William Patient made his mark on the Cleveland business scene in 1993, when his led the spin-off of Geon from BF Goodrich and took the plastics company public.
Today, nine months after his retirement from Geon’s top post, Patient is still deeply entrenched in the local business community. As the chairman of the board for Cleveland State University, he is charged with helping position the school to build business leaders for the 21st century.
Patient recently sat down with SBN to offer his take on the state of business in Cleveland and how well he believes Northeast Ohio supports entrepreneurs.
How would you evaluate Cleveland’s environment for nurturing business?
That question is one that’s on the minds of a lot of leaders in Northeast Ohio. People are still concerned when they look at entrepreneurship in Northeast Ohio and how well it’s doing. I’m probably a little more optimistic than some.
There are a lot of people in Northeast Ohio who have good ideas about business. There is hardly a lack of educational institutions in the area. I think the educational resource capability is good, but I don’t think we’re as well developed in the area of capital resources.
If you talk to some people from capital companies, they’d say we have plenty of money, we just don’t have any good ideas. I’ve always been a little suspicious of that. There are an awful lot of opportunities in the region requiring what I would call seed start-up money for ventures. The right kind of capital availability is important, and I’ve never felt comfortable that we’ve had enough of it in this area.
Is there a trend of business students getting their education here and then leaving after graduation?
I don’t see a terrible flight of people out of Cleveland. Statistically, 85 percent of the people who graduate from CSU stay in Cleveland and the area. The statistics for some private schools are much lower, like Case Western, for example.
Statistically, they probably do have a lot more (leave). ... One thing I do see as a negative is we don’t spend enough time working in the minority community. We’re just starting to develop that. Cleveland is a community with a very large African American and Hispanic community, and if you’re going to develop businesses in this region, you’re going to have to develop it in those communities.
Why do you think Cleveland is lagging behind other cities when it comes to Internet start-ups?
Part of it is really just people’s mobility and the fact they can live places where the sun shines more often than it does in Cleveland. I’d be surprised if it was anything more than that, because I’ve lived in a lot of places, and I’ve never seen a place that is more business friendly than Cleveland.
Governor (Bob) Taft has picked up on it and I do think he’s really intent on supporting technology and technology development. Whether there’s a specific result for that or whether it’s just this kind of aura that we’re technically friendly, it’s important. Taft is certainly intent on making people understand that.
We also have to turn around and look at our strengths. We have probably one of the strongest areas of medical research anywhere in the country. University Hospitals and Cleveland Clinic are two powerhouses of medical research. We’re also developing some very interesting capabilities in software and a lot of software is being written here.
When you look at Cleveland’s overall ability to support business, what aspect would you change?
There has to be a resolution of the airport issue. I never thought about it because Geon’s business is not that people intensive. We were more capital intensive. But, when you sit down and talk to people whose sole resources are their people who travel, you start to see how much money they spend out of their total budget on air travel.
For consulting firms and knowledge factories, that’s a huge part of their expense. There has to be a place where they can get economical and good air service.
Cleveland cannot escape that we are moving away from a capital intensive business climate, and that means mobility. That also means you have to be in a location where people feel comfortable that they can jump on an airplane and conveniently and economically get where they want to go.
If you can’t, you’re going to be at a disadvantage, period.
How to reach: William Patient, Cleveland State University, (216) 687-2000
Jim Vickers (email@example.com) is an associate editor at SBN.
Amazon.com fired the shot heard around the World Wide Web last October when the powerhouse online retailer filed a lawsuit against e-commerce competitor Barnes & Noble for using the company’s patented “one-click” shopping method.
In early December, a judge sided with Amazon, sending Barnes & Noble scrambling to modify its Web site in the midst of the busy holiday shopping season.
Although it was the not the first e-commerce patent battle to surface since business began migrating to the Web, Amazon’s actions sparked strong emotions. In a late February open letter to the company, computer book publisher Timothy O’Reilly accused the Web retailer of “pissing in the well” of online commerce because of its ultra-aggressive protection of business methods that he saw as fairly universal.
Amazon argued that its “one-click” patent, which allows previous site shoppers to order a book and have it billed to them with one mouse click, had been filed more than two years earlier. Nevertheless, the Web retailer was quickly lumped in with other companies, such as Microsoft and Priceline.com, which have also sought legal protection of their online business methods.
Even though these high profile squabbles among powerhouse dot-coms may generate headlines, the bigger question is what these patent cases will mean for the countless start-up e-commerce companies which have yet to be a blip on anyone’s competitive radar screen. The answer seems to depend on whom you ask.
Even two local attorneys, both entrenched in e-commerce law, have different views on what effect e-commerce business method patents may have in the long run. Whether they derail scores of Web start-ups or prove to be the ultimate competitive advantage for innovative entrepreneurs who have the foresight to protect their work, there seems to be one underlying truth: The advantages and dangers of any Web patent depend upon who’s holding it.
The battle over Web business method patents was fueled by a 1998 court decision that computer software is, in fact, potentially patentable. The decision opened the door for the approval of Web patent applications such as the one Amazon had for its “one-click” system, although the road to patent approval is far from a rubber stamp.
