Connie Swenson

Thursday, 29 November 2001 05:51

Transferring technology

If you knew that some of the technology that will drive tomorrow's economy was available in your backyard today, would you seek it out?

Many companies are doing just that by fostering relationships with research universities, in order to be the first informed when new inventions, technologies and innovations are discovered.

Kent State University is one local institution that is actively pursuing companies that will use the technology developed within its walls in a commercial capacity.

In the last three years, 10 start-up companies have grown out of research developed at KSU. They range in focus from liquid crystals for optical communications to medical diagnostics to information technology. Those relationships were largely facilitated by the university's Office of Technology Transfer and Outreach Coordination, headed by Greg Wilson.

Wilson has been the director of that office since 1996, after spending 15 years in the corporate world, largely working in new product development for Abbott Laboratories. SBN Magazine spoke to him about research available to companies and the function of the school's technology transfer program.

What is the primary mission of the Office of Technology Transfer and Outreach Coordination?

The Office of Technology Transfer and Outreach Coordination has two functions. The technology transfer piece relates primarily to technology-based partnerships that may come from technologies that we develop here on campus, inventions that are made in our various research labs and forming technology-based partnerships for the university that embrace all eight campuses.

The technologies that are most common are either in the biomedical area or liquid crystals and polymers or software areas. Those are the three arenas where we do most of our activity.

The outreach is a little more general in terms of helping to establish these collaborations and partnerships with businesses or economic development groups primarily around Northeast Ohio. Those partnerships run the gamut from actual technology licenses, where some of the technologies invented here at the university are licensed to businesses that want to make new products. We have a number of those kind of licensing arrangements with companies.

Secondly, our office has been active in helping university-related start-up companies. We've had a number of companies that have either involved university faculty as proprietors or small start-ups that have been licensees of university technologies.

We've tried to facilitate the success of those companies by helping them get resources, whether it's finding the right location or connecting them to angel investors to get money or financing.

On a broader basis, we have individual company collaborations. There's one in the liquid crystal and polymer area involving Kent State, the University of Akron and Case Western Reserve University called Advanced Liquid Crystalline Optical Materials (Alcom), a three-way academic partnership that facilitates research for liquid crystal and polymer projects. We have a number of collaborating companies that work with these three universities via the Alcom structure.

Kent State University's sponsored research base, which drives inventions, is now about $28 million.

Can you give an example of how your office has been the catalyst for a new business?

One of these university-related start-up companies is Viztech, a licensee of some Kent State technology in the area of polymer films. Their goal is to make flexible plastic displays. We've licensed them some technology invented here at Kent State and we're helping them get situated in their headquarters in Streetsboro.

We're helping them get connected with some resources and financing -- they're working on their second round of venture capital. They'll be hiring more employees, and for a high-tech company, the average wage is quite high. That's an example where we've given some technology to a small company and helped them get established in the area.

It will hopefully be a significant financial benefit to everybody.

How can companies find out what technology is available?

Currently we market primarily on the Web, and we seek partners in whatever technology area we have. Liquid crystals and polymers have been our biggest area of licensing to date. Since our Liquid Crystal Institute at Kent State is the largest academic research center in the world focused on liquid crystals, it's quite well known.

We have about 40 company partners from this area and around the country that work with us regularly and are part of a partnership program, like Crystaloid (Electronics Co.) in Hudson and Kent Displays Inc. We bring them here for training, and they're always checking with us on what kinds of new technologies we have.

What's in it for the university to share these licenses?

Everybody benefits in several ways, but the company obviously gains access to university technology, which they wouldn't have had otherwise, and the university gets money back. (KSU's licensing income last year was nearly $400,000.) The university's main mission, in terms of technology transfer, is to make these technologies available for the public good.

Generally, most technology transfer offices do a little better than break even. But if you have a big winner, like a Gatorade (which came out of) the University of Florida, it can bring in millions. So if you have a big winner, it can be extremely lucrative.

Is there competition among companies to gain access to a certain technology or patent?

We try to satisfy all comers. There are various kinds of licensing arrangements. Some of these technologies, if they look like they have broad applicability, can be licensed nonexclusively to companies, meaning they can be licensed to more than one company for the same application.

Some of our earlier liquid crystal display technologies needed a lot more development or a lot of investment, and companies are reluctant to do that unless they can have a piece of it exclusively themselves. Both approaches have been taken. Part of it is kind of a timing issue because these technologies are almost always early, because they're coming out of a university, and sometimes it's hard to get companies interested because it is so early.

