Walk The Line
When a truck dumps half a ton of lemons into your backyard, it wouldn't be an insane idea to start selling freshly squeezed lemonade. But when an unexpected flood threatens to ravage your town, is it right to unload your stockpile of sandbags with a sign on your garage door reading "Neighborhood Special: 3 for $5"? There's a fine line between capitalizing on an obvious opportunity and taking advantage of an unfortunate situation for personal gain. And entrepreneurs-opportunists by nature-often have to risk their reputations (in both the business and consumer worlds) in the name of seizing their chances at success, be it long-term or not.
We talked with some entrepreneurs who've spotted "sure thing" opportunities too potentially prosperous not to pursue and pre-existing businesses blessed by the gods of timing. Some have cashed out, and others didn't generate quite as much interest as they'd hoped for. So can we conclude that when a blatantly opportunistic endeavor fails, it's because the quality so many successful entrepreneurs swear by-having passion for a venture-was absent, and that consumers can smell a gimmick devoid of value miles away? Or is spotting an opportunity and capitalizing on it, by any means, rewarded and applauded in this Survivor era? A scientific answer, there is not. Each entrepreneur must be his or her own judge-and await public opinion, of course.
|Why Are You Doing It?|
There's no doubt it's possible to make fast money capitalizing on a craze, but in Randy Komisar's mind, the validity of a business relies on its ability to create value for customers. Komisar (at right) left his CEO position at video game company Crystal Dynamics to help get start-ups off the ground until they find permanent CEOs. In his book, The Monk and the Riddle (Harvard Business School Press), the 46-year-old Silicon Valley veteran narrates his dealings with fictional character Lenny, an opportunist looking to get in on the Internet craze who approaches Komisar with his proposal for the next billion-dollar business idea: Funerals.com. Says Komisar, "[Throughout the book], we work through what [Lenny's] true passion is and incorporate it into a business opportunity that is much more interesting to him and something he can really commit to."
While Komisar admits business isn't all about doing things out of the goodness of your heart, the goal of making money should merely be the physics of business, while doing something useful to society should be the purpose of it. "Profits, growth and opportunities for employees and investors are all very valid and all tend to work well when founded on bedrock," says Komisar. "The problem is, in an exuberant market like the one we just came through, greed overwhelms intelligence a lot. And as a result, you end up with a lot of people who are just looking to cash in and cash out and aren't thinking about building real value or long-term opportunities for themselves and others."
Robert D. Hisrich, professor of entrepreneurial studies at Case Western University's Weatherhead School of Management in Cleveland, says it's ultimately up to the public to determine the worthiness of an entrepreneurial endeavor and up to the entrepreneur to act responsibly. "I don't think we should have an expectation that everything produced in a society is going to have some significant impact," says Hisrich. "But what I think we need to expect is that when entrepreneurs create services and products, they maintain ethical standards in their business dealings and their treatment of customers and employees. As long as those ethical standards are maintained, then the [company's] output-as long as it's not harmful to society-is [there for society] to judge whether or not [to] buy it."
One Entrepreneur's Story
When Marcia and John Diamond, education professionals and political junkies, registered the Electoral College Sportswear & Accessories (ECSA) trademark in 1994, they could never have imagined what was coming in the winter of 2000. The presidential election to end all elections garnered them international press coverage and produced a throng of orders for the company's products: T-shirts, sweat-shirts and caps bearing the logos "Electoral College" and "Electoral College Athletic Department."
Back in 1994, ECSA Inc. simply seemed like a natural outlet for the Bangor, Maine, couple's political passions when Marcia, 38, took time off work after having their second child. And it was done without haste: They wrote a detailed business plan, spent months looking at possible graphic designs and attended small-business seminars. Their idea was to market collegiate-style merchandise and simultaneously educate customers by shipping the products with an explanation of the real electoral college.
To educate wasn't necessarily the motivating purpose, but, says John, 46, "we felt it should have some significance beyond simply taking advantage of a clever play on the name."
By 1996, word about ECSA was spreading in political circles, thanks to the occasional print ad, direct-mail campaigns and a bare-bones Web site. With repeat customers as their largest chunk of business, the Diamonds were satisfied with the cottage industry they'd created. Fast-forward to last October, when business began escalating, and then to Election Day, when C-SPAN discovered ECSA and aired a segment about its merchandise. That day alone saw the Diamonds answering 200 phone calls and Internet queries. The Associated Press picked up the story soon after, which led to talk of ECSA on radio stations across the nation and around the world, not to mention interviews with NBC's The Today Show, England's BBC Tonight and a mention on CNN.