David Cochran, an attorney who focuses on intellectual property issues at Cleveland’s Jones Day Reavis & Pogue, says the most difficult burden is proving that you have, in fact, broken new ground with your invention. Since less than a handful of the 150,000 patent applications filed each year are 100 percent original creations, patent approvals are a bit of a gray area.
“Not all software is potentially patentable. You still have to prove it’s new and it’s obviously different from what others have done in the field,” Cochran says. “It’s the same thing with these Internet business methods. They’re not all patentable, but some of them could be. You have to analyze what you’ve done that’s new.”
Obviously, the infancy of the Web helped Amazon’s cause, while also making it a prime target for media coverage once the Web retailer decided to flex its muscles against Barnes & Noble. But Cochran doesn’t buy into any “the sky is falling” mentality when it comes to the effect of Web patents.
For one, he says, most of those filed with the U.S. Patent Office are obsolete by the time the arduous approval process is complete. In his eyes, the Amazon and Priceline patents were just two early bets that ended up paying off handsomely.
“You file these patent applications and they take two or three years to mature,” explains Cochran. “Meanwhile, the market develops, and if you’re lucky, develops in the way that you predicted via your patent applications. And when your application finally issues, you’ve got something of value.
“Keep in mind for every one of those that works, there are thousands that just don’t do anything.”
So far, the threats tied to Web patents have yet to filter down past the level of the industry heavy hitters. Michael Stovsky, an attorney with Cleveland’s Ulmer & Berne LLP with expertise in the area of Internet law, says patents have yet to be a threat to any of his clients.
“Has it played a large role in start-up companies we’ve represented to date? No, it hasn’t,” he says. “We have not had one dispute over a company violation of a business patent yet ... Whether smaller companies are going to be held over a barrel by companies that own the business method patent is yet to be seen.”
Although the threat seems to be minimal, Stovsky says issues of trademarks, trade secrets and the possibilities of business method patents should be considered from Day One when it comes to the Web. He believes issues of intellectual property will only become more important as Web start-ups begin to provide serious competition to those e-commerce companies that seem to be holding all of the cards.
“My suspicion is the more mature clients become and the more successful they become, the better competitors they become in the marketplace, the more the holders of these business method patents will sit up and take notice and seek to enforce those patents,” says Stovsky. “And I guess the flip is true. The more mature our clients become, the more concerned they will become about their ability to get patent protection for what they’re doing.”
Cochran, on the other hand, doesn’t worry so much about industry players such as Amazon launching an aggressive campaign to knock off smaller companies. He does agree with Stovsky, however, when it comes to the importance of Web entrepreneurs working to protect their own e-commerce business method innovations. Once Web entrepreneurs realize the importance of patenting their original work, he believes it will be the tool that finally levels the playing field for smaller companies.
“I represent a lot of small fry inventors, particularly in the software area, and these guys need any edge they can get,” says Cochran. “When you’re going up against a Microsoft or an Oracle or some other huge company and you don’t have something to offer back, you’re hosed.”
Several years ago, an e-commerce company named Open Market Inc. issued a press release announcing it had patented the concept of an e-commerce “shopping cart.”
So why hasn’t the company filed lawsuits against the scores of Web companies that have integrated this feature into their own sites? It turns out the list of claims outlined in the patent application was very narrow and Web designers had little trouble creating their own “shopping cart” concepts without infringing on the Open Market patent.
“Just like the deed for your house describes your plot of land and nothing more, the claims that are in the back of a patent application describe what the patentee is entitled to keep other people from doing,” explains Cochran. “Of course, no one reads the claims except for patent attorneys and federal judges.”
So Amazon did not patent the concept of “one-click” shopping; it simply patented a way to deliver this feature to customers, which Barnes & Noble happened to copy too closely. The claims of a patent are always limited in some way, explains Cochran. However, he admits that Amazon attorneys wrote the “one-click” patent claims in such a way that Web designers will not be able to sidestep them as easily as they did Open Market.
“That one definitely is broad,” he says. “If (Amazon) did decide to assert it, that one could be difficult.”
Essentially, Amazon looked at mistakes like those made by Open Market and learned to play the game. That was evidenced by not only the “one-click” patent, but also a 1997 patent application for its “affiliates” program, which allows Webmasters to link to Amazon and receive a small cut of sales that emanate from their sites.
Although the program may seem a fairly ubiquitous Web business concept, Amazon took care to write the claims in that patent application very broadly.
So if Amazon ultimately succeeds in its quest to make these two very familiar business methods purely its own and entrepreneurs cannot create a viable alternative, the pioneering online retailer may have another source of revenue as e-commerce companies line up for licensing deals. For Stovsky, this is the type of scenario in which he believes Web start-ups could end up feeling a severe pinch or, in the worst case, crumble under the stress.
“You can just imagine the state of affairs where a start-up company now has to negotiate with a much larger company like an Amazon or Priceline, which was a start-up just a few years ago, but now it’s sort of like negotiating with an 800-pound gorilla,” says Stovsky. “What’s the effect of that?
“You may see businesses not coming to fruition that may have otherwise because they simply don’t have the resources to get the technology that they need.”
How to reach: Ulmer & Berne LLP, (216) 621-8400; Jones Day Reavis & Pogue, (216) 586-3939
Jim Vickers (firstname.lastname@example.org) is an associate editor at SBN.