And then you'll get one taker, they'll start to run with it, and word will get out that so-and-so company has this, and then you'll find people coming in later saying, 'Hey, I want that, too.' Then you just have to deal with it at that time.

Have you ever had to turn away a company?

We have tried not to say no. You try to keep everybody as satisfied as possible.

And of course we have many scientists here inventing new things all the time, and there are always new things to bring to the marketplace, too.

How do you stay on top of all the research that is being conducted within the university?

It's tough, because at a large university, it's quite diverse. I spend a lot of time on campus, circulating with faculty, going to technical meetings around campus and staying in the network of what kinds of technologies are being developed.

We also do educational seminars around the university on what technology transfer is and what the patenting process involves and what you get if your technology is patented and licensed, because there is money that goes back to these inventors, as well as the inventors' department and other areas of the university when a license is successful.

There are also policies in place at Kent State that say if you invent something, you need to disclose it to the technology transfer office. How to reach: Kent State University Office of Technology Transfer and Outreach Coordination, (330) 672-2692

Tuesday, 30 October 2001 05:56

Changing times

Early last month, I flew to Seattle to spend four days with fellow journalists from all over the country.

Most were breaking away from one of the busiest times of their careers as reporters and editors to come to this event. We left our jobs to participate in an annual conference on journalism, organized and hosted by the Society of Professional Journalists, a national organization that serves to protect the free press in our country.

In the days following the Sept. 11 attacks, there was much discussion among the groups' membership and board of directors about canceling this year's conference. A last-minute executive decision was made to hold the conference, unless a large proportion of the speakers cancelled.

That didn't happen. In fact, the turnout this year was as high or higher than it had ever been.

I'm sure I wasn't alone in my fear of stepping on a plane to travel to the West Coast so soon after the terrorist attacks, but, like hundreds of other journalists, I decided it was probably one of the most important times I could choose to renew my commitment to and understanding of journalism.

Not surprisingly, the program had been changed so that many of the professional development sessions were now focused on practical and ethical issues surrounding the coverage of the events emerging from the Sept. 11 attacks. Journalists spent most of their time sharing stories in formal and informal meetings of how they responded through their jobs to the events of the last few weeks.

The editor of the Washington Post's Sunday magazine told me how difficult it was to cover the Pentagon attack in a fresh manner after his daily newspaper had been reporting on it every day for the last several weeks. As the editor of a weekly magazine, he plans his articles at least two weeks in advance.

His solution was to send reporters out to "shadow" a handful of Washington, D.C., residents and workers who had been affected by the crisis to see how they were getting back to their "normal" lives.

At the conference, I sat and listened to the sensational stories that were being told, especially by the New York and Washington-area reporters who had to quickly set aside whatever they were doing to cover the events that changed the world. As the editor of a monthly business magazine that focuses on issues, not necessarily news, I didn't feel I could share in those experiences. My job, I thought, hasn't really changed.

I came home to wrap up our November issue and start planning for December, only to realize that my job has definitely changed, in some ways temporarily and in others probably permanently.

We may not report on the news that happened yesterday, but we do have an obligation to our readers to write about the issues that are affecting their workplaces today.

Stories about security issues and coping with severe revenue drops have replaced articles on finding great employees and travel tips. We're seeing more compassion and humanity in local workplaces during these tough times.

Layoffs are occurring, but many employers are trying to cut costs other ways. Retailers in every industry are offering huge incentives to lure back customers.

These are just a handful of the issues we'll be writing about this month and in the months to come. There are many more we are aware of and plan to cover, and some we may not know about yet.

I was reminded last month that my primary role as an editor is not to shape the news but to act as a conduit. You can help me with that responsibility by letting me know what issues you are now dealing with in your workplace.

SBN would like to share those stories with other business leaders to help everyone cope.

Connie Swenson is editor of SBN Magazine. Reach her via e-mail at cswenson@sbnnet.com or by fax at (330) 668-6224.

Tuesday, 23 October 2001 10:50

Competing in the big leagues

Five years ago, at the age of 30, Scott Wakser left a high-salaried sales position with a national medical device manufacturer to set out on his own.

He had one mission: to show his former employer, and a handful of national, billion-dollar companies, that he could compete in their exclusive arena.

Today, Wakser is president of DiaMed Inc., a company which has grown to more than $6 million in sales, and is doing exactly what Wakser and Vice President Doug Sharpe said it would when they founded it in 1995. By staying local and focusing on customer service, the medical supply distributor has carved out a niche in an industry that has historically been dominated by a small handful of national players.

