|an evening with the|
|stars of eCommerce
The transcript of a Morino Institute
Netpreneur Program event, held June 4, 1998, featuring business leaders
from five burgeoning eCommerce companies, including Bill Gorog, founder of
Lexis/Nexis and Chairman of InteliData Technologies; John Backus,
President and CEO of InteliData; Bill Melton; President and CEO of
CyberCash; John McDonnell Jr., President and CEO of Transaction Network
Services; and Mark Walsh, President and CEO of VerticalNet. The event was
moderated by New Economy analyst Gary Arlen and included closing remarks
by Mario Morino, Chairman of the Morino Institute and himself a software
1998 Morino Institute. All rights reserved. Edited for length and clarity.
table of contents
Good evening. My name is Penny Lewandowski, and, on behalf of The
Netpreneur Program team,
welcome to An Evening With the Stars of E commerce. It's hard to
believe we were in this very hotel a year ago with the first in this
series An Evening With the Barons (http://netpreneur.org/barons). The second was An Evening With
The Stars of Telecom (http:netpreneur.org/stars),
last year in October. We have come a long way since then, and it's been an
exciting time for our team and for netpreneurs in the Greater Washington
The Netpreneur Program
helps build a community of entrepreneurs who are developing businesses
around digital networks like the Internet—netpreneurs. Through events
like this one, as well as discussion groups, online databases, electronic
connections and our email newsletter, Netpreneur News (http://netpreneur.org/news), we are building
a virtual and physical community where netpreneurs share ideas, come
together to solve problems, provide advice and form relationships. Thanks to the participation of
hundreds of netpreneurs, as well as investors and strategic partners, we
are proving that the Greater Washington region is rapidly becoming a force
to be reckoned with in the online world.
It's now my pleasure to
introduce our moderator for this evening, Gary Arlen, whom Advertising
Age called one of the most visible media gurus. He is president of Arlen Communications, a Bethesda,
Maryland-based research firm known for commentary on the converging roles
of media and telecommunications. For
over 20 years, Gary has accurately analyzed and predicted the emergence of
new media and forecasted the evolution of customer-controlled media and
data services. After spending some time with Gary, I have no doubt that he
will bring enthusiasm to the program.
part 5: John Backus: the fastest way to a $10 million company
Thanks, Bill. I tried to get into the meeting down the hall, the Stars
of the NASDAQ Stock Market, but they wouldn't let me in for some reason. Maybe next year we'll be able to
make it into that meeting. I
have been with InteliData since we got it started back in 1990, and it's
been a roller coaster ride in a lot of ways. I'm not the great storyteller
like a lot of these others are, so, instead, I'll go through a half dozen or
so lessons that I've learned in the hopes that you can repeat some of them,
but more importantly, not repeat some of them that I had to learn the hard
The first one is, it's okay to change your vision. What do I mean by that? A lot of entrepreneurs start a
company with a great idea, but a lot of times—in fact, most of the
time—the idea has to change because the market changes. If you stay dogmatic about the idea
that you start with, while sometimes that's great, you miss the fact that
the market is changing. You can
really be in for a big surprise. We
made that mistake early on at U.S. Order.
We started out with the concept of a home transaction terminal that
would offer grocery shopping on a smart telephone. Now, somehow that concept
transmogrified into banking on the Web. We were a little late to embrace the
Web because we were pretty set in our ways and dogmatic about the smart
phone being the next wave of the future.
As Gary is often fond of saying about smart phones and interactive
telephones, "It may be the wave of the future, and it is, but it always
will be." We stayed with
that product a little bit too long.
The second lesson I'd like to talk about is focus, and I can't
underscore the importance of focus enough.
We tried to do too much early on.
We had a hardware product and platform, and we had a software product
and platform. Instead of
looking at them as one product, we thought we had two separate businesses. When Jack McDonnell joined our board
recently, he looked at the company and said, "This is the smallest
conglomerate that I have ever seen."
Well, we have taken Jack's advice and we are starting to
deconglomerate. Someone once
told me, that the fastest way to become a $10 million is to start out with a
$20 million company." We
are on the way to becoming, hopefully, a very successful $10 million company
in the electronic commerce space.