It’s no wonder, then, that entrepreneurs might think that securing venture capital is as easy as strolling to the nearest ATM. It turns out, though, that the biggest challenge Cleveland start-ups face is not finding millions in venture capital, but securing seed money, early-stage contributions that go toward such things as hiring staff, leasing equipment and beefing up business plans to ultimately make a new enterprise more appealing to big-money investors.
“In the early stages, you need to get other kinds of financing to get to the point where you can get venture capital,” says Warren Goldenberg, a partner at the Cleveland law firm Hahn, Loeser and Parks. “It’s much more difficult to get the angel funding into the deal. There just aren’t as many people ... willing to make those investments.”
And they are extremely risky investments. Jim Cookinham, executive director of the Northeast Ohio Software Association, says that while seed money is critical to, say, a fledgling dot-com, “we’re talking incredibly high risk. You put in $75,000 and chances are pretty good that you’re not going to see it again.”
The National Venture Capital Association (NVCA) and the Venture Economics group of Thomson Financial Securities Data reported in January that an astounding 50 percent of more than 540 initial public offerings in 1999 were venture-backed, a 30 percent increase over 1998. According to the NVCA, the median age of an IPO in 1999 was only 4 years old, many of them IT-related start-ups.
But the headquarters of such venture-backed IPOs, Goldenberg says, are more likely to be in California than Cleveland. Even when companies are born here, financing must often come from out of state. Witness Cleveland-based NetGenics, a biotechnology software firm that in March filed plans for an initial public offering. The company has never made a secret of the fact that its investors are based in other, larger cities, including New York and Chicago.
Are Cleveland start-ups doing something wrong or simply at a different point in the start-up funding curve? What can new ventures do to improve their chances of grabbing precious seed money and, ultimately, venture capital?
The answers are complicated. Northeast Ohio must clear a number of hurdles among them, a dearth of qualified managers, low numbers of proven successes among start-ups, and a shortage of fully realized business plans with which to seek investments in the first place.
“If you look at California or Boston, they have well-developed networks of angel investors,” Goldenberg says. “These are people who became rich themselves by forming technology companies they understand it and are willing to invest.”
They also, he adds, understand the importance of strong management to the success of their contribution. “Investors are looking for qualified management as a stronger [requirement] than technical ideas.”
Lack of solid management can be a real liability indeed, a deal-breaker when entrepreneurs search for seed money and venture capital. Locally, Northeast Ohio’s industrial legacy is something of a roadblock: Cleveland, Goldenberg says, is “still a big corporate town,” where working for someone else is the rule excepted by start-ups.
Finding management, as opposed to technical talent, is a Catch-22: The area needs successful start-ups in areas like biotechnology and software development to give managers the experience individual and corporate investors like to see.
Goldenberg says that by contrast, in Southern California, “all these people are walking around with business plans in their briefcases. There’s a whole pool of people who have formed companies and gotten rich and now [are managers] of new companies. That’s a different kind of talent from somebody who’s a manager at a Fortune 100 company. It’s a different skill set.”
Wayne Zeman, executive director of the Lewis Incubator for Technology (LIFT) for Enterprise Development Inc., agrees.
“I call it the genetics of this region,” he says. “[Northeast Ohio] has a lot of wealthy people, but most of them made their money in the heavier industries, like steel and automotive. To have them jump to information technology is hard. They don’t have the comfort level necessary ... to make an investment. It’s going to take some time.”
Another difficulty facing Cleveland-area tech entrepreneurs is follow-through putting a strong plan behind that great idea.
“Some businesses haven’t developed their idea to a stage where it’s fundable,” Zeman says. “They haven’t looked at the competition, they haven’t looked at what’s already out there. They feel that they have a strong technical idea that will automatically be a great business. That’s not always the case.”
As to management-recruiting difficulties, Zeman says some companies have actively sought out-of-state staff with a local connection.
“There’s a surprising pool of people who either were educated or grew up in Northeast Ohio and really value this region. There are a lot of people across the country that would like to come back, but you can imagine the challenge in finding them.”
So what’s an entrepreneur to do, short of packing a briefcase and heading for Silicon Valley?
The outlook is hardly as bleak as it may appear. Most local experts agree that the landscape is improving. Zeman points to technological resources throughout the area from universities and medical facilities, to NASA’s Glenn Research Center as well as the state’s Edison business incubator and education programs, as forming a strong support system to help entrepreneurs and inspire confidence in potential investors.
The encouragement and support are apparently working: Almost 40 percent of last year’s Weatherhead 100 list of the fastest-growing area companies were in the IT category, from software development and telecommunications to e-commerce. In 1998, less than one-quarter of the Weatherhead 100 were IT-related firms.
Goldenberg notes that the very fact that people are recognizing the difficulties finding seed money and venture capital signifies progress.
“I think it will continue to get better,” he says. “Now, when I go out and am talking to people [about investing] in deals, they’re willing to listen.”
Zeman notes that more ancillary businesses, such as law firms, investment bankers and business incubators such as LIFT, are placing particular emphasis on helping to pair entrepreneurs with potential angel investors.
“Our job is to help people start and grow technology-based businesses,” Zeman says. “That covers a whole range of technologies software, IT, and also biotech and biomedical.”