"I've always had the entrepreneurial spirit," Wakser says. "I didn't see myself working for someone else my whole life. When I was growing up, I had my own lawn service. I've always been a hustler that way."

While Wakser and Sharpe have focused on building business one physician office at a time in a limited territory that includes Ohio, Michigan and Western Pennsylvania, the two received confirmation of their success late last year when they won a $2 million contract from University Hospitals of Cleveland.

DiaMed is now the exclusive vendor of physician supplies to UH's 170 physician offices. And that hasn't gone unnoticed.

When Wakser and Sharpe left their sales positions at New Jersey-based Q-Med Inc., which develops, manufactures and sells medical devices and systems, to start DiaMed, they were told, "We'll have you out of business in six months," Wakser recalls.

"At the time we started, they [our competition] laughed at us," he says. "Twenty-four months later, they tried to buy us."

Physician Sales & Service Inc., a $1.3 billion medical supply distributor, based in Jacksonville, Fla., approached DiaMed with a $2 million purchase agreement in 1997, he says. The partners refused, but Wakser keeps the agreement in an easily accessible desk drawer, pulling it out on occasion as if to remind himself how quickly things can change.

Today, he says simply, "They respect us."

What makes DiaMed's success noteworthy is not necessarily the exclusivity of its industry, but the fact that the small North Canton company does not sell on price or product.

"We sell the same thing that the billion-dollar businesses sell," Wakser says. "There's no difference. Price does not create loyalty. The difference is what you will do."

So far, Wakser has shown his customers that there isn't much of a limit to what he will do for them. Rosanna Boveington, lab manager of Ohio Family Practice in Fairlawn, has used several suppliers over the years, but five years ago switched to DiaMed for the majority of her practice's supplies.

"When I need something, I call and talk to the same person every time. That's very important," she says. "If I have a problem, Scott sometimes comes himself."

It was that personal attention that Wakser noticed was missing from the industry when he decided to leave Q-Med. He and Sharpe gambled on the idea that enough of the industry's clients would sacrifice a big name for the personal attention they had never received.

"I thought, 'What a great idea,'" he says. "We would be the guys to service the equipment, to train the doctors how to use it, to show how to bill the products, and to really focus on service.

"Make the customer feel like a king, that was our goal."

While many entrepreneurs make that promise in the start-up stage, few are personally overseeing its execution five years down the road.

One of the ways Wakser personally monitors every customer's satisfaction with DiaMed is by sending out, reading and responding to customer surveys. He asks every customer to grade DiaMed's performance on a quarterly basis in areas such as customer service, sales representatives' knowledge and responsiveness and product quality and delivery.

The last question asks whether the customer would recommend DiaMed to an associate. Wakser says that if any of the questions come back with a poor rating, he calls the customer to attempt to rectify the problem.

But that's not to say he takes sole responsibility for maintaining high customer satisfaction levels. Visitors and clients will spot customer service programs in nearly every area of the company, starting with the friendly voice that answers the phone, "Hello. DiaMed: the company that cares."

Other customer-satisfaction measures include:

  • A training program in which every new employee works a shift in every department of the business.

    "I've worked the warehouse, and everyone here has packed a truck," says Wakser.

    This training corresponds with his belief that every position is as important as the next one.

    "I'm no more important than the delivery guy. He's the guy who's going to see the customer five times as much as I am," he says. "If you can't focus on 'we,' you have no company."

  • All new customer service reps are given mirrors for their desks. This one's simple: Wakser believes that a smile is heard through the phone, and he wants to make sure his employees are smiling when they're talking to customers.

  • The first office visitors approach upon entering DiaMed is Wakser's. His office, while small with barely room for two guest chairs, is the first in the building.

    "I want everyone to know they have a right to see me and to talk to me," he says.

Last year, DiaMed expanded its reach, opening a retail store out of its Belden Village office.

While the showroom houses an assortment of products including diabetic shoes, scooters, wheelchairs and walkers, for most customers, it's easier to shop from the convenience of their homes. DiaMed staff brings the products to the customer, then helps them with assembly, usage information or insurance coverage needs.

Wakser plans to continue to grow the retail side of the business, which accounted for $1 million of the company's sales in 2000, again selling the products on service, not price.

