Trading Places

What Makes A Successful Company

In the event you want to go ahead and set up a B2B exchange, it's important that you know your target industry like the back of your hand. To succeed, you'll have to be able to get all the suppliers in that industry to sign on with your system--or else buyers will have no reason to keep coming back.

WineryExchange.com has spent between $3 million and $5 million in start-up costs, and that doesn't include ongoing maintenance expenses. It's been so expensive because every supplier has its own product catalog that must be comported to a standard catalog. Because products and prices constantly change, they must be updated on a regular basis.

Such an infrastructure requires sophisticated software and hardware. WineryExchange.com's transaction engine, for example, was built on the Moai platform, a very high-end B2B e-commerce exchange platform. You can get similar platforms from such companies as Commerce One, Ariba and i2technologies. Starting an exchange also requires working with systems integrators to ensure the site functions smoothly.

Another example of an online exchange is e-Steel Corp., a well-known, 140-employee B2B exchange for the steel industry. The company was founded in 1998 by Michael S. Levin, who personally spent more than 30 years in the steel industry running various steel product companies and international manufacturing operations before starting the exchange. Says Levin, "A deep, fundamental understanding of an industry, both in how it works and the people who make it work, is essential to operating a successful B2B vertical exchange."

But that's not all you need. Successful B2B companies also have strong management teams, lots of experience managing businesses and long histories of operating. Levin says that e-Steel's team has more than 300 years of collective steel-industry experience. "The combination of deep domain knowledge and a business track record, wrapped with passionate, entrepreneurial fervor, is our proven formula," he says.

Byck also understands that formula. He grew up in Sonoma County, where his family owns a vineyard and winery. He also graduated from the University of California, Davis, which has a wine school, and spent time in Australia developing corporate strategy for South-corp Winery. "To be the winner in a particular area, you have to be able to form alliances with existing players, which we've done," he says. "And we've been able to do this because we've got a lot of experience, and we know a lot of people in the industry. It's hard to come from the office-supply industry and try to start a wine exchange."

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Melissa Campanelli is a technology writer in Brooklyn, New York, who has covered technology for Mobile Computing & Communications and Sales & Marketing Management magazines. You can reach her at mcampanelli@earthlink.net.

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This article was originally published in the November 2000 print edition of Entrepreneur with the headline: Trading Places.

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