The organization offers, in addition to four incubators and various educational programs, two programs to help start-up companies find sources of capital. Innovest (www.innovest.org) is a statewide program that places about 30 entrepreneurs in front of 300 or so potential investors, “a full range of angel investors, venture capitalists and some investment bankers. It really covers the whole range of possible sources of funding.”
Innovest has resulted in some $180 million in investment capital in its three-year existence, much of it in the form of early-stage funding.
The other program, operated by Enterprise Development for the federal Small Business Administration, is an Internet-based matching service through which entrepreneurs can post an abbreviated business plan for access by qualified investors.
Could these things happen without help from Innovest or SBA programs? “It’s hard to say,” Zeman says. “But this is a venue that makes it much easier, particularly when trying to find angel investors. Because they’re all individuals, it’s hard to get these businesses hooked up with them.”
Goldenberg and some of his colleagues have stepped up to the plate, putting together deals for start-ups and often actively seeking investors.
“Somebody has to,” Goldenberg says. Attorneys might, in addition to completing corporate legal work, do anything from provide strategic business advice to help structure financing or hook businesses up with investment bankers. “In many cases the entrepreneurs are very young and ... have never done this before.”
This May, NEOSA will host the Seed Capital Initiative, a day-long event designed, in part, Cookinham says, to graduate entrepreneurs from what he calls “financial kindergarten” and inspire confidence in potential angel investors. The Seed Capital Initiative scheduled just before the Cleveland World Trade Conference, which this year will focus on e-business will include a presentation of early stage financing options and business plan reviews “to expose investors to these companies and [help them] evaluate ideas,” Cookinham says.
Goldenberg, whose firm is a co-sponsor of the event, hopes to attract not only potential investors, but the stockbrokers and financial planners who advise high net-worth individuals, “to get people comfortable with how these deals are done.”
How to reach: NEOSA, (216) 592-2257; EDI, (216) 229-9445; Hahn Loeser & Parks, (216) 621-0150
Shari Sweeney (Sweene@aol.com) is a Lakewood-based freelance writer.
Who says making a buck is a bad thing? Certainly not Jack Shoykhet, president and CEO of Gov24.com. That didnt always ring true, however. During a Jones Day Reavis & Pogue e-commerce program recently, Shoykhet told the crowd, In the city where I came from, the word profit was illegal. I love capitalism.
Program sponsors Conley Canitano & Associates certainly agreed. Dont we all?
The Employers Resource Council of Northeast Ohio has announced that businesses utilizing its online Travel Center to make airline reservations will not be charged the reservation transaction fee which is typical in the travel industry. The fee generally ranges between $10 and $25 per ticket. ERC members employees are also eligible to access the ERC site (www.wercnet.org) and make their leisure reservations online. The site features a full spectrum of HR and workplace information, services and benefits.
Who needs the Super Bowl?
Its become standard, if a little risky, for Internet start-ups to blow their entire marketing budget on a 30-second Super Bowl commercial. But a Cleveland company proves you dont need a lot of flash to get recognized. 1-Jobs.com, an Independence-based high-tech recruiting Web site, was ranked by PCWeek Online as the seventh-best site for those looking for high-tech workers. That places 1-Jobs smack dab between HotJobs.com and Monster.com, two operations that blew a bundle on Super Bowl advertising. Sometimes its not who knows you, but how good you really are.
Modern day wisdom
Business owners seeking their fortunes on the Net may be wise to listen to the voice of someone whos been there. Todd McCormack, CEO of TWI Interactive, an independent subsidiary of Trans World International, reminds entrepreneurs: E is just one letter of nine letters in e-commerce. McCormack spoke at the Jones/Day e-commerce program. McCormack also took a poke at the tech industrys biggest fish: I cant believe how rich Bill Gates will be when his products actually work.
Self-employed on the Net
The number of self-employed Americans with Internet access has doubled in just two years, according to a survey of members of the National Association for the Self-Employed. More than 68 percent of those responding report they connect to the Internet at home or at work. A closer look reveals 39.7 percent access the Net at home and work, 20 percent at home only and 8.6 percent at work only. And for those wondering how much time those eyeballs spend in front of a computer, they average eight hours per week online.
Whats in a name?
Northeast Ohio is losing one of its best company names. Mozes Cleveland & Co., a Web development company specializing in intranet, extranet and Internet solutions, has merged with Quest4mation, an information services company specializing in consulting and electronic commerce. The new venture will do business as Digital Day. Its certainly a modern sounding moniker, appropriate given the service it provides. But we cant help but shed a tear as we reflect on our citys past and the man whose name we bear so proudly.
A high-tech venture
National City Corp. and Cuyahoga Community College have formed an alliance designed to bring high-tech jobs to Northeast Ohio residents. The venture calls for National City to fund the establishment of Techno Venture, a series of super camps on Tri-Cs three campuses. The camps will train 350 students, grades 9-12, in the computer technology necessary to become professionally certified for high-tech jobs. The alliance also provides National City with access to the colleges students for part- and full-time employees.