"We believe that within the next five years, we will be the dominant force in medical distribution in this area," Wakser says. "We know this marketplace. That's all I want to understand. I stay with what I know, so I don't lose my focus." How to reach: DiaMed Inc., (330) 966-7264


Going up against the big boys

Scott Wakser looks at his company's size as an advantage, not a weakness, in going up against his billion-dollar competitors for contracts. Here are three ways he uses DiaMed's size to his advantage:

1. As a smaller company, he is able to respond to the needs of his clientele more quickly, because he doesn't have bureaucracy to go through, he says.

2. A more focused organization can bring better service to the table, he says. A large company has lots of contracts, so each customer is one in a million. As a smaller company, the bottom line is that each company's business is imperative.

3. Selling by reference. Sell through other customers. Wakser develops a referral list that includes letters from happy customers on why they have chosen to do business with him.

"Whenever I have a good client, I always ask them to write a letter about why they chose us, and why they continue to do business with us."

Tuesday, 23 October 2001 10:50

Borrowed advice

It's that time of year again to make New Year's resolutions. If this isn't a tradition you follow, you may want to reconsider.

And what better time could there be to set new goals than the start of the new millennium? (No, that wasn't last year.)

Consider this: Research shows that those who make New Year's resolutions are far more likely to achieve those goals that those who don't. So, what do you have to lose?

Here are some ideas I've borrowed from the many businesspeople SBN's editorial staff spoke to over the past year:

1.) Lose weight. In November, Twinsburg-based PlanSoft, one of the area's most prominent Web companies, laid off 40 employees. The company cut its staff to turn a profit after investors started to grumble.

A sign of another dot-com in trouble or a smart business move that could serve as an example to businesses in all industries? You decide.

2.) Jump out of a plane. That's what Don Taylor, owner of Welty Building Co. in Akron, did when he agreed to take on the renovation of Portage Country Club. He knew the project would either help or destroy the reputation of the company he had just taken over. His work was scrutinized by 600 of Akron's most prominent citizens during the months his crew worked on the project.

The outcome? The country club's membership loved the work. And, it was done within budget. The project was risky, yes. But Taylor will tell you he'd do it all over again. In less than a year, he gained 600 new fans. Business has never been better.

3. Take a vacation. In October, Lee DiCola, chairman of Galt Industries in Canton, did just that when he took a sabbatical from his job and traveled to Burma, Cambodia, India and Egypt (among other locales) with his wife. Can you think of a better way to refresh a high-pressure position?

4. Buy that diamond you always wanted. Heck, give me a few. That's how Sterling Jewelers (based in Fairlawn) grew to $1 billion in sales. The company owns a diverse group of jewelry stores that appeal to just about every customer profile. If you're not a Roger's customer, you probably shop at Osterman. Or Jared. Or Kay ...

5. Forget about the money for once. Linda Smithers, owner of Susan's Coffee & Tea (with locations in Akron, Canton and Massillon), sold her company to an investment firm last year, then bought it back when she suspected the company was sacrificing quality to save money.

Her story showed us that very few decisions are as permanent as they may appear at the onset. While the jury's still out, Smithers insists that profits can be maintained by prioritizing quality, not sacrificing it. Connie Swenson (cswenson@sbnnet.com) is editor of SBN Magazine.

Tuesday, 23 October 2001 10:50

Recession-proof

Whether or not the predictions we're hearing are accurate, the economy is in for some kind of a change. If you read everything you get your hands on, you might believe that we're in for a recession soon.

My peers in the journalism community are poising their pens to write about what they deem inevitable. A turn in the economy is great fodder for business journalism.

Most of the business owners I talk to don't seem as concerned. They're not hoarding their cash. They're not laying off employees. In fact, the growth-oriented businesses SBN Magazine has been covering the last several months are talking about the investments they plan to make -- or are now making --- to prepare for long-term growth.

Why is this? For one, when the U.S. economy is facing a predicted recession, money gets cheaper. That means many businesses take the opportunity to invest in new technology and equipment at lower rates. But even at those costs, if a company is not poised for growth, why would it invest in that direction?

The answer is, at least from the company owners I have spoken to the last couple of months, that they indeed are poised for growth -- even (and especially) if their competitors aren't.

Whether or not you believe that President Bush's tax-relief package or Federal Reserve Chairman Alan Greenspan's rate cuts will spur the economy, economists will tell you that monetary policy actions take at least 18 months to yield results. While these actions can have immediate effects in terms of convincing businesses and consumers that better times are around the corner, they can't affect the current economy.

Savvy business owners know that this forecast is not a bad omen. They see it as an opportunity to jump ahead. They know that they must build upon the policies put in place today to reap the benefits when the economic landscape evens out a year or year and a half from now. There will be some fallout, as we've witnessed in the dot-com industry of late, but these savvy business owners say, better our competitors than us.

