- Business Software
- Computer Security
- Internet and Online Business
- Managing Technology
- Telecom and Wireless
- Tools on Managing Technology
Tag Archives: Ford Motor Company
Envision the day when you can video chat or write a report while behind the wheel on your way to work. Not only is the car driving itself, but it communicates with other vehicles and senses the environment, so getting into an accident is nearly impossible. That sounds like a sci-fi fantasy, right? Not at all. Several car companies, including Volvo, General Motors, Ford, Audi and its parent company, Volkswagen, are aggressively developing autonomous cars. Even Google has figured out a way to make cars drive themselves. “Almost all accidents take place because of human distraction,” says Sebastian Thrun, a fellow at Google and director of Stanford University’s Artificial Intelligence Lab. “A self-driving car never sleeps and always pays attention so we believe there is a significant opportunity to make cars much safer.” For the small business, using AI for robotic driving means commute time can someday be turned into work time. And, it could mean a fleet of delivery vehicles autonomously controlled. “The capability of this is absolutely realistic,” says Karl Brauer, senior analyst and editor-at-large for Edmunds.com. “There might be a few odd things to iron out but we’re talking years, not decades to finish it off.” The Google car One of the strangest examples of robotic driving comes from the search engine giant, based in California, who is using their programming prowess to help build AI for cars. Google announced in October that seven Toyota Prius test cars have driven more than 140,000 miles on California roads with only occasional human control. Considering Google’s penetration into the average person’s everyday life — whether through search, maps, or apps on Android phones — it’s entry into the automotive scene almost makes sense. During the tests, a driver was always on board in case something went awry, but it’s still amazing to think about. Six months ago who would have considered the search engine giant would be letting their robocars roam the California countryside? Of course, current AI programming is not quite ready for rush hour. “Construction zones aren’t handled well yet. If the car were to drive on a snow-covered road it would cause problems for us. We also get hiccups, for example, if someone parks and blocks our lane — then our cars are stopped and the person needs to take over,” Thrun says. That said, Thrun maintains that Google’s accomplishment is remarkable. “Until recently, there seemed to be a consensus that this was 30 or 40 years off. And I would submit that the progress that we and others have made has stunned all of us in this area,” he says. Self-driving cars and safety Recently, GM gave reporters (including this one) a ride in a small, autonomous concept car at the Consumer Electronics Show last month in Las Vegas. The two-seater EN-V, which stands for Electric Networked-Vehicle, was designed for use in large cities to help with traffic congestion, parking availability (you can’t imagine a car that is easier to park!) and improved air quality. According to GM spokesperson Daniel Flores, when vehicles are able to communicate with each other and sense their environment, the accidents that contribute to traffic congestion can be eliminated. “Urban congestion is a very legitimate problem. If left without new technologies it’s going to become a bigger and bigger issue,” he says. Volvo also is working on autonomous cars and already offers, in its S60 sedan, sophisticated options such as pedestrian detection and collision warning, both with full automatic braking. The Swedish carmaker is also working on a project backed by the European Union called SARTRE, which stands for Safe Road Trains for the Environment. Spokesperson Daniel Johnston says the project is all about platooning many vehicles together — a sort of long-distance game of “follow the leader” in which all the occupants can do other things instead of paying attention to the road. “The idea is to compact distances between lead and following cars. Compacting space allows for more cars in one lane,” he says, adding that platooning also saves fuel by reducing air resistance, resulting in the use of less horsepower. What about people who like driving? Along with Stanford University and Oracle, Audi and Volkswagen have successfully created the Autonomous Audi TTS Pike’s Peak Research Car which last September completed the 12.42-mile Pike’s Peak International Hill Climb without any driver behind the wheel. Because some people actually like driving, Dr. Burkhard Huhnke, executive director of the Audi Electronics Research Laboratory in Palo Alto, Calif., says Audi is less concerned about making fully autonomous cars and is more focused on “reducing accidents down to zero. That would be a dream.” He says Audi is working toward that lofty goal by experimenting with its self-driving car and through a new research collaboration with four universities in California and Michigan to bring as much information as possible about drivers and their environments into the vehicle. Cars that talk to one another Edmunds’ Karl Brauer says the technology in today’s new cars like Audi’s A8, which is covered from head to toe in sensors, has several cameras and is connected to the Internet, making the prospect of cars talking to each other and automatically averting dangers on the road much more feasible. “We can put sensors in roadways. We can put sensors in cars. We can put GPS devices in vehicles so that they are aware of where they are and what’s around them. That can already be done now — it’s largely what the Google car does. But it’s going to cost money and it’s going to require some standardization work,” he says. About that standardization, Ford recently said it is partnering with other auto makers and the federal government to create a single language that ensures all vehicles can talk to each other based on a common communication standard. The company says its involvement is part of a stepped-up commitment to developing wirelessly connected intelligent vehicles. Steve Birkeland, who owns a Minnesota-based company called Custom Canopy, says he often drives hundreds or more miles to get to a job site and would be interested in reclaiming time spent in the car as long as doing so was safe. “I could easily see a sleeping area where I would leave for Denver after dinner, watch a movie, go to sleep and wake up in the morning in Denver.” Not everyone is buying the idea of cars that talk to each other and drive themselves. Paul Burton, who owns West Point Driving School in Sacramento, says, “Unless autonomous cars are vastly superior to the average teenage brain — which is pretty sophisticated — they’re going to make a lot of mistakes.” According to Thrun, the AI is coming along, however. In the next decade (or less), your car might just drive you home. Now if we can just figure out how to make them brew coffee.