Its good to be a woman
The U.S. Small Business Administration has nearly tripled both the number and dollar value of approved loans to women entrepreneurs since fiscal year 1992. According to the SBA, there are 9.1 million women-owned businesses in the United States, which account for 40 percent of all business. These ventures employ 27.5 million people and account for $3.6 trillion in sales. And women are starting new firms at twice the rate of all other businesses.
Not so elementary
Canton-based Diebold Inc. used the recent CeBit 2000 technology trade fair in Hanover, Germany, to unveil its new Watson technology. The revolutionary ATM-like kiosks adjust to a users physical traits and consumer tastes using a mix of biometric technology and the Internet.
The result is a personalized experience that could one day make your corner ATM about as cutting edge as a rotary telephone. The Watson system identifies consumers as they approach the terminal, eliminating the need for a personal identification number. By accessing pre-registered information, the machine automatically adjusts to a consumers physical needs.
The interface also allows access to items of personal interest, such as customized stock reports and movie listings via an Internet connection. Meanwhile, the units color laser printer allows for the creation of hard copies to take with you. With technology like this at our doorstep, can those Jetsons-style TV phones be far behind?
Innovation for sale
When it comes to developing new products, a recent study shows Americas fastest growing companies acquire intellectual properties from others to gain a competitive edge. PricewaterhouseCoopers interviewed 449 CEOs of companies identified by the media as Americas fastest growing. It found 49 percent of those CEOs license technologies or intellectual assets from others, while 27 percent are involved in joint ventures and 15 percent invest in smaller, independent businesses as an extension of their research and development.
Ironically, only half the businesses surveyed have a formal process for identifying and managing their own intellectual property assets. Consequently, only about one in four that hold IP assets end up licensing them to others.
Trade shows make the cut
Dont worry about the Internet replacing the traditional industry trade show any time soon. In a survey of 250 business executives conducted by Chicago-based Incomm Center for Research and Sales Training, 91 percent believed the traditional industry trade show would survive the information age.
When asked why they believed the Internet would not send the traditional exposition the way of the dinosaurs, 55 percent pointed to the networking opportunities provided by such events; 35 percent said the hands-on ability to see and discuss a service or product is hard to replicate online; and 10 percent said questions are answered better when visiting an exhibit in person.
Counting their blessings
On April 8, a dozen Cleveland area clergy representing a wide variety of faiths and spiritual beliefs blessed Western Reserve Brewery Co. Gavin Smith, CEO of the award-winning brewery in Midtown Cleveland at 4130 Commerce Ave., says there is a considerable body of historical precedent for the intertwining of beer brewing and religion, and the idea of blessing the Western Reserve Brewing Co. had been bouncing around in his head for awhile.
This is something weve always planned to do, and for some unknown reason, weve just never gotten around to it, he says.
EDR Media strikes Olympic gold
When marketing specialists at Clevelands world renowned International Management Group needed a cutting-edge presentation to sell sponsorships for the 2000 Summer Games in Sydney, the 2002 Winter Games in Salt Lake City and the 2004 Summer Games in Athens, they turned to Beachwood-based EDR Media. The company responded with a top quality sight and sound DVD showcasing great Olympic moments for IMG marketing specialists to take with them on the road.
Cliff Hughes, director-interactive media for EDR Media, says the big-name sponsors IMG is seeking required an impressive, yet portable presentation. Given the stature and significance of the Olympics and the high profile of IMGs target audience of upper level corporate management, they wanted the quality of the presentation to make a strong statement about the quality of the sponsorship, he explains. The fidelity of the audio and the resolution of the video on DVD really sets this presentation apart, and it can easily be played on a laptop computer.
Olympic gold part II
Beachwoods Allen Telecom Inc. will make sure every cellular phone at Sydneys Olympic Park works properly during this years summer games. The company is deploying technology that allows the use of a large number of cellular phones in the same area without excessive interference. Olympics officials worried that the massive popularity of cellular phones in Australia may create problems for the main Olympic venue, expected to draw up to 500,000 visitors a day, especially as people call family and friends to share the excitement of the occasion.
Walking the tightrope
Owners of small and medium-sized businesses say their top goals are achieving significant personal wealth and making time for family, according to a survey by Chicago-based George S. May International Co. That may not be terribly earth-shattering, but the 75-year-old business management consulting firm reports that now, more than ever, business executives think they can achieve both of these goals. Seventy percent of those surveyed reported they have established or are working on a business plan that includes the integration of time-saving procedures that will help them with this delicate balance of work and family.
American business decision-makers are consciously saying they want and know how to have their cake and eat it, too, says Donald Fletcher, president of George S. May International. Before this current age of telecommuting and mommy tracks, you had to choose between fortune and family. Now, it is possible to achieve a work/life balance but it requires planning.
Rudy Socha, the president of Lorain-based WildlifeCollectibles.com, recently sent out 15,000 customer surveys to members of her Dolphin Whale & Shark gift store in an attempt to assemble a profile of her average customer. Thirty-six hours after sending out the surveys via e-mail, she received 223 responses and discovered some interesting information about her customers online habits:
- Eighty-one percent of the shoppers who responded to the WildlifeCollectibles.com survey were women.
- Sixty-five percent visited between one and three new e-commerce Web sites a week.
- Customers made an average of 11.1 online purchases a year and reported an average of 7.4 purchases a year from traditional catalogs.
