by Pat Cole
You've been watching e-commerce giants such as amazon.com surf their way into business glory. And you're intrigued by the idea of incorporating
this latest tool into your own operation. Yet with all the many aspects of e-commerce you're not quite
certain how to best employ it‹or even if it's really right for you.
You're not alone.
Across Corporate America and beyond, businesspeople are struggling with how they, too, can profit from this latest technological marvel.
Simply put, e-commerce is nothing more than the ability to conduct business electronically. Yet its implications go far beyond that basic definition to include what some say will be a total restructuring of the economy.
"All aspects of the economy are more dependent on companies that handle information than on companies that manufacture products," says Brian Dos Santos, the Frazier family professor of computer information systems in U of L's College of Business and Public Administration (CBPA). CBPA and other areas at U of L have been working with students, entrepreneurs and existing companies since e-commerce first appeared on the horizon.
The goal is to help them piece together the jigsaw puzzle of opportunities that e-commerce presents.
One observer has compared doing business today without the World Wide Web to doing business in the pre-Internet era minus a telephone, notes finance professor John "Russ" Ray Jr. '73A, '74G. He agrees that even existing "brick and mortar" businesses need to be Web savvy.
"If you don't learn e-commerce, your competition will put you out of business in no time," he says.
Selling goods is just one aspect of the new competitive dynamics introduced by e-commerce. Businesses also buy inventory, supplies and other materials online, generally at prices lower than those offered through traditional channels. In fact, Ray says that business-to-business transactions constitute 80 percent of all e-commerce activities.
Yet he and other e-commerce experts warn that its efficiencies and innovations are no substitute for a solid business plan.
"Nine out of 10 companies make the mistake of not approaching e-commerce as a business project. They approach it in a desperate manner or they don't know what they want to do with the Web site," Ray says.
"When they do finally figure it out, it turns out that the $120,000 they spent to put up the site is wasted. They threw up something they don't use."
The poor customer service performance of some online companies during the last holiday season proved that e-commerce depends on more than just technology, observes CBPA dean Robert Taylor '85AD. "Unable to deliver what they promised and falling short in service after the sale, the upstarts demonstrated convincingly that there must be more than a dot-com site for long-term effectiveness," he cautions.
Van Clouse, the CBPA's Cobb family professor of entrepreneurship, adds his own admonition to would-be Netpreneurs: While e-commerce enables the economy to be more efficient, the basic principles of business, such as offering the right products, services and price, still apply.
"The Internet places more power in the hands of the consumer," he advises.
Savvy businesses, then, are preparing to deal with this heightened awareness on the part of customers. Savvy schools are helping them.
From Class to Cyberspace
Students in U of L's nationally acclaimed entrepreneurship program are discovering unlimited room to grow businesses in cyberspace.
Moreover, the study of e-commerce and the information economy is making its way into every aspect of the business curriculum.
"E-commerce is a new frontier and that's exciting," says Clouse. "The best and brightest are interested in the new frontier, and it has really increased the interest of students in entrepreneurship."
The relatively low startup costs of e-commerce businesses and their high potential for growth motivate some students to implement the business plans they originally created as class assignments.
At least two e-commerce companies developed for class by CBPA graduate students plan to start operation in coming months.
One of those is TowBiz.com, a supplier of parts and accessories for the towing industry. It will open late this summer or early fall, says co-founder David Shuck.
Tow truck parts already are available online through dealers who focus mainly on selling and leasing trucks. TowBiz.com, however, will be the first to concentrate on parts and accessories, according to Shuck, whose own family has been in the towing business since the 1950s.
"One of the key factors in pulling this off is location," he says.
The company's proximity to the UPS air hub in Louisville will allow TowBiz.com to take an order as late as 10 p.m. and ship it for next-day delivery. This could mean an advantage of up to six hours over the competition, Shuck says. And the timeliness could keep a tow truck operator from having to miss a day's work.
U of L's relationship with UPS might pay off for others, too. The university and the shipper are looking into ways that Louisville businesses can use the UPS hub to their competitive advantage, says Jim Graham, director of U of L's Information Technology Resource Center (iTRC).
"We are working with them to see how we can enhance the big picture and tie it all together for the economic development of the community," Graham says. "It's exciting to see the UPS air hub included as part of the business plan for some of these companies."
Another student-developed company is interested in moving inventory via truck rather than airplane. Freight-Jungle.com will connect shippers and truckers through an online auction that helps truckers keep their trailers full and shippers get the lowest price, co-founder Tim Harper '99G says.
Truckers who face the prospect of leaving an area without a full load of freight can log on to Freight-jungle.com and see what shipments are available to bid on. The founders of FreightJungle.com are betting that truckers will quote lower prices rather than not use their available space.
"Small trucking firms and independent truckers generate about $400 billion in annual revenue," Harper says. They also lose about $31 billion because of trucks returning from a run either empty or with partial loads, he adds.
In new business competitions, the teams that created TowBiz.com and FreightJungle.com have fared well against their peers. TowBiz.com finished second in the Midwest New Business Competition, whose entrants included several Big 10 schools. The team also placed third in regional competition at the University of Georgia.