When the Boston Red Sox reversed their curse in 2004 by vanquishing the Yankees and going on to take the World Series, many fans and pundits were quick to give much of the credit to management’s decision to enlist sophisticated computerized analyses of player performance data to make staffing decisions. This year, the team’s all-too-familiar collapse left these same observers wondering how the numbers could have led the Red Sox astray. Einstein kept a sign in his office that read, “Not everything that counts can be counted, and not everything that can be counted counts.” Baseball fans are not the only ones being forced to consider that the best decisions aren’t necessarily the ones based on analyzing reams of data. Companies of all sorts are setting themselves up for the same hard lesson, thanks to the growing excitement over technology’s ability to place all manner of salient data at the fingertips of managers. Armed with so-called dashboard displays on their PCs, CEOs can effortlessly summon up a cornucopia of performance indicators. Call up this week’s sales by product line, throw in profit by region, cost per widget produced, and change in inventory levels. Compare it all with last week, with the same week last year, and with forecasts and goals. And there you have it: a comprehensive guide to the organization’s performance and to what you need to do to improve it. If only it were that easy. The fact is, this sort of data worship can provide a distorted, misleading view of what’s going on, and it can lead to flat-out bad decisions. Part of the problem is that some of the most important inputs aren’t easily quantifiable. (Einstein used to keep a sign in his office that read, “Not everything that counts can be counted, and not everything that can be counted counts.”) Adam Galinsky, an associate professor at Northwestern University’s Kellogg School of Management who studies decision making, notes that a bias toward hard data causes organizations real harm. “Things that are hard to quantify tend to get left out of the decision-making process,” he says. For business owners, there are all sorts of intangible or hard-to-quantify factors that can mean the difference between life or death: employee morale, the emergence of new technologies, changes in the competitive landscape, evolution in customer tastes. Think of executives at Ford (NYSE:F) and GM (NYSE:GM) endlessly twiddling with the easy-to-track impact of rebates, advertising, and health care costs, while remaining oblivious to the cultural and political forces–forces that helped trigger higher gas prices–that spelled doom for their obsession with SUVs. This isn’t a new problem. Managers have always had a misplaced confidence in numbers. But the ability to do more and more with the data in an increasingly high-tech fashion is making things worse. Indeed, the availability of slick new data-crunching tools, and the hype they’re receiving, leads executives to rely on them more. Good managers know the nonnumerical stuff matters, of course, but it sure must feel as if you’re being highly effective when you can dash off a few e-mail notes and then in a few days or even hours watch those real-time graphs leap skyward on your screen. And, of course, companies can’t help but treasure these data tools, given that they’ve spent a fortune investing in them, egged on by consultants and other experts. Thus, the CEO risks becoming Nero, fiddling with his keyboard, as it were, while the company burns. The problem goes beyond neglecting the intangibles. Sometimes the data that goes into a dashboard is incomplete or biased in subtle but significant ways that can lead a manager astray. Jorge Grau, the CIO at cell-phone-tower operator SBA Communications (NASDAQ:SBAC) in Boca Raton, Florida, helped build a system to place virtually any sort of real-time report in the hands of managers. But there have been occasions when managers, delighted by the sheer number of facts at their fingertips, were oblivious to problems with the data. “We’ve been bitten,” Grau says. In several cases, managers were making decisions based on summary performance for the entire company, not realizing that those numbers did not include data from a few key regions. When data is misread this way, it can lead to bad calls on anything from budgeting to promotions. “Reports can do more harm than good,” Grau says, which is why he now cautions managers about accepting a slick table of figures at face value. Even when the data is complete, there are plenty of ways to misinterpret it. One temptation for managers is to assume that when two sets of numbers go up and down together, changing one will lead to a change in the other–inspiring a CEO, for example, to order up a series of costly facility upgrades simply because the last two facility investments happened to be followed by sales spikes. “You can find correlations between the most improbable things, if you look for them,” says Luca Rigotti, a decision sciences researcher at Duke University’s Fuqua School of Business. “You’ll just end up doing silly stuff.” In fact, there’s a range of potentially costly psychological tricks that managers can inflict on themselves in the face of perfectly solid data, says Northwestern’s Galinsky. For example, the same set of numbers can provoke wildly different decisions depending on the order in which the numbers are presented. That’s because people tend to jump to conclusions based on the first numbers they hear, and they don’t allow the later figures to change their minds. The same numbers can also have different impacts depending on how they are framed–for example, stating that 10 percent of the customer base will defect if a product is changed, as opposed to stating that 90 percent will stay. “Managers need to protect themselves against falling for those sorts of biases,” says Galinsky. Even if you avoid false correlations and biases, you’re still in danger of getting smacked by the law of unintended consequences when you try to manage by dashboard, says Christopher Zappe, who studies decision sciences at Bucknell University. “People tend to respond to falling numbers with a knee-jerk reaction to try to halt the fall,” Zappe says. “But it often ends up aggravating the situation because they often don’t really understand the ways in which the different things going on at an organization affect each other.” Thus, the manager who sees the on-screen sales graph start to droop might order sales reps to increase the number of prospects they contact, not realizing that sales are falling because the reps are already stretched too thin. Or a jump in inventory might lead to a decision to slow production, even though much of the inventory is set to go out the door. None of this is to say that dashboards are the enemy here. Indeed, CEOs probably get into more trouble when they fail to bring enough data into the decision-making process. And companies that sell dashboard-related systems are themselves quick to point out some of the pitfalls of data-driven decision making. “The concept of data quality is a very unsexy part of our business,” says Kendall Collins, vice president of product marketing for Salesforce.com (NYSE:CRM). “But without it you’re not going to have the ability to make decisions or react in an intelligent way.” Dashboards also can be modified to deal with the problems. Howard Diamond, CEO of ePartners, an Irving, Texas, consultancy that installs information systems that often include executive dashboards, notes that even intangible aspects of a business can be brought into a dashboard if companies are clever. For example, part of the Cool Cuts 4 Kids chain of hairstyling shops, an ePartners client, wanted to track trends in customer satisfaction. The company’s system will chart the number of customers who fail to return within 10 weeks. But part of the key to success also has to be to retain a certain amount of healthy skepticism about the value of the information we get from our computers, no matter how slick or costly the system. That, and not trading Babe Ruth to the Yankees. Contributing editor David H. Freedman (firstname.lastname@example.org) is a Boston-based author of several books about business and technology. His latest, A Perfect Mess, co-authored with Eric Abrahamson, will be published by Little, Brown in January.
For most small business technology applications, price is the top consideration. But when considering high-speed or broadband Internet service, that top consideration needs to be speed. That’s because slower broadband access will likely cost more money in the long run in the form of lost productivity. So, for a small business owner, the question of whether cable is faster than DSL is a salient one. The answer? It depends. Cable firms advertise speeds of up to 6 megabits per second (Mbps), but to quote a well-known auto ad disclaimer, actual speeds may vary. Because cable relies on shared bandwidth technology, if a lot of users are on at once in the immediate area, they will slow the connection. Average speeds for the telcos’ broadband rival to cable, digital subscriber line (DSL) service, go as high as 1.5 Mbps, but that rate tends to be steadier since bandwidth isn’t shared outside the office. Actual speeds, of course, vary from minute to minute for both. Small business traditionally preferred DSL More small businesses have traditionally gone for DSL. This year, 35 percent of businesses with fewer than 500 employees will have DSL versus 25 percent for cable, according to The Yankee Group, a Boston research firm. (The rest of the pie is divided by dial-up, “none” or T-1, the latter of which can be DSL or cable.) That’s changing. Over the last three or four years, many cable firms have begun targeting small businesses. “The cable companies are doing a smashup job talking about speed, speed, speed,” said Yankee Group director Steve Hilton. “It’s worked.” In response, telcos have slashed rates for DSL. Covad, a DSL provider based in San Jose, Calif., dropped its prices 30 percent over the last 18 months. Cable companies haven’t responded to the price war, so they tend to be more expensive. Covad’s DSL starts at around $50. Hilton says $90 a month is around the average a small business can expect to pay for either cable or DSL. Companies typically waive a set-up fee in return for a year or more contract. Many upgrade to T-1 The question for many fast-growing businesses is whether DSL or cable broadband service is fast and/or reliable enough. Many companies opt for the more expensive and robust T-1 service, which telcos and cable firms both provide. David McMorrow, vice president of sales for Covad, says his technicians can repair a busted T-1 line in about four hours, versus 12 to 18 hours to fix a standard DSL connection. “Businesses can’t tolerate their Internet connection being down,” Hilton says. Your business will pay for the better service, though. T-1 averages around $400 a month. But it guarantees small businesses consistent speeds of 1.5 Mbps and up. Thermal Dynamics, an Ontario, Calif., firm that makes oil coolers and power steering coolers for General Motors’ Hummer and Ford’s Mustang, respectively, bonds three T-1s to get an average speed of 4.5 Mpbs. The firm, which has about 300 U.S. employees, pays about $1,200 a month, which includes on-call support from Los Angeles T-1 provider TierZero. Hanns Schweis, IT director at Thermal Dynamics, says it’s worth the extra expense. In three years, the network only went down once and that was Verizon’s fault, not TierZero’s. Plus, the connection is fast. “Speed was a big issue,” he says. Jim Gurol, vice president of sales for TierZero, says small firms want fast pipes, too. “If their business relies on the Internet, they’ll spring for it,” he says. “We’ve got Web consultants that run a one- or two-man shop that use it.”