- Forty-four percent of shoppers spend between $21 and $30 when buying a gift on the site for a non-immediate family member. Thirty-three percent spend less than $20, while 13 percent spend between $31 and $50.
Weve all been through the process: Buy the product, send in the rebate materials and wait. Sometimes you wait so long youve forgotten what the check is for when it finally arrives.
The demand for efficiency and speed by consumers has pushed rebates and other post-sale services to the Internet, and How2.com has found a way to serve both consumers and manufacturers as a sort of go-between.
Our focus is post-purchase customer care, says Ken Johnsen, How2.com president. Retailers can offer a rebate, and with our services, the end-user can check the status and get an e-mail confirmation back. It helps the end-user understand whats happening.
Consumers often got so frustrated with the rebate process that they went back to the store, where the rebate was issued out of the cash register to keep them happy, costing the company money.
In the old economy, a manufacturer offered a rebate on a product for a set length of time. A third party collected the rebate offers sent in and waited until the promotion was over. That company then aggregated the checks, got payment from the company offering the rebate, and mailed out rebate payments. This could take six to 12 weeks, especially if someone bought the product early in the promotion.
Now, How2.com works with manufacturers to try to get checks cut every week, dramatically cutting the turnaround time and enhancing the value of the rebate offer. Much of the process has been moved to the Web, including filling out forms and other necessary information. Manufacturers can use this opportunity to sell other products by offering special deals, such as trading the $50 rebate for a $60 gift certificate for additional items.
Small businesses can take advantage of these services as well. How2.com will coordinate a rebate program, taking care of all the applications and processing. The business is charged on a per-rebate basis.
How2.com is also putting manuals for products online to complement its rebate offerings.
These will not be static manuals, says Johnsen. We will be filming video of the products so you can see how to install it. Instead of trying to pick the installation off a piece of paper, we will make the manuals come alive.
The plan is for consumers to come to the site, fill out and submit rebate forms, then view a multimedia presentation on how to install or program their new product.
How to reach: www.how2.com
Todd Shryock (email@example.com) is SBNs special reports editor.
A year later, were still working on building that name brand identity and shaking the old one. You cant imagine how many people still refer to our publication as Small Business News.
Building a brand name one that your customers, suppliers and employees can identify with is one of the most capital and manpower-intensive ventures any business can undertake. It goes much further than a simple public relations campaign or hiring a PR firm to fire off press releases to the local media exclaiming, XYC Co. is now ABC Firm Inc.
Consider Bearings Inc., which recently changed its name to Applied Industrial Technologies. Even though it built a state-of-the-art facility just down the street from its previous offices, its still common to hear people refer to AIT as Bearings.
One company that has successfully made the switch is Scott Technologies, the former Figgie International. That company changed its name two years ago after jettisoning its majority owner and beginning an extensive divestiture of noncore assets.
Figgies change arose out of necessity the new leadership group decided the only way to regain the trust of shareholders, customers and employees was a complete facelift. So it went back to its roots, adopting the moniker of one of Figgies early acquisitions, the Scott Technologies Group.
Today, Scott Technologies has shed its Figgie image pleasing not only company brass, but shareholders as well. And while Scotts leadership team doesnt eschew its former identity, it has refocused attention on its strengths. (See the story on the image change of Figgie International on page xxx).
But swapping monikers mid-stream in a business cycle is a risky move. Consultants regularly warn that building a brand name is one of the most important facets of your company. Why else would giants such as Xerox spend millions in litigation to protect their trademarked products?
And when Bell Laboratories made the switch to Lucent Technologies, the board of directors knew it was taking a gamble. Remember Lucents early advertisements reminding consumers and business partners that Lucent was formerly Bell Labs?
The bottom line is this: If you spent years and millions building name recognition for your company, product or service, dont consider a change simply on a whim. Reduced sales volume, bad public relations or new products or services dont necessarily merit switching your name.
However, if you do find your company in need of a moniker makeover, tread carefully and be prepared to reinforce the change more often than you may like.
As for SBN, Ive gotten used to explaining to readers the reasons behind our change. I feel like Im not only getting our point across, Im educating them about what we really do provide smart ideas for growing companies.
And that is reason enough for a change.
Dustin Klein (firstname.lastname@example.org) is editor of SBN.
In the mad rush to get on the Web, some Internet start-ups have learned that what you don’t know can hurt you especially when it concerns taxes.
“These companies are getting burned on the drop shipment rules,” says Patrick Carney, a tax partner with the Pittsburgh office of Ernst & Young. “They’re rather complex. But the bottom line is that they end up having to pay sales tax on drop ship transactions, which basically wipes out their profit margin.
“And, they don’t even know it until after it’s happened, because they don’t understand the rules.”
Drop ship? Hidden taxes? That’s right. Here’s how the law works, and how it may affect your e-commerce initiative:
Let’s says that someone forms a Web company in Ohio. A Pennsylvania customer visits the site and places an order. The Ohio business doesn’t keep those specific goods or perhaps any goods in inventory, so it contracts with a third party, perhaps in Pennsylvania, to supply them.
The Ohio-based Web business buys the goods and, instead of having them delivered to its offices in Ohio, has them shipped directly to the customer in Pennsylvania. That’s potentially a taxable transaction.