Now is not the time to sit still. Better times are ahead, but we won't all be here to enjoy them. On a large scale, you can learn from companies such as Apple, which is preparing to boost its position in the marketplace by adding extras, such as standard CDs, DVDs and increased power levels, to its computer products.

On a local level, you can learn from our cover story this month about a company increasing its capacity so that it can expand its product line.

These companies are staying within their areas of expertise, but expanding their capacities. Their strategies share a common philosophy. They are positioning themselves for growth by sticking to what they know best.

It may not be the time to take on a big risk, but as they'll tell you, it's certainly not the time to be stagnant. Connie Swenson (cswenson@sbnnet.com) is editor of SBN Magazine.

Tuesday, 23 October 2001 10:49

It's that simple

I am constantly searching for innovative companies to feature on the pages of this magazine. However, when most of us define innovation, rarely do we picture a century-old family business whose staple product is jelly.

This month, I was surprised to find out how much The J.M. Smucker Co. has to teach other businesses. That's right. Even you, running your dot-com start-up, can learn from this family-run producer of jelly, juices and butterscotch sauces.

What, you may ask, is innovative about food items so basic your grandmother probably had the same ones stocked in her refrigerator?

The answer can be found in two words: Magic Shell. You know, that topping that magically freezes in seconds on your ice cream. Sundaes gained new appeal for me at age 12 after my mother brought this product home and I figured out that I could have a fun, candy-based science experiment while enjoying my ice cream.

While I don't know exactly how the Magic Shell product came to be, I do know about some of the new products The J.M. Smucker Co. has unveiled recently. Like frozen, round, crustless peanut-butter-and-jelly sandwiches that are already becoming a hit not only in the grocery store, but with school districts and restaurants.

The company has been able to create new products, with incredible appeal, that aren't really new. The company's governing principles dictate that the company be run by Jerome Monroe Smucker's 1897 basic beliefs. So, Tim and Richard Smucker, who run the company today, don't diversify much from their core products. The J.M. Smucker Co. has always produced peanut butter and jelly. It just turned it into a product that every kid wants. And in an age where parents are buying cereal that comes packaged with milk and a spoon, what parent isn't going to like the idea of buying a pre-made, crustless sandwich?

So who comes up with these innovative, yet traditional ideas that have helped maintain the company's success over the years? The J.M. Smucker Co. employees, who, not-so-coincidentally, have put the company within the top 25 of Fortune magazine's list of the 100 best companies to work for since 1997.

The ranking is based on a number of factors including a low employee turnover rate (the company boasted a 4 percent turnover rate in 1999), job growth, and employee training. It's also interesting to note that 31 percent of the company's employees have worked there for more than 15 years.

When I asked Tim Smucker, co-CEO, about the ranking, he was somewhat aloof: "Our goal isn't to get the award," he said. "Our goal is just to treat people the way they want to be treated."

That sounds too simple. Connie Swenson (cswenson@sbnnet.com) is the editor of SBN Magazine.

 

 

 

Tuesday, 23 October 2001 10:49

Growing your own

You've most certainly noticed that the economy has shifted gears over the last few months. Companies are cutting back, tightening their purse strings.

And while the unemployment rate has been slowly rising from an historic low, I've observed a trend that seems to contradict the statistics economists are feeding us on a daily basis: Most companies are actually hiring right now.

That's right. As they tighten their budgets, they're still looking for good workers to fill critical roles. At the same time, their present employees are being asked to do more with less, and the need for skilled, results-oriented workers has become more of a priority.

If you're one of those companies looking for exceptional workers, you're probably not finding the worker pool you need from your classified ads. A new economy begs for a new way to take action. Here are some examples of what your peers are doing to attract new workers.

Akron's FirstEnergy Corp., a diversified energy utility operating company, comprises the nation's 10th largest electric system, serving 2.2 million customers. Deregulation, mergers and a unique challenge caused by the prediction that 40 percent of the company's work force will retire within the next eight years have forced management to look for new ways to find employees.

As a result, FirstEnergy is working with Lakeland Community College in Kirtland and Stark State College of Technology in Canton to develop a replacement strategy called Power Systems Institute. Students of the program spend half of their class time (2 and 1/2 days a week) at a FirstEnergy facility, receiving hands-on training from company instructors. The program takes 21 months to complete, and graduates are given special consideration for employment at FirstEnergy.