Special Technology Report The Internet promised to drastically change your business. Now state-of-the-art small-company intranets are actually delivering on that promise. Instant word-association test: What comes to mind when you hear the terms intranet and extranet? Chances are, it’s something like this: Big-company stuff. Internal Web sites with multimillion-dollar price tags at places like Hewlett-Packard and GE and Charles Schwab. Hotshot technology that my small business wouldn’t use and doesn’t need. And even if we did need it, we couldn’t afford it. Right? Guess again. True, intranets come to the party with a big-company, big-bucks reputation — and deservedly so. The earliest private Web-based networks began at Fortune 500 giants like Ford Motor Co. and Sun Microsystems. The best, in some cases, save more money than many small businesses make in a year. And true, they’ve typically involved large-scale initiatives, such as linking thousands of workers worldwide or putting millions of documents online. But here’s some news that is just as true: private Web sites are changing small business, big time. Small and midsize companies are turning to intranets (and their external cousins, extranets) in much the same way they turned to the public Web a few years ago. And in some cases, they’re getting far more favorable results with the private sites. Many are using them to fundamentally change some aspect of their business. A pioneering few are using the sites to drive their company’s entire strategy. And they’re doing it using technology once viewed as strictly a big-company tool. We’re not talking about companies’ using internal networks as electronic filing cabinets for human-resources forms or bulletin boards where Joe in accounting can advertise a used Jeep for sale. We’re talking about entrepreneurs’ strategically using a broad range of intranet-extranet efforts to gain a competitive foothold in a tight economy, typically by nurturing existing relationships or creating conduits for new ones. On one end of that spectrum are the rare companies run primarily, or entirely, on private Web sites that let them easily connect with employees, partners, or customers. One of those companies is 1-800-GOT-JUNK, a Vancouver, B.C., trash-removal business whose intranet for its franchisees, called JunkNet, helped to fuel the company’s growth from $2 million in revenues in 1999 to $10 million last year. Another is Boston-based SeniorLink, a fledgling company that will launch an extranet later this year to help baby-boomer customers nationwide find care-management services for their aging parents. On the opposite end are traditional companies that are using intranets to transform one practice, with effects that ripple through the rest of their culture. A sterling example: Extreme Logic Inc., an Atlanta-based technology consulting firm. Like many growing companies, Extreme Logic handles job-performance reviews online. What’s unusual is that the company encourages its corporate clients to log on and evaluate the employees who serve them. As a result, company officials say, Extreme Logic has deepened relationships with customers by letting them know they’re trusted partners whose opinions count. In the middle of the spectrum are companies with the most intriguing stories: those whose private sites create unprecedented opportunities. At TemPositions Group, a New York City-based staffing company, an intranet instantly matches customers’ requests for temporary employees with contractors who best fit the bill, allowing the 125-employee business to successfully bid against giant national staffing companies for major contracts. Eckert Seamans Cherin & Mellott, a Pittsburgh-based law firm, now coordinates hundreds of product-liability claims filed nationwide against one of its major clients, thanks to sophisticated technology that makes it possible for the firm’s lawyers to share court documents with other lawyers in 50 states, Puerto Rico, and the U.S. Virgin Islands. And Eminent Research Systems, in Minneapolis, uses an intranet to dramatically speed up its ability to coordinate protocol documents for medical-device tests, thereby helping the company to increase its business capacity tenfold. It’s impossible to find hard numbers on how many companies are jumping onto the private Web. The few studies done to date confirm only that a growing number of small companies have either launched a private network or expect to do so soon. Most, it appears, still use the technology for pedestrian purposes: storing documents, sharing files, ordering supplies. But we’ve found a handful of cutting-edge entrepreneurs who are using intranets and extranets to transform their business strategies, in most cases by helping their companies forge new relationships. OPEN BOOK: Dennis L. Veraldi says that his law firm’s extranet improves services for clients. What’s propelling this small-business intranet revolution? Experts tick off a number of drivers: the migration of big-business practices to small-business scale, recession-driven pressure to find new ways to get new customers or better serve existing ones, and increased comfort with doing business online. “All the things that the major corporations were doing two or three years ago are trickling down to the small-business realm,” says Ryan Bernard, president of Wordmark Associates Inc., a Houston consulting firm, and author of The Corporate Intranet. “The larger corporations were the proving ground.” Web-usability consultant Jakob Nielsen, whose Nielsen Norman Group, in Fremont, Calif., annually honors 10 outstanding intranets, has recently noticed that more small companies are making the list. Says Nielsen, “That proves it’s possible to get good effect out of an intranet without being a huge corporation.” Other experts call the trend evolutionary, saying that it is picking up speed as companies conduct more and more business online. Nearly everyone can use a Web browser, which means that nearly everyone can adapt almost instantly to a Web-based network. And small companies can now choose from a broad range of intranet options, from cut-rate do-it-yourself models to cutting-edge, custom-designed systems. Admittedly, the trend’s leaders tend to spend freely to launch, staff, and maintain their private Web sites. Initial five- or six-figure investments aren’t unusual, and some ambitious companies may well spend more. But there are plenty of less pricey options, ranging from having a savvy staffer do the job in-house to renting the service. (See ” Spin Your Own,” below.) Perhaps the most remarkable cultural change is how many entrepreneurs are overcoming their natural reticence to share information, inside the company or out. Brian Chavis, CEO of ARGroup, a Web and intranet developer based in Leesburg, Va., says that he used to have to pitch the idea of private networks to his customers. “I don’t have to do that anymore,” he says. “Our clients are telling me that they want this.” What they want, as the leading examples show, are new and better ways to connect with customers, employees, and partners. Rather than blindly following the late-1990s mantra to endlessly hurl money at their public Web sites in hopes of expanding their reach, many companies now look inward for ways to better serve customers they’ve already got. “Companies are saying, ‘Let’s really strengthen those relationships as much as possible,” says Ray Boggs, vice-president of small-business and home-office research at IDC, in Framingham, Mass. Randy J. Hinrichs couldn’t agree more. Hinrichs, group research manager in learning sciences and technology for Microsoft Research and author of Intranets: What’s the Bottom Line?, says intranets and extranets provide the perfect environment for small companies to create and nurture the partnerships they need to thrive. He makes the goal sound almost romantic. “You make long-term, meaningful relationships by saying, ‘We can share each other’s data,’ and knowing that it’s going to be consistent and trustworthy,” he says. Executives at Atlanta IT-consulting firm Extreme Logic consider it critical to forge long-term commitments with both employees and customers. So the company sends both to its combo intranet-extranet for performance reviews. The system hasn’t directly affected Extreme Logic’s revenues, which topped $30 million last year. But it’s improved the company’s own showing in two top-priority areas: retaining star performers and nurturing all employees. When workers leave — whether they’re hired away by competitors or fired for poor performance — the company spends as much as three times an employee’s annual salary to find and train a replacement. Getting quick online feedback directly from customers lets Extreme Logic reward its stars and provide specific improvement goals for everyone else. The approach seems to work. Mike Williams, who oversees human resources, says the company’s turnover rate is 5% to 10% lower than the IT industry standard. And since the company added the performance-evaluation feature to its intranet, 18 months ago, about 80% of its employees and managers feel that they’re working toward the same goals, compared with 52% before, according to an internal study. For TemPositions, making connections quickly is what counts. The company, one of 350 temporary-staffing agencies in New York City, has begun bidding against the big boys — including $4.1-billion Kelly Services — for major contracts. To compete against the industry giants, TemPositions focuses on what CEO and president James Essey calls its core strength: delivering the perfect worker faster. And to do that, TemPositions relies on an intranet that, much like a dating service, instantly matches customer requests with the best available contract employees. If, for instance, a client company needs a registered nurse with pediatric experience, the TemPositions intranet automatically E-mails the job offer to the best-qualified candidates. The system excludes temps who are already on assignments or unavailable because of vacation or illness. When contractors accept gigs, the intranet automatically E-mails them a link to their own personal job bank sites, where they find assignment sheets