“There’s actually two sales going on here,” Carney explains. “The company in Ohio is billing the customer in Pennsylvania. They’re not registered in Pennsylvania, so they can’t really charge that customer sales tax.”
But, while that’s happening, the Pennsylvania supplier asks the Ohio company for a resale certificate. And therein lies the problem.
“Typically, these Internet companies, these start-ups, they’re registered in their home state, so they cannot supply that supplier with a resale certificate. The (supplier) has no recourse but to charge (sales) tax to the dot-com company in Ohio.”
In layman’s terms, the dot-com company is paying sales tax, but is unable to charge its customer sales tax. So the tax wipes out the profit.
Worse, “they’re not even aware of it,” Carney says. “We’ve seen a lot of these start-up companies that totally get blindsided by the drop shipment rules. Sales tax has been our biggest issue with companies that are growing, expanding or forming dot-com companies, because they hardly can keep up with the compliance. It’s just very cumbersome.”
Of the 50 states, 45 charge sales tax. Of those, there are 31 with drop ship rules or guidelines. A handful of those have procedures that help companies around the issue.
But that still leaves about half the states that could cause problems for start-ups.
To alleviate the problem, companies can register in each of the states, but that can become an administrative burden, Carney says.
“We’ve seen that already here in Pittsburgh with start-up dot-com companies. They think they have this whole thing figured out and they don’t realize the sales tax ramifications of what they’ve just done. I’ve been preaching that message here for awhile.
“These companies that want to get into Internet business are totally missing that issue.”
How to reach: Ernst & Young Pittsburgh office, (412) 644-7829
Daniel G. Jacobs (email@example.com) is senior editor of SBN.
The telecommunications industry is a tough place to do business right now, especially for those companies chasing after the business end-user.
Prices are dropping, contracts lock up customers for years, and business owners know more than ever about capabilities and technology, raising their expectations from their provider.
Customer satisfaction and loyalty depend more than ever on the telecommunications providers ability to understand and fulfill the expectations of its business customers.
A recent study of the business customer by Deloitte Consulting reveals the following trends:
- Though price still appears to be driving initial purchase decisions, and is therefore a key criterion for getting into the game, customer retention and loyalty hinge on service issues, not price.
- Year-over-year survey findings show that operational responsiveness and customer service continue to be the high priority areas for improvement among respondents of all sizes. This is true even with an extended survey base that includes more small- and medium-sized businesses.
Providers which invest in, and differentiate themselves on, increased operational responsiveness will set the standard for the industry and increase the proportion of their customers who are likely to remain loyal in the face of competitive threats.
- By an overwhelming margin, respondents indicate a strong desire to be served by account teams not alternative support channels such as call centers or e-business channels. However, the significant dissatisfaction with account teams represents a dramatic vulnerability for providers, and an opportunity for their competitors.
- We have moved into an environment in which business end-users no longer fear the daunting task of switching vendors. At the same time, the boundaries that have sharply defined the competitive landscape in the recent past are blurring in a market being redefined by mergers, acquisitions and joint ventures. Telecommunications competitors are now judged on their own merits, not by the traditional brand identity with which each type of carrier was previously associated.
- Although true competition (equal reliability, availability, service and price) has only recently begun to emerge in previously protected markets such as local service, customers are sending a clear signal to providers: Improve service or be prepared to lose my business.
- Given the increasingly competitive marketplace, managing customer expectations and perceptions is nearly as difficult a job as actually provisioning and supporting reliable service.
Todd Shryock (firstname.lastname@example.org) is SBNs special reports editor.
Laurel Lake Retirement Community has received a grant from the Salmon Memorial Fund of the Sisters of the Humility of Mary. The grant will be used for health assessments of residents of Key Towers, a low-income senior housing complex in Stow.
Seagrey Recruitment & Retention Inc. has introduced The Career Minute, a forum for broadcasting area job opportunities via television, radio and the Internet.
Radix Wire Company has named Bill Brokaw Advertising as its agency of record.
Stein & Company Communications Web development company, Digital Navigation, has won an award of distinction in The International Creative 29 Competition.
American Stone Industries of Amherst has announced the receipt of contracts worth approximately $1.2 million to supply stone for a new building at Oberlin College and for restoration projects for Bethany College in West Virginia and the New York State Assembly Chamber.
Fifth Third Securities Inc. has introduced the Strategic Communications & Technology Trust, Series 2, a fixed portfolio of stocks made available to investors Feb. 18.
The chapters of Network Professionals Inc. have regular breakfast and lunch meetings, offering a speaker who outlines his or her area of expertise. Anyone interested in joining the group or learning more about NPI is welcome to attend a meeting. For information, call (216) 348-4744.
Bill Brokaw Advertising has launched Brokaw New Media, offering Web site design, development and consultation; online marketing, advertising and branding; and digital public relations.
The Practice Greens at Bobicks Golf Pro Shop has been named by Golf Range magazine as one of the Top 100 Golf Ranges in America for 1999.
The ROGERS Company, a marketing exhibitry agency, welcomes Designouveau Inc., a digital multimedia development firm, to its headquarters in Mentor.
The magazine inside PR awarded Edward Howard & Co. excellent ratings in the following categories: regional powerhouse, management, strategic thinking, investor relations, business-to-business communications and in-house training.
