Power Play

Opportunitys Knocking

In this era of global economies, rapidly emerging industries and dramatic social change, the world is evolving at breakneck speed. As a result of this fast pace, gaping holes and discontinuities that are not being met by current products and services are emerging in the marketplace, says Rice. These gaps provide entrepreneurs with unparalleled opportunities to improve existing products or create entirely new ones.

Meanwhile, Rice says, changes in technology are occurring equally fast, with innovations making headlines seemingly every day. When you combine these two facts, "there's a greater set of opportunities to match up emerging market needs with new technologies," says Rice.

Consider the case of Craig Skevington and Mary Bayly. In his previous business, Skevington, 43, had developed an information management program for manufacturers to track production processes in real-time. With momentous changes shaping the health-care arena, though, Skevington and Bayly, who worked for Skevington as a marketing director, saw a healthy opportunity to tailor the application to this growing industry--and to build an entirely new company, which they did in January 1996.

"With so many changes going on in managed care, a lot of organizations are combining, and the information systems needed to link them together [didn't] exist," says Bayly, 39, co-owner of Flow Management Technologies Inc. in Clifton Park, New York. "We had the core technology; we just needed to adapt it for the health-care field."

Admittedly, not every entrepreneur has access to cutting-edge technology like this. Yet a shift in attitudes among today's scientists and top innovators is quickly changing all that, says Rice. With lucrative contracts drying up in recent years, government, corporate and university laboratories have changed their focus from primarily long-term research to the "transfer" of technology for commercial needs. Consequently, a host of laboratories at the forefront of high-tech research--including the Massachusetts Institute of Technology Lincoln Laboratory in Lexington, Massachusetts; Sandia National Laboratories in Albuquerque, New Mexico; and the Wisconsin Alumni Research Foundation in Madison--have active technology transfer programs, pairing entrepreneurs with the necessary technologies to build their businesses.

Government agencies such as the Small Business Administration (SBA) are also tackling this issue. The Small Business Tech-nology Transfer (STTR) program, initially a three-year pilot program started in 1993, was developed by the SBA to help nonprofit research organizations, universities and small businesses cooperatively bring technologies and products to market. The SBA estimates more than $50 million was awarded to entrepreneurs in the STTR program by the end of 1996. (Congress has extended the STTR program through September.)

These types of programs are effectively placing technology in the hands of those most capable of turning it into viable ventures: entrepreneurs. Moreover, not only is it now easier to identify which technologies can make the shift into the commercial sector, but more systems are being created to facilitate their transfer, says Chuck Rancourt, director of RPI's Office of Technology Commercialization. University programs like RPI's Rensselaer Technological Entrepreneurship Council, which brings students and faculty with technical and entrepreneurial backgrounds together to network, locate investors and learn about technology commercialization, are becoming more common.

"Programs like these are reinforcing the idea that engineers and scientists have ideas, but they require entrepreneurs to help build commercial ventures," says Rancort.

Perhaps the greatest factor contributing to the swelling opportunities for high-tech entrepreneurs is the burgeoning information technology (IT) market. Driven in large part by the swiftly expanding service sector, a whole new segment of the economy is opening to new hardware and software products. According to market research firm International Data Corp. (IDC) in Framingham, Massachusetts, the worldwide software market is expected to grow from $94 billion in 1995 to $177.4 billion by the year 2000. Furthermore, IDC projects worldwide IT spending (including hardware, software and IT services) will grow by 10 percent this year and an average of 9 percent annually throughout the decade.

"The information technology industry is just mind-boggling to the extent to which it [offers entrepreneurial] opportunity," says Rice. "There is a huge amount of attention put on the value of information and knowledge today."

It's the Internet, though, that's garnering most of the attention in IT circles these days. "The Internet has so much to do with the explosion in IT," says Rice. "We're sitting on the doorstep of a whole new information revolution because of what's going on with the Internet."

Ron Schmelzer, 21, and Dan Housman, 23, are among the entrepreneurs riding the Internet wave. In December 1994, the partners founded VirtuMall, an electronic commerce site for hosting Web sites. But when market needs shifted (as they often do in the Internet business) and companies began moving away from centralized sites to develop their own, VirtuMall had to reinvent itself by morphing into an Internet software company. Profiting from a nationwide shortage of Web programmers and customers' desire to cut costs, in April 1995, Schmelzer and Housman founded VirtuFlex, a Cambridge, Massachusetts, business that helps users build dynamic Web applications.

While the Internet provides ample opportunities for entrepreneurs like Schmelzer and Housman, owning an Internet-based business isn't always a smooth ride. "There are no standards, proven market leader or proven market direction. Nobody really knows where the Internet is going," says Schmelzer, VirtuFlex's president. "Since there's no force pushing it in a particular direction, you may spend time working on a project and by the time you're done, the market has totally shifted in another direction."

High-tech businesses also experience some additional pressures that nontechnology companies don't. "In addition to all the [typical concerns] of owning a business, a technology-based business also has the risk and uncertainty of developing new technology," says Rice. "On the other hand, [this] can give companies a competitive advantage if they can deal with the risk successfully, and it becomes a barrier to businesses trying to compete with them."

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This article was originally published in the June 1997 print edition of Entrepreneur with the headline: Power Play.

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