electronic Government tronic commerce, intelligent agents, and Internet busi-
and the Evaluation of Korea Electronic Govern- ness models in international journals.
118 Development of an E-Government Service Model Vol. 7, No. 2

Joon-Hyung Hong is a Professor of Law at the Gradu- gen. His research interests include administrative and
ate School of Public Administration, Seoul National public law, information law and policy, environmental
University (SNU). He received his LL.B. and LL.M. law and policy, dispute resolution and management, and
from SNU and a Doktor iuris from University of Göttin- comparative public law.