with dates, prices, a map, and supervisor contact information. When temps reject offers or don’t respond, the intranet solicits the next person in line. Corporate customers can even make their own temp requests online. Essey says the do-it-yourself convenience “cements us to the customer in a big way because once they get into the system and see all the information there, they’re less likely to go to a competitor.” That’s a far cry from the traditional temp-placement process, which typically requires hours of telephone tag. (Customers call the agency with a personnel request, and then agency employees dig through paper files, call candidates, and wait for return calls.) And the streamlined process, in turn, has allowed the 40-year-old company to go after huge long-term contracts it couldn’t even have considered before. At press time, TemPositions was competing for a contract to supply the New York City schools with more than 1,000 temps in a variety of areas, including curriculum and course development and counseling. “We couldn’t bid on it if we didn’t have these tools,” says Essey. “We’d need enough employees to fill a football-field-size call center.” TemPositions, which had about $30 million in revenues in 2001, spent $250,000 building its intranet in 1998 — primarily, Essey says, on Web design and for the salaries of a chief information officer, a programmer, and a technology troubleshooter — and it continues to spend liberally on salaries, equipment upgrades, and maintenance. “It’s not free,” he acknowledges. At the same time, he expects the intranet to reduce the company’s head count — eliminating, for instance, the need for data-entry staffers. Essey says those savings are well worth the investment. GRAND SCALE: James Parks credits his firm’s extranet for letting Eckert Seamans go national. Speed was the issue at Eminent Research Systems, in Minneapolis, where clogged procedural arteries were stunting the company’s growth. The $7-million, 22-employee company specializes in coordinating trials for heart and blood-vessel devices such as stents — products that typically have a market life span of only 18 months before they’re replaced by newer models. Previously, Eminent sent 150- to 500-page study-protocol documents to participating physicians and regulators, who marked them up and mailed them back. Sometimes the hefty hard copies made several round trips before everybody agreed on protocols — a process that typically took at least two months. The lengthy procedure caused some customers to forgo putting their devices on the market altogether, which meant less work for Eminent. “Turnaround time is key,” says Linda Laak, vice-president and chief operating officer. “Our competition is not necessarily another company but whether or not the client will do the study at all.” That changed in February 2001, when Eminent launched an extranet that allows doctors nationwide to collaborate on protocols electronically. The system sliced the approval process from two months to two weeks. Meanwhile, although Eminent spent $50,000 to launch its private Web site, Laak estimates that the company saves 10 times that amount by eliminating the “heavy lifting”: shipping, storage, and paying the salaries of two administrative people who handled all the documents. And the company can handle 10 times as many projects at once as it could before, resulting in a 40% increase in revenues. At Eckert Seamans Cherin & Mellott, the Pittsburgh law firm, an extranet became the key to going national without opening any additional offices. The 44-year-old firm wanted to serve as the national coordinator for thousands of product-liability claims against a major client. But the firm couldn’t possibly set up shop in all the affected jurisdictions: 50 states, Puerto Rico, and the Virgin Islands. Instead, the firm’s executive team decided it needed two things: a network of partners and a network connecting them. Those partners were, and are, “local counsel” — dozens of far-flung law firms that Eckert Seamans hired to handle claims in their own states. The network that connects them is Eckert Seamans’s extranet, which contains all related documents, including briefs, transcripts, interviews, research, medical and scientific information, and correspondence. Obviously, storing paperwork in one location helps everybody access documents faster. But Eckert Seamans argues that the extranet provides two more important benefits. First, it’s an unprecedented way to provide clients with a consistent nationwide defense by making sure that all the lawyers are literally on the same page. In addition, it saves time and money by providing those far-flung partners with research to strengthen the cases in their states. And the extranet lets the firm’s 215 lawyers coordinate cases in a way they couldn’t have before. “There is no way we could have managed and provided oversight to claims in Texas or California,” says the firm’s executive director, James Parks, citing the time and cost of constant travel, telephone calls, and shipping tons of hard copies cross-country. The system, part of a firmwide technology overhaul, didn’t come cheap: Parks estimates that Eckert Seamans has invested nearly $1.3 million so far, including construction costs to create a separate technology center. But chief operating officer Dennis L. Veraldi is philosophical about the cost. “Sophisticated, larger clients just expect that you’re going to be able to do those things, that you have the capability to service them,” he says. The firm doesn’t even worry much about tracking the system’s return on investment. “It’s part of the infrastructure, part of the overhead,” Parks says. “You have to manage it the same way you manage supplies or telephones or receptionists or libraries or anything else.” But he credits the technology with cutting legal-work costs by 6% to 7% annually and allowing the firm to take on more clients. But Eckert Seamans does worry about security breaches — and not just those involving hackers. The firm must also protect itself against possible security breaches involving the very partners for whom it established the intranet: those local-counsel firms. “Yes, we’re working with them, but they’re still competitors,” Veraldi says. So the firm relies on a combination of firewalls, multiple passwords, and encryption to make sure those faraway lawyers get access only to the appropriate cases — and only for the length of their contracts. For Eckert Seamans and other early adopters, the challenge now is staying ahead of the curve while not getting too far out in front. As Parks puts it: “We’re going to be very judicious about what we implement. We have to ask, ‘Are we letting the technology drag us? Or are we dragging the technology in a way that’s beneficial to us and our clients?’ “ But intranet evangelists believe the potential drawbacks — security concerns, cost, and the constant challenge of keeping current — pale when compared with the rewards gained from creating new partnerships and strengthening existing ones. Especially in a tough economy, the ability to forge new and stronger links offers small companies the best kind of competitive advantage. Anne Stuart is a senior writer at Inc. Jill Hecht Maxwell is a staff writer. Send your comments to email@example.com. Spin Your Own Why not? It’s getting cheaper. The companies mentioned here got transformational results from their intranets, but they spent a bundle. You don’t have to pay your way into intranet nirvana. There are less costly ways to get a little closer to the light. As more small businesses have started using private Web sites, software vendors and application service providers (ASPs) have found ways to reduce the pain of building them. Their offerings range from robust software packages to cheap, basic ones that a monkey can set up online in minutes. So how do you decide which path to follow? James Parks, who led the intranet project at Eckert Seamans, offers a few suggestions. BEEF UP SECURITY. Parks won’t touch a system that doesn’t force users to pass through three electronic checkpoints to enter. But if you don’t run a law firm, you may not need security worthy of the CIA. CREATE MULTIPLE LEVELS OF USER ACCESS. Some users need to read files; others need to edit them. Only a few should be allowed to delete them. So you should be able to determine whom you’ll allow into each part of your intranet and what they can do once they get there. DO AN INVENTORY OF YOUR EXISTING DATA. Can you easily move information from your company databases onto the intranet? When Parks started his firm’s project, Eckert Seamans already had 40-plus years’ worth of data living on its systems. CONSIDER STORAGE. If you’ve got 40 dedicated databases on seven mammoth servers, as Eckert Seamans does, don’t even consider the intranets that you can rent for a few dollars per user monthly. They won’t provide anywhere near the storage space you need. So if you need high security and have lots of users and mountains of information, you should start by looking at midpriced software packages — and perhaps talking with a consultant who’s built at least a few intranets before. For less than $6,000, you’ll find software from more than a dozen vendors, like Planet Intra, in Mountain View, Calif. Planet Intra’s software lets regular nontechie people create multiple levels of security access. All employees can use it to publish Web-ready content on a site, even if they don’t know HTML from TCBY. Of course, if you have a decent techie on staff, you can build your own simple intranet with a program like Microsoft FrontPage. You won’t need a firewall if you’re not letting anyone outside your office log on. Finally, if your needs are simple — say, you want a group to share a calendar, swap documents, and hold online discussions — you can set up an intranet for practically nothing. Intranets.com, the King Kong of off-the-shelf intranet ASPs, charges between $3 and $6 per user per month. Competitor InfoStreet charges $3 per user per month. Or try Microsoft’s SharePoint Team Services, which comes free with Office XP Professional Special Edition. Intranet gurus say that no matter which method you elect, there’s at least one thing you should do to ensure that your intranet doesn’t turn into the electronic equivalent of Euro Disney. Find out what would make your employees’ lives easier. People won’t use the intranet if it doesn’t help them. “Think about human needs as opposed to technology,” says Jakob Nielsen of the Nielsen Norman Group. –Jill Hecht Maxwell Still want more information on building your private Web site? Visit www.inc.com/keyword/intranet. Please E-mail your comments to firstname.lastname@example.org. Related Links: TemPositions Intranet Make Your Intranet Click Intranet Shortfalls