Many of the large auto dealers in Akron and Canton have already figured out how to grow their own qualified employees -- they have joined alliances with local technical schools to ensure the skills and training of their future employees. Over the years, it's been more difficult for auto and truck dealers to fully staff their service departments. Through these alliances, dealerships have been able to participate in educating future generation of mechanics.

And for those smaller- and mid-sized companies that may not have the financial resources to contribute to the education of future employees, Stark Truss Co. of Canton offers another solution. This growing company has maintained a tradition of hiring employees while they're still in high school. Many of those hired in their teens have grown through the ranks to reach management positions.

In addition, the company doesn't frown on nepotism. In fact, employees are encouraged to recommend family members for open positions. The theory is that relatives of Stark Truss employees already know the hard work that's expected of their family members. Connie Swenson (cswenson@sbnnet.com) is editor of SBN Magazine.

Tuesday, 23 October 2001 10:48

At your service

If free expert advice were available to you on one of the most important areas of your business, any time of the day, and as close as your phone, would you use it?

Even though it is available, many companies don't take advantage of one of the most valuable resources they have.

If you're thinking I'm going to say your customers, you're only partially correct. That's because you'll probably find more useful advice comes from your ex-customers. Unless they no longer need your product or service, something enticed them to switch to one of your competitors -- and wouldn't you like to know what that was?

One of the most competitive new industries is the cellular phone industry. It seems as if everyone's trying to get your business with special air time and equipment deals that change daily. As a loyal GTE customer for many years, I made the decision to switch providers after GTE became Alltel last fall and suddenly service started to falter.

I think phone service is one of those commodities that you don't give much thought to until things start to go wrong. Suddenly, I was waiting on hold for half-hour periods, no one knew who the local rep was who had sold me the phone, or who had replaced him.

With competition so fierce, the decision to switch was easy, especially since I knew of a local entrepreneurial company that acted as an agent for both Sprint and Nextel. I had a choice of two national cellular providers, backed by local customer service reps who report directly to the owner of the company.

When I called Alltel to tell them I was dissatisfied and ready to cancel my service, they did what you'd expect a company to do: the rep on the other end of the phone tried to dissuade me. In fact, she was so adamant about keeping my business, she told me that if I left, I would be billed $300 in addition to my normal monthly rate because I broke a contract. No questions about why I wanted to cancel, just a threat.

I was confused. The only contract I signed was three-and-a-half years ago, for a two-year term. No matter how you do the math, it clearly had expired. "No," she replied. "You renewed the contract for another two years when you called last fall to adjust your rate plan."

While I knew how outrageous this was, because I certainly would never have agreed to another contract with Alltel, I tried for a month after that to find the right person within the company to talk to about it. The two sales reps I'd dealt with locally at various times were long gone. No one at the company's 800 number had the authority to even discuss my predicament.

When I asked to be transferred to a supervisor, I was told to call the manager of a local Alltel store. The sounded a bit strange to me, since I had never even stepped foot into an Alltel store, but I followed the advice. It must have sounded strange to that store manager, too, because she wouldn't return my calls.

I'm still trying to reach someone at that company who has the authority to act reasonably. While I want to get that fee waived from my account, I'd also like to tell them, as an ex-customer this time, to take a look at one of the greatest employee handbooks ever written.

It's the handbook for Nordstrom employees, but it's not about selling shoes. It's just one piece of paper that simply says, "Use your good judgment at all times." Connie Swenson (cswenson@sbnnet.com) is editor of SBN Magazine.

Tuesday, 23 October 2001 10:48

Sold! to the highest bidder

eBay Inc. was founded in September 1995 in the living room of software developer Pierre Omidyar.

Now based out of offices in San Jose, Calif., eBay boasts 30 million users who transacted more than $5 billion in annualized gross merchandise sales last year and employs 2,000 people in 15 countries. But what really sets it apart from other dot-coms is that it has been consistently profitable since Day One.

Arguably the largest, oldest and most successful auction site on the Web, eBay has changed the way goods are bought and sold for both online and offline companies.

Gary Bengier, eBay's senior vice president of strategic planning and development, spoke last month at Kent State University's commencement. A 1977 Kent State graduate, Bengier joined the company as CFO in 1997 and spent his first three years there building the financial team and processes, and leading the funding efforts for its IPO.

Today he is responsible for planning and leading the company's longer-term strategy.

What is eBay's mission?

To create a marketplace where people can trade practically anything on Earth. The mission has remained remarkably the same. We had a really strong vision from the beginning of what the company would be, and that's been very stable.