FreightJungle.com placed third in international competition at the University of Oregon. During the event, the team was approached by several venture capitalists who expressed an interest in the company, Harper says.
The success of U of L students in new business competitions adds to the school's growing reputation. For example, the U.S. Association for Small Business and Entrepreneurship recently ranked the university's MBA entrepreneurship program second-best in the nation.
Rather than structure a major in e-commerce, U of L integrates the study of e-commerce across the various business disciplines. Additionally, the school has developed and will continue to develop new courses on the subject, Taylor says.
In one e-commerce class, Dos Santos shows students portraits of automobile magnate Henry Ford and scientific management guru Fredrick Taylor, two key figures in the industrial economy. He then challenges students to look for opportunities to play such strategic roles themselves in the new economy.
"Over time we will know how to change to succeed in the new economy and we will know what works and what doesn't work," Dos Santos says. Meanwhile, he adds, the need for innovative thinking and experimentation is crucial.
From Ideas to Action
Louisville-area entrepreneurs can get assistance from the iTRC in putting their creative ideas into action. The center lends guidance and facilities to those starting technology companies.
"We take in a company and help it get started," Graham explains. "We provide space, equipment, office furniture, meeting rooms, consultations and support from community resources."
The iTRC, an alliance between U of L and BellSouth, began a decade ago when few people had access to the Internet. In its early days, the iTRC concentrated on applied-research ventures such as telemedicine, high-speed data and distance learning.
As the World Wide Web developed, e-commerce became its concentration.
"Some of the companies we have incubated are big players in the e-commerce marketplace," Graham says.
Net Tango is one of them. A 1998 graduate of iTRC, the business recently landed a contract with the Gates Foundation to develop a Web-based assessment program that measures the technological competency of schoolteachers and administrators across the nation. The company already has performed a similar project for the BellSouth Foundation that studied schools in the South.
Both foundations want to assess the impact of the technology grants made to schools. Teachers are questioned about their technology skills and how often they use technology in the classroom. Administrators and teachers are asked about school technology plans and how well the plans were communicated to them. Results are compared on a year-to-year basis.
"The benefit of this application is to get information from people in different areas of the country and do it relatively quickly," says Barbara Lang '92B, a Net Tango co-founder. She added that the assessment tool developed by her company will be used by half of all the schools in the country.
In addition to technical expertise, the iTRC program gave Net Tango the "credibility and presence" to launch a business in a new field, Lang says. Entrepreneurs now in the program or who have completed it are also able to help each other, she adds.
Graham believes that business incubators such as iTRC will play a crucial role in the development of e-commerce. The days of teenage entrepreneurs developing multimillion dollar technology businesses from their basements may be gone forever, he observes.
"In many cases, the person may be great at programming and Java script or have a very creative idea, but he or she doesn't necessarily have the business skills to take it to the next level," Graham says. "That's where the incubator comes in."
In one respect, e-commerce companies are relatively inexpensive to start because they demand less capital for infrastructure, Graham acknowledges. However, he notes, e-commerce companies often pursue a national or international customer base and incur steep marketing expenses.
One recent iTRC graduate is moving quickly to become a nationwide business. Ironmax.com sells and rents heavy equipment by inviting potential buyers to post their needs online. Distributors can then respond after paying Ironmax.com a fee.
Ironmax.com anticipates doing business in more than 300 markets by year's end, says CEO Steve Paradis. He added that his main online competition comes from auction sites and predicts there will be room in the market for two or three similar sites.
But that doesn't worry him.
"We are the first to market," he says, "and we have the best technical expertise."
Another iTRC-assisted company, Agora Interactive (www.agorainteractive.com), wants to make video games a competitive activity for the global village. It will install kiosks in malls where players can pay to compete against opponents from around the world. They'll do this through terminals with quality audio-video links. The first are set to roll out this summer in Louisville, Chicago, Houston, New York City, Long Island, N.Y., and Anaheim, Calif.
"We are developing public-access terminals that allow people to play games and participate in e-commerce and pure communication," says chief technology officer Andrew Prell. His wife, Shannon Prell '94E, '98G, fine-tuned Agora's business plan in an MBA class at the university. Agora's management sees even broader applications for the technology. For example, when deciding which of two cameras to buy, a customer might contact a representative of each manufacturer via an Agora terminal, bring them up on screen and let them tout their product's merits.
"What we are developing are public-access terminals that allow people to play games, participate in e-commerce and pure communication," Prell says The iTRC is now focusing on high-growth technical companies with first-to-market productrs and services, Graham says, adding that the center is also in the process of reviewing a plan to take stake in some of the companies, as other university incubators around the country are doing.
This means the center could share in a handsome return in the event of an acquisition or a public stock offering. Any profit would then be reinvested in the business incubator.
"We want to focus on companies that really need us," Graham says. "We can add value and provide a return to the university so we can help other companies down the road." n Contact Jim Graham at: Information Technology Resource Center, U of L Shelby Campus, Louisville, KY 40292; (502) 852-0900. Or visit the center on the Web at http://trc.louisville.edu.