IDENTIFYING E-COMMERCE WEBSITE DESIGN INEFFICIENCIES: A BUSINESS VALUE-DRIVEN APPROACH USING DEA Jungpil Hahn Assistant Professor of Management Krannert School of Management, Purdue University West Lafayette, IN 47907 Email: jphahn@mgmt.purdue.edu Robert J. Kauffman Director, MIS Research Center, and Professor and Chair, Information and Decision Sciences Carlson School of Management, University of Minnesota Minneapolis, MN 55455 Email: rkauffman@csom.umn.edu Last revised: March 31, 2005 ______________________________________________________________________________ ABSTRACT Managers at e-commerce firms are in need of proven methods for website evaluation. So, one of the most pressing issues is whether the design of their online storefronts is effective, and if not, which areas require attention and improvements. However, current approaches (e.g., user testing, inspection, inquiry) are not well suited to the task at hand. This paper proposes a new business value-driven approach to website evaluation, which is grounded in the economic theory of production. We conceptualize online shopping as an economic production process in which customers are making use of various functionalities provided by the e-commerce website in order to complete a purchase transaction. This view enables us to formulate a novel perspective on website performance—the ability to transform inputs (i.e., use of website functionalities) into outputs (i.e., completed purchase transactions). We use data envelopment analysis (DEA) as the methodological vehicle for assessing e-commerce website effectiveness and propose two new metrics, Inefficiency Breadth and Unit Inefficiency to help identify website functionalities that are potentially ineffective. The value of the proposed method is illustrated by applying it to the evaluation of a real-world e-commerce website. Keywords and phrases: B2C e-commerce, business value, data envelopment analysis, efficiency assessment, production frontiers, systems design, website evaluation. ______________________________________________________________________ Acknowledgments. An earlier version of this paper was presented at the 3rd Pre-ICIS Annual Workshop on HCI Research in MIS, Washington, DC, December 2004. The authors thank the four anonymous reviewers and workshop participants for helpful suggestions. We also thank participants at seminars at the University of Minnesota, Purdue University, Tulane University, the University of Arizona and the University of Calgary for valuable comments. G. Davis, A. Gupta, J. Konstan and G. Salvendy gave insightful suggestions on our conceptual approach to website evaluation. We thank an anonymous corporate sponsor of our research for access to data.