How is revenue generated?

Our users can list items for sale, and when a user lists an item, we charge a small fee for listing, and then if they're successful and sell the item, we charge a small success fee -- a percentage. It starts at 5 percent for the first $25, and it declines, based on the price, to 1.24 percent. It's a transaction-based model, and that's where we get almost all of our revenues. It's really a bargain by comparison with other ways of buying and selling.

How do you think the eBay business model has changed commerce?

I think it's changed commerce for the average person. Our philosophy is based upon having a level playing field, so that everybody can compete equally, so that the average individual person can compete on an equal basis with Kmart.

How do you maintain or monitor the quality and authenticity of the products that are sold on the site?

Let me first explain how a trade works. If you see something that you're interested in, you have to register before you can bid, so that the people who have registered to be a user have an economic interest in buying or selling. Let's say you bid and you win the item. Typically what happens is, during the time that the auction is going on, the seller and the potential buyers exchange e-mails.

There's a conversation that very frequently happens around the item. One of the things you as a buyer would do is check (the seller's) feedback. The feedback is essentially an online reputation, and that's created every time someone has a transaction.

From the very beginning, we were measuring that there were fewer than 30 irregularities per 1 million items listed, and that's dropped down into the 20s. We've just spent a lot of effort to make the site safer.

Some of the stories you hear about are because we work so closely with state and local law enforcement on all kinds of levels. It's actually a silly thing to try to do something (illegal) online because, in many cases ,it's violating federal postal laws, and we're talking about felonies. Someone pointed out that if you look at our percentages, you have a greater chance of having a problem at a shopping mall than you do on eBay.

Do you have people on your staff randomly checking the quality of the items that are sold?

No. It's a community of users that came together. This gets back to how we started. We started from the founders' belief system, which sounds very idealistic, that most people are basically good and that you have to give people the benefit of the doubt.

It seemed like we got a large number of good people at the beginning and then we continually impressed upon the community of users what was the right behavior at eBay. I think good people brought good people to the site, so we had a community culture of being very polite and looking for the best in people.

How is the whole auction format going to change in the future? Is it going to become more or less predominant?

I think it's going to become much more a common part of the way people think about buying and selling things. If you think about this historically, 150 years ago in America, you went down to your local town square, you shook hands with the cobbler, and you made an individual agreement with the cobbler about the quality of shoes and the price.

There were no fixed prices in the United States until 1870 when Mr. Ward of Montgomery Ward published the first fixed price list. That was when we had mass manufacturers in New York and Chicago and other industrial cities creating mass manufactured goods.

With that there was a need to figure out how to distribute those goods, and we had a disappearance of the small local store where we knew the person individually. It was replaced by the Sears Roebucks and the large mass market retailers, where you depended upon their reputations for things.

What we had then was interestingly a very small part in all of human history -- less than 150 years -- where we've had fixed prices as the only way we've fundamentally bought and sold things. For the prior 4,000 years of human history, it's been much more flexible.

Do you think eBay is in the forefront of changing consumers' dependence upon fixed pricing?

I think it's a revolutionary change about how people think about buying and selling things. You can think of buying things at a more flexible price as a different mechanism, and you think about buying things that might be used more than you might have before, because now there's a medium to make that possible.

Who is eBay's biggest competitor?

We think we're in a pretty strong position competitively. We're less and less challenged, particularly in the United States. You always have to watch for competitors. 'You have to stay paranoid,' as Andy Grove (co-founder and chairman) of Intel liked to say. We think that our community is just safer, and has a much broader selection of merchandise and it's just easier to use. It keeps growing bigger.

How will eBay continue to evolve?

We are continuing to look at that vision, which we think is really changing the world. Think about how we build that marketplace to be better, safer, faster and easier to use in many dimensions. One is, we're moving further into fixed pricing.

On that dimension, we did two things recently. One, we acquired a company called Half.com, which offers person-to-person fixed prices. It started out with CDs, books, movies, videos, games, and we've just recently expanded that into computers and a whole list of new categories. It allows you to buy and sell at a fixed price very quickly. That's our initiative on moving into fixed price.

We also launched, in the fourth quarter, a new feature called Buy It Now. Buy It Now allows people to, rather than wait for an item to finish an auction where they might lose, immediately buy the item and be sure that they were winning it and be sure of the timing. That's been extremely successful. One-fourth of the listings on our site now use the Buy It Now feature.

The economy has not been too kind lately to dot-coms. How has that affected eBay?