The third lesson applies to the stock market. It also applies to companies and
everything within a company: invest in your winners and kill off your
losers. Every company is going
to take some risks, which means you are going to have some winning products
and you are going to have some losing products. You are going to have some winning
business ideas and business units, and you are going to have some losers. What you have to do is take quick
action to get rid of the dogs so you can keep the winners out there. One mistake that I have seen made
before, that I have made before personally and that I hope you don't make,
is taking your best people and trying to turn around the worst business. Big mistake. Take your best people and put them on the best business,
because if you take your best people and put them on your worst business,
what does that mean? It means
you have people, who aren't your best people, working on your best products. That's a problem. The corollary to that is, as Warren Buffet once said,
"Oftentimes, if you take a good manager and put him in a bad business,
more often than not, you end up with a bad manager instead of a good
The fourth point is to stand by strong partners when you're small. Every one of us wants to start a
company some day. It's an
exciting experience and it's a lot of fun, but one of the biggest problems
you have is getting visibility. How
do you get credibility? It's
important to look like you are a lot bigger than you are, and on the Web
it's easy to do that, but when you start selling business-to-business, it's
a little bit harder. Businesses expect a certain level of scale or
credibility or profitability or something like that. It's very important to find a good
partner. We are actually trying
to thread the needle right now by working with Microsoft in the NT area and
IBM in the mainframe area. So
far, we have been successful and, if we keep it quiet and don't talk about
it at events like this, I think we'll continue to be successful for some
time to come. The corollary to
that rule is, don't let weak partners tarnish you. Once you start becoming successful,
you'll also find there are some partners who may not be the best ones down
the road. Just like some of your best products, you might have to cut
bait here as well.
Fifth, cash is king. Watch it personally. I don't care what your job is in the
company—if you're running the company or if you're interested in working
for the company—understand the cash position and watch it. For the three or four years before
we went public, I spent probably one day a week either raising money,
talking to investors, or talking about where the money was going to come
from and where it was going. It
takes a lot of time, and I have a mantra that I developed—actually the
mantra kind of developed in college around the subject of beer, but we'll
ignore that for a moment. The
appropriate mantra to remember with respect to cash is, "More is
better, too much is just enough."
You can never have too much cash in your company.
Finally, most importantly, and on a serious note, if you are going to
start a company, get a great group of advisors or a great board of
directors. It is very
important. Whatever you think
you are going to go through, you are going to find problems that you
couldn't even dream you might encounter.
You might think you are the only one out there facing them, but
you're not. A lot of people
have been down that path before and, if you have the right board of advisors
or board of directors, they are going to help point out the pitfalls that
you might otherwise fall into. When
you look for a good board member or advisor, look for someone, first of all,
who is going to commit the time to understand your business. Don't get a figurehead. Get someone who's going to spend the
time to understand your business, because your business will have problems
that are unique to your business and not someone else's. Also, look for someone who is going
to offer to help, either with your investors or with fundraising, with
working with customers or getting customers, or with getting suppliers. We're blessed in our company, and
I'm blessed personally, to have, in addition to Bill Gorog who has been my
mentor for the last eight years, three wonderful advisors at our board
level: Pat Graham, one of the
original founders of Bain & Company, who spent 30 years advising Fortune
500 companies; Bill Seidman, former head of the FDIC and another classic
entrepreneur who almost single-handedly martialed the nearly trillion-dollar
S&L bailout in the Reagan-Bush years; and Jack McDonnell, who will be
coming up to speak later. If he
decides to throw bricks at us for not making money, we'll just question his
professional advice and guidance as a board member. I'm preempting something I have a
feeling is going to come up later.
With that, I would like to turn this over to Mark Walsh. I met Mark at a bar once in San Diego. It was at a conference, but I think we actually met at a bar. Mark is VerticalNet's president and
CEO. Before that, he was a
senior VP and corporate officer at America Online. He worked at CUC, GEnie and Home Box
Office. He is a classic entrepreneur who has done a lot of exciting
part 6: Mark Walsh: hard, expensive, proprietary and scary
Thank you. It's kind of surreal being at this table. I'm not sure if I stumbled into a
family reunion or I'm on The Truman Show, which is this Internet worldwide
broadcast, and for those of you watching us on the Net, it's a lot more
fun here than it is where you are watching it.
My company is named VerticalNet.
We run 16 sites on the Net. I'll
read the 16 names rapidly and I think you'll get the idea. The sites are named Water Online,
Pollution Online, Public Works.com, Power Online, Solid Waste.com, Food
Online, Chemical Online, Pharmaceutical Online, Hydrocarbon Online, Pulp
And Paper.com, Photonics Online, Test and Measurement.com, Medical Design,
Computer OEM Online, Wireless Design, Fiber-optics Online and Property and
Casualty.com. Each of them has vendor listings and search engines for
vendors, news and editorial content, chats, forums, job listings, auctions
However, I come to you tonight to tell you that e-commerce is a
bust. It's a fallacy. Why? Because we
keep focusing on markets where any rational disintermediation would win,
like flowers, airlines, stocks, books and cars.