The Big Idea A handful of entrepreneurs are building marketplaces designed to hook up creative thinkers with businesses that need them. Is the world ready for an eBay of ideas? Anyone who has spent time hunting for his glasses only to discover them on the bridge of his nose can relate to Sanjay Goel’s feelings when he finally came up with the business idea for which he had been searching for half a year. The idea was this: to build a Web site for ideas. Ideas are now widely regarded as the lifeblood of the economy. By some measures the market for the transfer of intellectual property has hit $100 billion. Increasingly, organizations are looking outside the ranks of employees to find these ideas. Last year, for example, mining company Goldcorp Inc. offered a total of $500,000 for the best ideas for getting 6 million ounces of gold out from under a lake in Ontario. The incentive paid off so well that the Canadian company upped the ante in March, offering a total of $2 million for other stellar gold-mining ideas. You can’t even say it’s not rocket science: NASA recently called on the world at large to come up with a scheme for launching a probe to Pluto for less than $500 million, having scrapped its own, more expensive plans. Meanwhile, hundreds of thousands, and possibly millions, of people routinely generate ideas that could conceivably make someone a lot of money or otherwise improve the lot of some subset of humankind, but they’re clueless about what to do with them. Send them uninvited to a company? Call a patent lawyer? Hire an intellectual-property agent? Start a company? Take out an ad? All are avenues conventionally taken by those imaginative thinkers who don’t simply let their ideas die on the vine. But maybe a better notion is to bring the Internet’s aggre- gating capabilities to bear on idea matchmaking, in much the same way that eBay has brought together buyers and sellers of collectible goods. And so it was that the company Goel and Sharat Singh founded, called Ideas.com, along with a small pack of competing Web sites, intended to pull in orphaned ideas and funnel them to businesses willing to pay cold, hard cash for the best of them. “We’re creating a marketplace of ideas,” says Goel. “The ideas that are now being wasted are extremely valuable to companies.” Trafficking in ideas, of course, entails complexities that Beanie Baby traders never had to worry about, including the daunting difficulties in determining and valuing ownership of ideas. But, as with so many dot-coms, the biggest barrier faced by Ideas.com and its competitors has been having to struggle with unproved revenue models in an investment market that has turned its back on Internet companies unlikely to turn a quick profit. Indeed, time may have run out on Ideas.com. On July 31, Goel and Singh were seriously considering shutting down the company. But in bringing his company as far as he did, Goel managed to raise a question that may continue to beguile companies and individuals for years to come: can the Internet help transport ideas across organizational boundaries and in doing so render obsolete the entire notion of corporate boundaries? HIDDEN JEWELS: “The ideas that are now being wasted are extremely valuable to companies,” says Sanjay Goel, founder of Ideas.com. Sanjay Goel was born in Delhi, India, to parents who expected him to become an engineer or a doctor. But Goel was fascinated with business and by age 12 had cofounded a thriving neighborhood magazine-rental stand. He dutifully trudged off to the Indian Institute of Technology in 1984, where he studied electrical engineering and secretly planned to start a business when he graduated. But, like many of his classmates, he felt obligated to first grab a master’s degree in the United States, and he ventured to UCLA. After a stint as a robotics researcher in Japan, Goel returned to California in 1990 and reinvented himself as a programmer specializing in finance. “I had zero background,” he says. “My whole thing is I’d rather fail doing something very ambitious than succeed doing something that’s not ambitious.” After a year of programming, Goel decided it was Wall Street or bust, so he loaded up his aging Honda Civic and headed cross-country. In New York City he had several interviews, to no avail. His credit cards were maxed out, so Goel decided he’d drive a taxi to make ends meet — only to learn that a taxi driver’s license would cost $300 — $290 more than he had. Still, he wouldn’t budge from his goal. “I’m either going to do what I want or nothing,” he says. “There’s nothing in the middle.” He was counting his change to see if he had enough money for a meal when Citibank called and offered him a position in its investment-banking division. By 1998 Goel had already been named the division’s managing director — a career rise of unheard-of velocity in the staid world of big-time investment banking. Despite the success and his indulgence in on-the-edge hobbies — he carried his parachute with him on business trips, began flying airplanes and helicopters, climbed Mount McKinley, and started motorcycling and windsurfing — Goel became increasingly restless. In 1999 he realized that, for all his daring exploits, he had been keeping his back turned on the biggest adventure of all: building a company from scratch. Goel came up with a sensible course of action: develop a business plan, get funding, and then resign from his position. He then promptly rejected his own advice and quit on the spot. “It had to be a clean break,” he says. “I have enough confidence in myself to know that for the second time in my life I was going to restart my career.” Goel had already come up with what he thought was a golden business idea: an innovation marketplace. Now he had to figure out how to make such a thing work. He took to spending his days at the New York University Law Library, reading about innovation. “The books were telling me that companies understand the value of innovation, but that they haven’t found an optimal way to deal with it,” he says. But what sort of business could close that gap? For months Goel researched the problem and couldn’t nail down an answer. Then, as if in tribute to the adventitious nature of idea generation, the solution came to him in his sleep. “I woke up and said, ‘Now I’m ready for this,” he recalls. The idea behind Ideas.com was simple enough. Anyone could post to the site a brief description of an idea. Corporate executives in need of an R&D boost paid a fee to become affiliated with the site, along with monthly fees to maintain their affiliations. The executives perused the postings, and if they liked what they saw, they could negotiate directly with the poster. Postings described such things as a Web-based system for taking opinion polls; a laboratory bench that prints documents; and a heated, rollable pad for covering a sidewalk before a snowstorm. Companies paid commissions to Ideas.com of as much as 30% on ideas that they bought. (Neither Goel nor his customers will divulge how high any of those fees ran, except to say that the prices depended on company size and other unnamed variables.) Idea contributors paid nothing. If Goel had had any doubts about the plan’s viability, they evaporated when he shared his idea in late 1999 with Venky Harinarayan, a former UCLA classmate who had sold his own dot-com, Junglee, to Amazon.com in 1998 for $250 million. “I had been talking about it for 30 seconds when he told me to stop. I thought he was going to kick me out of his office, but he immediately offered to invest,” Goel says. Harinarayan brought in his two Junglee cofounders, and the three chipped in $1.2 million to get Ideas.com off the ground. It launched last November with 15 employees. Among the executives who joined the start-up’s board of advisers was John Seely Brown, the near-legendary former director of Xerox’s ultrainnovative Palo Alto Research Center. Things can get prickly in the field of idea vending when, for starters, a potential buyer notifies an idea poster that he or she wants to hear more about the idea. To sell the idea, the author must spell it out to the prospective purchaser. But once the idea is explained, the business could take it and run with it without paying. “How do you simultaneously advertise what an idea is while maintaining it as a secret?” asks Stephen Margolis, head of the economics department at North Carolina State University. For that reason, he says, economists call an unshared idea a form of “impacted information,” meaning that it is hobbled by a breakdown in market forces. Goel was well aware of the dilemma. “It was the first and main issue we had to deal with,” he says. To get around it, the site encouraged idea sellers to ask prospective buyers to sign nondisclosure agreements (NDAs). Sellers were urged to enlist the “principle of incremental disclosure” — that is, to unveil the idea in layers of increasing specificity. After each layer was revealed, the buying company could demonstrate its good faith with a payment or by upping the price it was proposing to pay for the idea. If negotiations broke down, the buyer left the picture, in theory without having seen enough details to implement the idea. Thus one Ideas.com contributor listed an idea for a “Computer Mouse (special type)” in this oblique manner: “It is a normal mouse with some very useful additional features.” More details were available to “serious buyers,” he or she noted. In fact, incremental disclosure is the means by which the business world has long handled the sale of trade secrets. Trade secrets are designs and processes that aren’t patented, typically