It's been positive, because we have such a powerful business model. eBay has made money since the very beginning, consistently. The weakness among others has meant that it's been easier to recruit good talent.

What advice would you give to an entrepreneur who was considering starting a dot-com division or a dot-com company?

I'd say first make sure that you have a solid business model, and that starts with a real need of the consumer that you are meeting. That's the heart of any solid business, whether it's an online or offline business: Customer needs.

Is there any one message that you hoped to get across to the graduating students at Kent State, who are about to enter the business world?

Take risks. How to reach: eBay Inc., ebay.com

Connie Swenson (cswenson@sbnnet.com) is editor of SBN Magazine in Akron and SBN Magazine in Stark.

Tuesday, 23 October 2001 08:33

Where customers are critical

On June 15, Jack Pickard took over as CEO of FedEx Custom Critical. He succeeded Bruce Simpson, who had gained a reputation as one of the region's most accessible and admired business leaders during his 13-year reign.

Even though Pickard had served at a vice presidential level since 1989, he still had huge shoes to fill.

When SBN talked to Simpson days before his retirement, his advice to Pickard was simple.

"I think leadership is a subject that thousands of books are written about every year," he says. "He'll be a good leader. The important thing in this whole process is to continue to perpetuate the culture that we have, that really, in addition to this unique service that we provide, stimulates us."

The essence of the culture, according to Simpson, is "an obsession with the customer."

In an industry in which the product is service, Pickard knows the importance of perpetuating that. It starts, he says, with giving every employee the authority to do whatever it takes to serve the customer. By granting that power, he says, you encourage innovative thinking when employees are faced with problems.

"We promote an atmosphere of empowerment, where employees are encouraged to be creative and uncover new ways of doing business," Pickard says.

"Our customer service agents don't have to ask a supervisor's permission to dispatch a truck or charter an airplane in order to satisfy a customer's unmet needs," he says. "They are empowered to spend whatever amount of money it takes in order to meet our original commitment. It's spelled out in our mission statement."

Pickard says that customer service agents have spent upwards of $15,000 to get a delivery made that cost the customer $1,000.

"They are empowered to do whatever it takes that is customary, ordinary and reasonable," he says.

Pickard admits that level of authority still frightens a lot of people, who want the terms "customary, ordinary and reasonable" defined.

"What's ordinary and reasonable? I can't answer that question for you definitively," he says.

The company promotes innovative thinking by including innovation in every employee's job description. Each job, he says, has a set of core competencies that are expected of the employee.; some expected from every employee are zeal, team spirit, relentless achievement, trust, customer obsession and innovation.

"We expect our employees to use creative thinking to generate new ideas and business solutions," Pickard says. "And to continuously look for ways to challenge the status quo and embrace change as a means of enhancing organizational effectiveness and customer satisfaction."

So, how does one demonstrate that competency?

"You're given unusual situations to which you respond and provide customer satisfaction to meet the needs of both the customer and the company," he says. "In our business, you're as good as your last shipment. And if you failed in any way, shape or form in the mind of the customer, you need to take immediate corrective action.

"How you react when times are tough really builds customer loyalty in the long run."

Pickard says there are three things any company must do well. The first is that it has to perform operational excellence.

"That means quality," he says. "That means doing what you say you're going to do every time. If you make a commitment, you live up to that commitment. It doesn't matter whether it's FexEx Custom Critical or an ice cream stand on the corner."

The second thing any company has to do well is product and service innovation.

"That means bringing new product and new service to the market before your competition does," he says. "That's the innovation part."

The third characteristic of a successful company is what he terms "customer intimacy, or having good relationships with your customers.

"We have to develop a relationship that's so close to our customers that we can begin to anticipate their needs before they even realize that they've got them," he says.

Pickard admits that quality and service are easier to control than innovation.

"Like most organizations, we're doing some things very well, and there are areas that we need to improve on, too," he says. "We need to become more innovative."

He says while every employee hired at FedEx Custom Critical comes into the organization with a certain level of intelligence and creativity, allowing employees the freedom to share their ideas is the difficult part.

"It's my job, as much as anything, to keep the corporate hierarchy from squelching that innovation and creativity that comes naturally to everybody," he says.

"In my prior experience, companies become very stratified and ossified sometimes, and they just don't get the value that they should from all of their employees because the system stifles them. And what I need to do here is constantly guard against that, to make sure that's it's an open environment where people can trust one another." <

B>How to reach: FedEx Custom Critical, (800) 762-3787

Fed Ex Custom Critical

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