In all the places we say we have declared victory, the customer is
always ticked off and the seller is always confusing the buyer. Of course e-commerce will win then, because disintermediation
is a natural imperative, as opposed to a lot of places we expect
e-commerce to win where disintermediation might never occur. E-commerce today will continue to
be a bust as long as it is technology-driven. E-commerce in 1998 is just like
X.25 online services in 1988. They
are hard, expensive, proprietary and scary.
They will never win until we acknowledge one truth about the
e-commerce industry, specifically the business-to-business sector of it. Consumers and business users of online services are exactly
the same people. They behave the same way.
They demand the same value. They
insist upon the same ubiquity, utility and meaning for the service. That is because online services
are the only technology that have come from our house to our desk. All other business technologies have had the exact reverse
direction. We first used a PC
in our company. We first had
conferencing and transfer buttons on phones at our desk. We first started using FedEx at
our corporation. We first
used a cell phone or a pager when our company bought it for us. We first used Document Management
in the Wang department in 1982 in our steno pool. But each of those products, now,
we use as consumers universally and without any thought.
But interactive services—as a way to communicate, to buy things,
to join together in cyberspace as a work unit—happened in our den and
now we are bringing them to our desk.
Because of that amazing reversal, the consumer is actually the
person we should be looking toward to drive business-to-business
My example is that EDI and e-commerce will work in the business
environment when the CEO sits home one night, and he or she uses it to pay
the mortgage, the kid's tuition, the house painter or the credit card
bill. They will go to work
the next day and say, "Why can't I do this at work?" Those are four different payment
channels, four different types of commerce, four different types of money,
and all easily done.
I, as a consumer, figure out it should happen, and that it should
happen at my business. What we see in the e-business, or e-commerce side
for business-to-business, is a cycle of life in cyberspace where content
attracts eyeballs, context secures eyeballs—people like me in an
industry that I care about. Commerce
engages those visitors to try something.
But what wins? Community. Community wins in the
business-to-business sector just like it won in the consumer sector. A place in cyberspace that makes you a better business person
is a place you will go and a place where you will buy things. The Internet and e-commerce are
not about Beany Babies, books and flowers.
The Internet and e-commerce are not about EDI standards and video
conferencing. What it is
about is accelerating and facilitating leads that connect buyers and
Let me read to you some leads that came through some of our sites
in the last 30 days. These are pieces of email from visitors around the
globe to individual vendors on our sites.
This one, from Lexington, Massachusettes, "I need a price
quote on an exhaust jacket assembly to be used in the filling operations
of 180 to 320-gallon tote bins with hydrazine. The assembly must cover the bung
opening and surround the filling lance completely. It should have a collapsible
accordion outer sleeve."
This from France to Chemical Online, "We're looking for a
solids level probe capable of localizing the top of a solids accumulation
in a liquid-filled vessel, range zero to six feet approximate. Must be able to operate under at
least 100 bar and if possible up to 690 bar. Electrical output must be 4-20 mHz,
or common industrial communication protocol."
This from Water Online from Canada, "I have a textile dying
wastewater treatment recycling project in China. The wastewater has the following
specs: COD 650 mg per liter,
etc. The new expansion would
be 100,000 cubic ml a day. If
your company can treat this type of water, would you please send me your
technical info with price tags on 20,000 to 100,000 ml a day. I look forward to receiving your
early reply. Truly, JCU,
This is e-commerce. It
is not about disintermediation, it is about reintermediation because, in
most business-to-business environments, the middleman adds value. Unlike flowers, unlike stocks,
unlike airline seats, unlike books, unlike records, the middleman adds
value in the real world outside of these doors. I would suggest that when we study
e-commerce, we keep reminding ourselves, it isn't going to happen until we
make it easy for all of us to use.
With that, I will introduce the next guest. I have not met Jack before
tonight, but I enjoyed sitting next to him because I think he is a core
technology guy for what this is all about.
He had significant stints at the Electronic Industries Association
(EIA), and, as an old X.25 guy like me, spent some time at Tymnet. Those were the days, huh? Selling that 900 baud and 300 baud
stuff? He spends a lot of
time with the Electronic Funds Transfer Association (EFTA), and you've
heard his connections to the rest of the panel. With that, it's my pleasure to
introduce Jack McDonnell.