because their owners fear that competitors will glean the secret from the patent file and find a way to implement it without violating the strict confines of the patent. (Think Coca-Cola recipe, which has never been patented.) Incremental disclosure became particularly popular in the 1970s, after Asian companies proved maddeningly adept at turning U.S. businesses’ own innovations against them. “Certain offshore organizations with far more experience than us would send armies of guys over to look at information on the pretext of evaluating the company for a joint venture,” says Kathryn Rudie Harrigan, Henry R. Kravis Professor of Business Leadership, at Columbia Business School. “These people were actually intellectual-property vacuum cleaners, and they got away with it until U.S. companies became more savvy and found ways to break their information into pieces with a pricing schedule.” Goel concedes that NDAs and incremental disclosure don’t offer ironclad protection against unscrupulous companies bent on stealing ideas. But he insists that most idea sellers recognize that unethical companies are the exception. “Individuals generally have a sense that companies will treat them fairly,” he says. “It’s in a company’s interest to reward someone for contributing an idea. The value of an uncooked idea is generally a small fraction of the value which the company is going to derive from it. Buying an idea isn’t a one-shot transaction, it’s a magnet for attracting the best ideas going forward.” In other words, the best way to make sure smart thinkers send you their most valuable ideas — as they come up with them — is to buy their half-baked ideas now. Ronald S. Jonash, managing director of Arthur D. Little’s Global Technology and Innovation Management Practice and chief of innovation at ADL, agrees that companies need to be cautious about leaving idea generators feeling exploited. Jonash has worked with the automotive-supply industry and says that employees at many supply companies are not inclined to share new ideas with General Motors because of its reputation for taking ideas and developing them on its own. Chrysler, meanwhile, paid some suppliers to develop promising ideas in exchange for the exclusive rights to the resulting product for two years. That — along with other creative relationships with suppliers — is why Chrysler became the preferred customer of more than 75% of all suppliers, says Jonash. HIGH RISK, HIGH REWARD: “I’d rather fail doing something very ambitious than succeed doing something that’s not ambitious,” says Goel. Even if an Ideas.com posting attracted a company that wanted to do the right thing, the formidable task of placing a value on the idea remained. Typically, the buyer and the seller would take their own shots at coming up with a value and then the negotiations would begin. “When it comes to assessing an idea’s worth before the idea is implemented, wilderness is a good word for describing the position you’re in,” says North Carolina State’s Margolis. In cases where a reasonable sales estimate can be made for products based on the idea, he notes, a royalty of 2% to 10% of revenues is a rough rule of thumb. But if the product couldn’t exist without the idea, he adds, the figure is frequently 30% of revenues and can go even higher. The amount may dip to a tiny fraction of a percent if the idea represents a slight improvement in an established product, such as a better knob in a car. Things only get more complicated from there. In most cases, it’s not clear up front whether an idea will end up being worth implementing at all, let alone how well the resulting product will sell. “Generally speaking, an idea by itself is worth nothing,” says Mel Lazar, managing partner of Lazar Levine & Felix LLP, a New York City accounting firm that specializes in business valuation. “The question is, Can you take that idea and put it into a business in a form that will generate income?” For that reason, Lazar thinks the chances that a company will pay much money for an idea it spots in a Web-site posting are small. And even if it is willing to pay, it will probably enlist a hardball negotiator to get it cheaply. “The average guy would get run over,” he says. Goel doesn’t argue with the suggestion that the majority of posters are unlikely to score big financially. But he points out that for many idea authors, money isn’t the main point. “A large number of people are very happy just seeing their idea taken to fruition, even if they never get paid for it,” he says. “If you come up with an idea for a new windshield wiper and it gets implemented by an automaker and before you know it millions of cars around the world are using it, that’s a very powerful experience.” Of course, the man who had that experience, an inventor named Robert W. Kearns, spent decades in court trying to get automakers to pay up, eventually receiving $30 million. Still, Goel has a point: the average person who comes up with a modestly good idea isn’t likely to hold out for big bucks at the almost certain cost of seeing the idea ignored. In any case, even if the site had been frequented by the most fair-minded of buyers, the vast majority of ideas posted there didn’t seem destined for the big time. Consider this posting, from “skankinARTboy,” for a “Wider Salsa Container”: Hey tostitos — i am a lazy college student. I buy nachos and chips all the time, and i personaly hate that i cannot dip my chips into your tiny containers. Half-way empty your container becomes impossible to dip into. I undestand you can pour it out but guess what? America is lazy, and convience is the key to marketing. So shorter but wider container, same glass cost, it hold the same amount and it is better for all lazy people who sit and eat your chips and salsa on the couch. To help idea buyers skip the junk and root out the gems, Goel worked on “reputation engines” that would have enabled at least some site visitors to rank idea sellers. But he warns that ranking ideas isn’t as reliable as ranking baseball cards on eBay. “It’s hard to say that an individual who in the past has not come up with good ideas will not come up with good ideas in the future,” he says. Conversely, he adds, someone who has had one good idea may not ever come up with a useful idea again. He would not allow sellers to rank buyers. “Everybody believes their idea is very powerful and that it deserves significant reward,” he says. Clearly, posting a random idea in the hope that a company will seek it out and buy it is a long shot. But Goel built some twists into Ideas.com that were intended to strengthen the odds. One was that a company could pay Ideas.com to allow posters to submit ideas for that company only. In fact, of the 50,000 ideas that the site received, 48,000 were such “dedicated” ideas. Unfortunately, many of them were addressed to companies such as Apple and GM that didn’t pay Ideas.com for the privilege of receiving ideas. But Goel didn’t mind. He used the homeless missives to entice those companies to join. Of course, corporations have always received unsolicited ideas from eager innovators, and in general it’s caused them giant headaches. Ideas from the public tend to be not only less than earth-shatteringly useful but also not unique. ADL’s Jonash explains that even in-house ideas typically aren’t original. For instance, after a recent productive brainstorming session that ADL had with a corporate client’s scientists and managers, research revealed that most of the resulting ideas were already known to the industry. But try telling that to the proud idea submitter who is promptly blown off by a corporate R&D manager, only to see his or her idea appear in a product the next year. Large companies are so routinely hit with lawsuits by such sincere but misguided idea producers that, notes Margolis, many have set up departments whose sole function is to ensure that over-the-transom ideas almost never make it to the desk of any employee who might be working on a similar project. From that perspective, a steady stream of unsolicited ideas doesn’t seem like the answer to the business world’s dreams. That’s one reason more-experienced inventors and idea producers often turn to intellectual-property agents who shepherd submissions to corporate buyers and negotiate deals. That’s all well and good, says Goel — if you don’t mind paying commissions of 15% or more and waiting a year to get an answer. Why not let the Internet do what it’s best at? Goel asks — which is avoiding the need for a middleman and eliminating the friction. In fact, Goel Offered an even more compelling use of the Internet than giving idea generators a chance to promote their ideas to corporate buyers. He helped companies put their problems in front of idea generators. When a fee-paying company wanted the public to try its hand at coming up with a winning idea, it posted an “Idea Quest.” Coca-Cola offered $5,000 each for two Idea Quests: “an energized packaging system” and “a new fun and healthy kids’ drink.” And Sears ponied up $5,000 for the best idea for “hand and bench tools for the 21st century.” Ideas.com also wrote its own Idea Quests. Those quests were by far the more interesting, including “new personal handheld devices” and “a better election process for the U.S.” The Idea Quests from outside companies, in contrast, had a public-relations feel to them. Which was exactly as it should have been, says Jonash. He argues that the real benefit of soliciting ideas from the public is not to get usable ideas but rather to make customers feel like part of the team and to provide market research. Steven Kirn, former vice-president of innovation and organization development for Sears, agrees that opening up a dialogue with customers is one of the big payoffs of soliciting ideas. “We wanted an effective and efficient way to make customers feel there’s a point of contact where they can tell us what they’re thinking,” he says. But Kirn also insists that Sears was pleased with the results of the Idea Quest. “Out of 130 to 150 ideas sent in, probably about 12 to 15 of them were pretty viable,” he says. “That’s not a bad ratio of ideas to ideas worth thinking about.” The winning idea — for an improved wet-dry vacuum attachment — might never have made it to the right person’s attention at Sears if it hadn’t been for the contest, he adds. “In the past Sears didn’t have a consistent way to deal with submitted ideas,” he says. “Some might have made it to the fast track, but some probably withered.” Not surprisingly, many entrepreneurs see potential in a marketplace of ideas. Some, like Rob Brazell, coauthor of a 1995 book called The Idea Economy, have focused on mass-market ideas — that is, ideas aimed at Joe Consumer. Brazell, who founded a site named Ideaexchange.com, says, “I wanted the everyday useful idea that would deliver immediate return on investment to consumers.” The ideas that appear at Ideaexchange range from the mundane (how to keep your shoelaces from untying) to the offbeat (how to improve your singing range) to the esoteric (how to double your cattle yield without cutting your wheat yield). Idea buyers rate ideas. I bought an idea for $5 about how to reduce the number of lost signals on cell phones. I’m prohibited from revealing the details. But I can report that the notion was simple and helped a bit. People can also post idea requests on the site. I found one from a businessperson looking for an idea for a Web company, another from someone seeking a shark repellent, and one pleading for antiwrinkle secrets. Brazell is convinced there is gold in such trivialities. He charges idea generators for listing an idea for sale; they name their own price for their ideas. The seller splits any revenues with Ideaexchange. Brazell won’t disclose revenues or profitability but says he has $22 million to work with, all raised from private investors. By this past summer Brazell had expanded his vision of the company and planned to eventually provide paid content of many kinds, including a deep well of how-to information. He recently purchased the assets of the bankrupt eHow, a site that offers thousands of tips on everything from how to feed an orphaned kitten to how to save money on taxes. But Goel’s more direct competition came from sites like IdeaDollar.com, BrightIdea.com, and NewIdeaTrade.com, all of which are gunning for business-oriented ideas. Those sites don’t seem as polished or as well stocked with ideas and idea solicitations as Ideas.com did, but each has its own twist on the concept. It’s too soon to say which of those sites will catch on. Niaz Ahmed, founder of NewIdeaTrade, says that his willingness to let businesses access all ideas on the site without paying any fees gives his advertising-supported site a competitive advantage — at least for the time being. Ahmed, who won’t disclose the company’s financial details, admits, “How long we’ll be able to continue to offer this service for free, I don’t know.” Ideas.com’s short life is, of course, just about over. Visitors had downloaded more than a million pages by the summer, Goel says. The company had raised a second round of financing but was unable to raise a third. At press time Goel and Singh had laid off all their employees, and Goel was jetting off to London to interview, once again, for banking jobs. But Goel, ever upbeat, still believes in his dream. “One day,” he says gamely, “someone’s going to make a lot of money from it. It’s just not going to be us.” Had his financial prospects allowed it, Goel planned to expand his services. He wanted to set up a branded version of the site accessible through Coca-Cola’s Web site; there, visitors would have submitted ideas only to Coca-Cola. Creating branded idea sites was supposed to become an important source of revenues for Goel’s company as more and more businesses recognized the value of soliciting ideas but didn’t want the cost and hassle of building their own idea-handling system from scratch. And he was working on offerings that would have enabled client companies to set up versions of Ideas.com accessible only to specific groups — employees, for example, or suppliers and customers or outside professionals likely to be useful contributors. “These companies already spend a lot of money to reach out to these groups for ideas, even though they might already be members of their commu- nity of interest,” he explains. In fact, Goel had recently changed the name of the company to Ideation Networks Inc., to emphasize that Ideas.com was just one manifestation of a grander plan to set up many different idea-collection engines. Steven Kirn, for one, thinks that’s the right way to go. “Where I think we’re headed is that there will be some problems that we’ll want everyone in the world’s ideas on, and others where we’ll establish relationships with communities of inventors,” he says. Jonash, too, believes that companies will want a portfolio of “idea banks.” Some of the most successful idea networks, he notes, involve large corporations’ paying for the expertise of small companies. Most of the large pharmaceutical companies now work closely with small biotech companies, he points out, and in the computer industry Cisco has created a successful model for providing generous funding to small enterprises and then acquiring them on friendly terms if their technology pays off. Coca-Cola, meanwhile, recently created a sort of in-house incubator called Fizzion to fund and support start-ups whose services could be of value to Coca-Cola. Other large companies are likely to follow those models, and online idea swapping could become a standard part of corporate R&D. Small companies especially may be big beneficiaries of idea networks, since they’re less likely to have experts in-house. And they typically don’t have an army of people that they can send to conferences and trade shows to scope out new ideas, although those are among the best places to find them. Consider Cirrus Design Corp., a small manufacturer of aircraft in Duluth, Minn. Dean Vogel, vice-president of research and technology at Cirrus, notes that some of the company’s ideas for aircraft features come from randomly encountered sources. As an example, he offers the fellow who was ogling one of the company’s planes at an aviation show. The man casually observed that a minivan-style sliding door would make it easier to get into and out of the plane. Vogel overheard him, and Cirrus execs have since been thinking about how a sliding-door mechanism could be made lightweight enough for the plane. “If you can reach out to the world, you’ll be harvesting a lot more brains than you could afford to hire,” says Vogel. Goel had been planning to push the envelope even beyond Ideation Networks. For example, he speaks of creating networks that would enable everyone in a company’s “value chain” — that is, suppliers through customers — to put their heads together not just to trade formal ideas but to interactively solve problems, meet needs, and create new opportunities. But he appears to have also discovered that his concept for commercializing ideas is one idea that the world may not yet be ready to pay for. Even if that’s the case, Goel is not likely to give up permanently on his ambitions. “I don’t like to dabble,” he says. “I like to take my adventures all the way.” David H. Freedman is a contributor to Inc. Hold That Thought When does a simple thought become transformed into something you can buy and sell? Reporter Kate O’Sullivan spoke with some inventors, investors, and experts who’ve struggled with that question. Steve Jurvetson, managing director of venture-capital firm Draper Fisher Jurvetson, invests in early-stage companies. Kevin Rivette is coauthor of Rembrandts in the Attic: Unlocking the Hidden Value of Patents. Scott Randall founded FairMarket, which builds online auctions for such businesses as the Miller Brewing Co. John Kowalski, CEO of Load Hog Industries, turned his unlikely invention into a product that attracted the attention of Ford Motor Co. (See ” The Pickup Artist,” June 2001.) And Paul Moller built a company around his own invention — a flying car. (See ” This Is Rocket Science,” July 2000.) Here’s what they said about idea marketplaces. Is an online idea marketplace a valid business concept? Steve Jurvetson: “At some level I do believe that there’s a worldwide marketplace for information. … But I’m not sure there’s a thriving market for patentable ideas.” Paul Moller: “In the early ’70s I could have benefited if I had had such a process available to me. It would have maybe been a great way to get exposure for some of the other products I’ve developed.” What would it take to make something like this work? John Kowalski: “They’d have to build some credibility. Any exchange of soft product is really hard to track. Who’s buying? Who’s selling? What’s been sold? I would think anyone with a substantive idea would be concerned about throwing something like that into the barrel. It might be knocked off, and then you don’t get paid.” What could cause such companies to fail? Kevin Rivette: “If I’m going to download my novel idea into somebody else’s database, that completely eliminates my ability to get patents in other places in the world. Once you’ve made a publication for sale, bingo, you can’t get patent rights. Once you’ve put it up on the site, you’ve published it for sale. That is the triggering event at which point you should have filed for your patent application in most of the world.” What do you think of the notion of corporations’ offering branded idea marketplaces? Scott Randall: “I love the democratization of the idea-collection process. This is the truest form of listening to your customers. The goodwill generated would be enormous. Consumers will shower tremendous loyalty on those companies that are perceived as listening best to their needs. The major caveats would be the legal ownership questions, the potential disputes around people submitting similar ideas but not getting credit, and the royalties associated with paying the inventors.” Is this concept ahead of its time? Paul Moller: “Oh, no. I don’t think it’s ahead of its time at all. I think, like a lot of things, there will probably be half a dozen [companies] that come and half a dozen that go, and I think there will be one who eventually separates himself from the pack.” Please e-mail your comments to email@example.com.
