E-Reality

Building Blocks

How can you enhance e-commerce success? Differentiation comes first. Raging Bull faces three competitors in the online financial advice field: Yahoo! Finance, Silicon Investor and Motley Fool. Raging Bull differentiates itself by offering online stock discussions-searchable message boards on dozens of industries and market segments. Users can also customize the site to fit their own needs. For example, they can track and link to discussions relevant to their own interests, notes Martin.

All initial hires were friends of Martin who believed passionately in the project. They helped develop the prototype that was on the Web for a year before an investor took notice.

Click Interactive Inc. in Chicago pursued a differentiation strategy as well. As a result, founder Michael Ferro, 32, has seen the firm grow 500 percent over the past two years. Sales are near $15 million, and several buyout offers have been floated. A former manufacturing executive, Ferro put up about $100,000 of his own money to pursue his Internet concept back in 1996, when his then-employer rejected the idea of selling goods on the Internet as "too radical."

In addition to differentiation, Ferro says, there's another rule new entrepreneurs should follow: Develop a demonstration of your product, then find a leading company to buy in to the demo and serve as a reference for you. "Having a great reference sets the stage for everything else you do," says Ferro.

Click builds extranet software for industrial clients like Motorola and Ameritech. Their product enables clients' customers to order new products online, check the status of previous orders, order repair parts and even check their credit level with the company. "The idea was to replace customer service calls," says Ferro. "With the Web, customers can also serve themselves at any time. They're not restricted to doing business when you're in the office."

Ferro's demonstration success came from a deal with Mercury Marine Corp., an international manufacturer of inboard and outboard engines. Mercury Marine implemented the extranet concept across its worldwide network of 2,500 dealers in late 1998, says Andre Busch, information technology manager for Marine Power Europe, Petit-Rechail, Belgium.

Ferro notes this approach to Web site design is dramatically different from that of other Internet companies. Many focus on the consumer market, but the business-to-business niche of the Internet is "four or five times that size," says Ellen Carnahan, a managing director at William Blair Capital Partners, a Chicago investment banking firm that funds Internet start-ups. "We're looking at projects that increase interactivity [among] consumers, employees and vendors."

Another company that has pursued differentiation is search engine Excite. For close to a year after it was founded in 1994 in a Silicon Valley garage, the firm was rejected by financiers. But after figuring out how to differentiate their search engine from the competition, Excite's founders reached a deal with a leading venture capital provider and took the company public in 1996. Since then, the company has attracted big-name talent to put it on a new, strategic path.

"We're redefining ourselves as more than a search firm," says Graham Spencer, 26, a co-founder of Excite. "We're essentially becoming a proprietary online service for the Web. We now have mail, chat rooms, bulletin boards, stocks, news, weather and channels, just like AOL."

At press time, @Home Network and Excite had announced plans to merge in an all-stock transaction valued at some $6.7 billion; those involved say Excite's recent personalization and community strategies will continue.

None of these companies-Raging Bull, Click Interactive or Excite-were guaranteed success when they launched. Most people were skeptical of the concepts at the time.

"There were many times we didn't think we'd make it," admits Ferro, who didn't take a salary for more than a year during Click's launch. "But we stuck with it. You have to be like an artist, committed to your work, committed to creating something new in the world. That's the key."

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This article was originally published in the May 1999 print edition of Entrepreneur with the headline: E-Reality.

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