Media II Inc. has announced the acquisition of the following clients: TOMCO Products Inc. and KEC North America.
Applewood Centers Inc. has been named Ohios Outstanding Youth Serving Agency and has received the 1999 Ohio Governors Community Peace Award.
AARP has selected Fleishman-Hilliard as marketing communications partner for a campaign designed to promote the association.
Alvins Jewelers has announced the building of a new store at Parmatown Mall.
The Greater Cleveland Growth Association, the North Coast Tech Prep Consortium and Region 8 School-to-Work have announced the recruitment of high school seniors as interns for local businesses. If interested in hiring interns, contact Sue Thompson at (216) 592-2369.
Everstream announced the addition of The McClatchy Co. to its media network.
Four Points Hotels by Sheraton has announced an addition to its family, the Four Points Hotel Cleveland South.
Flight Options Inc. has been named to the Weatherhead 100 for exceptional sales performance.
MultiWeb Communications has introduced a suite of electronic tools designed to edit and format corporate Web pages.
John E. Bollman of State Farm Insurance Cos. has relocated his offices to Tyler Boulevard in Mentor.
Milbourn Pressworks Co. Inc. has been placed on the Weatherhead 100 and the Lake-Geauga Fast Track 50.
Smythe, Cramer Co. has announced a record high for closed sales volume in 1999, increasing 3 percent over 1998.
Auburn Career Centers Vocational Rehabilitation Case Management Services has celebrated its first anniversary.
The Independence Chamber of Commerce and the Cuyahoga Valley Business Association announced a merger into one organization, named the Independence/Cuyahoga Valley Chamber of Commerce.
Cleveland State Universitys Advanced Manufacturing Center has teamed with East Technical High School to develop a robot to enter in this years FIRST Robotic Competition.
Background Information Services Inc. has been founded by Jason B. Morris. The company offers pre-employment background screening to corporations and organizations.
WCPN 90.3 FM announced the addition of Public NewsRoom to its Internet news and information service at www.wcpn.org.
The Home Builders Association of Greater Cleveland has formed a partnership with the Cleveland Schools to sponsor a job program to recruit trainees and offer job placement assistance.
Budzar Industries Inc. has expanded the size of its headquarters in Willoughby, mirrored by a steady sales growth of 15 to 20 percent annually.
EDR Media has prepared a videotape of Scott Hamilton and other professional figure skaters to help promote cancer awareness and raise funds to support cancer research, education and patient care programs at the Cleveland Clinic.
Rand Worldwide, a provider of knowledge-based solutions to engineering and information technology companies, has acquired Technical Software Inc.
Cleveland State University and WVIZ/PBS have announced plans for the creation of an Applied Digital Technology Center.
Ohio is the most recent state to come under attack for references to God. A challenge to the 6th Circuit U.S. Court of Appeals to remove the phrase With God all things are possible as the official state motto for Ohio, suggests just one more step in the process of removing any mention of deity in our lives.
The first step is removing God from our government and schools. Will the next step be to remove God from our businesses? Will faith be outlawed as a guiding principle in our daily affairs as religious references are erased from public view?
In our rapidly changing, high-tech culture, we are so crowded with our own inventions that we have no need for dependence on, nor accountability to, a Supreme Being. But can success, material wealth and power give ultimate meaning to our lives? In our shift from the spiritual to a more secular world view, our appeal to higher standards of love, virtue, compassion and positive traits in general have lost their point of reference.
There is a growing sense of frustration that achieving The American Dream does not fulfill our deeper longings. We spend years building businesses, growing market share and watching the bottom line. After years of struggling to climb a mountain of obstacles, we get to the top, only to realize that success can be an empty feeling.
We have it all, but we are not satisfied.
Peggy Noonen, former speech writer for Presidents Ronald Reagan and George Bush, spoke about our national spiritual crisis in the Sept. 14, 1992, issue of Forbes magazine: ... We are beginning to lose God banishing Him from the scene, from our consciousness, losing the assumption He was part of the deity drama or its Maker.
And it is a terrible thing when people lose God. Life is difficult and people are afraid, and to be without God is to lose mans great source of consolation and coherence.
From Moses to Aleksandr Solzhenitsyn have come dire warnings of the consequences of a nation that forgets God. Without God, our business endeavors have no reason or meaning. It becomes a game of wealth accumulation and power struggles.
Some will demand evidence before allowing God to guide their daily affairs, but there are compelling reasons that a belief in a Supreme Being is not so farfetched. Consider:
- The outer evidence. Look at the order, beauty and intricate design of nature. Could all of this happen by chance or accident? I think not, any more than an explosion in a print shop could result in a book of poetry!
Abraham Lincoln said, All that I see teaches me to believe in a God that I do not see.
- The inner evidence: The inner longing of every human being to be loved and to express love, to know truth and the desire for peace where do these come from? A higher being? To come to the realization that we are created for a purpose will influence our personal, family and business worlds. The more we seek to be in a right relationship with God, the more we come into right relationships with our fellow human beings.
It will pervade every area of our lives as we remember that in all matters however, great or small it is In God We Trust.
Fred Koury (email@example.com) is president and CEO of SBN.