The potential benefits of the molten-hot, new B2B market are enormous, but so are the potential pitfalls as industry giants muscle their way into the arena, Web builders take advantage of the high demand for their services, and an industry shakeout looms large. The Big-Business Squeeze Manufacturing titans in almost every major industrial sector are forming alliances to create their own buyer-driven exchanges. For example, Boeing, Lockheed Martin, Raytheon, and BAE Systems plan to build an online marketplace for the aerospace industry. Ford, General Motors, and DaimlerChrysler are creating an auto industry exchange. Forest products giants International Paper, Weyerhaeuser, and Georgia-Pacific have joined forces to launch a pulp-and-paper marketplace. The list goes on and on. If you’re looking to start your own exchange, you could be up against some heavy competition. The industrial behemoths have an edge over start-ups due to the enormous amount of capital they have to put into the development and promotion of their exchanges. The idea is that vendors will flock to the well-funded, buyer-driven marketplaces because these will be the only venues in which the major buyers will participate. In this way the megaindustrial exchanges hope to gain critical mass, and it could work, given analysts’ prediction that the B2B market will be winner-take-most: This means that because gains for participants increase as more members join, few businesses will want to deal with the #2 market — the independent exchanges. Similarly, if you’re a vendor in one of the industrial sectors where a buyer-driven megaexchange is king of the hill, you may be forced into doing business in a marketplace where prices are forced as low as possible and the rules are set by the buyers. But do not despair just yet; there is reason for hope. First of all, does the term “price fixing” come to mind? If so, you’re not the only one whose antitrust sensors are going off. Government officials are beginning to scrutinize exchanges made up of competing industry giants. Look for antitrust cases to start popping up as the big-business marketplaces kick into high gear later this year. A second potential weakness of the big-biz exchanges is their lack of neutrality. Mark Walsh, president and CEO of the successful Verticalnet, predicts a “revenge of the vendors.com” as suppliers rebel under the pressure of lowering their prices as far as they can go. Walsh also contends that independent ownership of exchanges is crucial to their success. He believes that all participants must feel that the marketplace is trustworthy: that everyone involved has open access to vendors and prices. It’s questionable as to whether the corporate giants, which are so invested in their own interests, will be able to provide such a neutral environment. High Cost of Development Another potential pitfall to be aware of when considering the creation of your own B2B is the high costs associated with developing your site’s back-end capabilities. Whether you’re looking to create your own exchange or support transactions with the exchanges you desire to do business with, you will most likely face development prices forced high by the tight Web development market. Companies that specialize in building B2B sites and integrating information systems on various platforms are in extreme demand. “Clients chase integrators the way teenagers chase rock stars,” says Christine Ferrusi Ross, a Forrester Research analyst. This results in high prices and, more often than not, poor service. An October 1999 Forrester report titled “Taming eCommerce Integrators” stated that many corporate customers are facing huge fees, long delays, demands for equity, and even abandonment from the Web developers that are supposed to be helping them. These developers then move on to the next lucrative project. Of course, not all development companies are run in this way. But to protect your fledgling B2B company from such a devastating scenario, it would be wise to clearly outline the scope of every project for the development company you work with and obtain a contract that covers all the bases, allowing for proper recourse if the relationship with your developer should fall apart. The Inevitable Shakeout Another major hazard to B2Bs is the winnowing of the hot from the not. Not all these new businesses will succeed. Factors contributing to the coming shakeout include: An overcrowded market. Two dozen B2B firms plan to go public this year alone, and many industrial sectors have four or five exchanges elbowing each other for the hallowed top spot. As Patrick Walravens, an analyst at Lehman Bros., puts it, “For a year, B2B was a land grab. We’re now reaching the end of the land grab, and all the flags are in the ground.” Untested revenue models. B2B sites are so new, no one’s quite sure how to turn a profit. Even the most successful of B2B firms have yet to find themselves in the black. Wary investors. The volatile motions of the stock market with respect to B2B companies have put fear into venture capitalists, the major money source B2Bs depend on. Those businesses that jumped into the game early now have nervous investors breathing down their necks, and may have trouble securing further rounds of funding. Those new to the market may have a hard time finding investors at all. Investors are a fickle bunch, and if they don’t like the way things are going, they’ll pull out in a heartbeat. Take, for example, Neoforma, a medical supply exchange. The company’s shares opened at $13, rose to $73 in February, and now loll about in the $7 to $8 range. If your B2B site is an exchange, you face the possibility of losing to your competitors for the above reasons. If you are a vendor dealing with a potentially unsuccessful exchange, you risk the time and money lost should that exchange go under. The safest approach for an exchange in such an environment is to choose a niche marketplace where it will be less likely to face such heated competition. The best maneuver for vendors would be to avoid committing to doing business exclusively with a particular exchange. Now is the time to diversify. Overall Strategies for Sidestepping B2B Pitfalls Despite the tricky landscape, some experts believe there are definite strategies to staying alive in the current B2B marketplace. Below are a few tips floating around the e-commerce world. If your B2B site is an exchange: Have a well-respected, established partner in your camp that will see you through the rough times and give you the clout needed to rise above the rest. Create a diversified revenue stream, thereby becoming a moving target for your competitors. Focus on earlier links in the supply chain not covered by the large exchanges. As with any business venture, develop a solid business plan and procure a niche for yourself. If you are a vendor dealing with exchanges: Keep a close eye on which marketplaces are doing the best in your industry. These are usually the ones with the most value-added services to offer and the greatest number of players involved. If at all possible, do business with and support independent exchanges that offer impartial access to all vendors. Focus your attention and efforts on marketplaces that have the most buyers looking for the product you offer. The B2B market is in the early phase of formation, and with that phase come the peaks and valleys necessary to hammering out an entirely new industry. Keep your eyes and ears open, there’s still much more to come. To find out more about the emerging B2B market, read the following articles: Is There Gold under That There Hype? B2B Exchanges: Industry Heavyweights Push Aside Little Guys Middlemen Business-to-Business Exchanges Trim Costs and Time, Open Up Larger Markets for Goods — But Success Isn’t Assured Copyright Â© 1995-1999 Pinnacle WebWorkz Inc. All rights reserved. Do notduplicate or redistribute in any form.