"We were hoping way back that, because 2000 was an open presidency, there would be more talk of the electoral college, but of course nobody could've anticipated what happened," says John. And the Diamonds never would've guessed that they'd have to hire 14 people, order six additional phone lines, move operations into a warehouse facility and resort to letting voice mail pick up calls for at least three hours per day so they could get some shut-eye.
Surprisingly, ECSA didn't receive any criticism from folks assuming the business was established to poke fun at the election's unfortunate turn. The Diamonds did, however, get many questions from people unaware of their pre-Election 2000 life asking how it was possible to erect a business so quickly.
That's not so far-fetched a mistake. There are businesses that appeared out of nowhere once the election took a turn for the uncertain. While political shirts Web site FloridaElections.net, launched in November 2000 by Cleveland Web design/hosting and e-commerce services firm Cool and Arty Productions, and VoteChad2000.com, the "first to offer chad for sale over the Internet," may not hold quite the political weight ECSA does, they, too, found there's money to be made from national crises.
We can't tell you how much in sales those little bits of paper actually generated, but Jory Rozner was pretty impressed with the $40,000 her Chicago-based Jewish media and marketing company, Zipple, made in only six weeks off the (Joseph) Lieberman Yarmulke sold through its Web site, Zipple.com.
Was your first instinct to roll your eyes-shake your head, maybe? Rozner, 32, admits she was hesitant last September to go ahead with the idea, which was suggested by a company outsider, for fear of that very reaction. Luckily, the only negative feedback she received was from people who didn't like Lieberman. No one in the Jewish community took offense to the yarmulkes, which, according to Rozner, were meant to celebrate cultural diversity and the fact that a Jewish person was on a presidential ticket. Besides, if all the cool kids in Jewish day schools are sporting yarmulkes with Rugrats and Sesame Street characters, what's wrong with a $15 star-spangled, white leather skullcap with "Lieberman 2000" emblazoned on the side?
In explaining her ultimate decision to go to market with the yarmulkes, Rozner quips, "Someone was going to do it-it might as well have been me!" But in all seriousness: "You just have to draw the line," she says. "You don't want to be offensive or turn anyone off. But everything's going to turn someone off. You could open a restaurant, and if someone doesn't like seafood, it's going to turn them off."
New York City publicist Paul Lerner agrees there's a definite line between what society deems acceptable and what it thinks is questionable. If a company makes unpopular PR decisions, it might get press and increased sales-but it could also leave a bad taste in the mouths of many. Such was the fate of Annapolis, Maryland, software firm Risk Watch, which produces software that analyzes security measures in buildings. It sent out a press release trying to increase awareness of school security the night of the Columbine tragedy in April 1999. "I think people's gut reactions are more negative than positive, even when [companies are] trying to help," says Lerner. "Especially if someone's profiting."
The difference between how society views something like the Risk Watch situation and the sudden success experienced by ECSA and Zipple, according to Lerner, is that the latter two are somewhat lighthearted. "I don't think [the Election 2000 business] is so bad," he says. However, in the case of Columbine, says Lerner, people died, and that makes any appearance of opportunism-real or imagined-a danger for companies like Risk Watch.
While the Diamonds benefited from a nation in political upheaval for a while, John says that what Marcia told Katie Couric on The Today Show sums up their thoughts on the matter. "She said that the last thing we want to do is trivialize the electoral college process or even the election of the presidency," says John. "We don't want to see ourselves benefit from it if it means the turmoil of the country continues. We don't want to be accused of profiteering on the situation, and hopefully, we're not."
The Downside Of Opportunity
Hanna Irwin, 46, and Albert Will, 45, saw the dollar signs in Y2K kitsch years before the ball touched down on the first day of 2000. They originally intended to trademark "Y2K" so clients of their Indianapolis marketing and consulting firm, Looking Glass Partners LLC, could buy the right to the catch phrase and exploit it based on their needs. In early 1997, Irwin and Will went ahead and trademarked "Y2K" as well as the phrases "Millennium Bug," "Uh 00H!" and "Sorry, it's a non-negotiable deadline" to name a few, but none of Looking Glass Partners' clients were biting.
You can probably chalk lack of interest up to the foreseeable lack of longevity in Y2K merchandise. After all, where are all those sites like AMillenniumStore.com and AY2KStore.com now? In cyberspace heaven. The current owner of "Y2KStore.com" has put the domain name up for sale, but who's going to bid on it? Maybe the same person who bought two "Vermont Y2K Lanterns" to get one free. But in 1997, Irwin and Will were convinced Y2K could be marketed well after the fact, based on confusion about when the new millennium actually began and the fact that a millennium lasts 1,000 years. So they decided to exploit it for themselves, launching Y2K Stuff, home to millennium-related apparel, gifts and toys.
In hindsight, "generally disappointing" is how Will describes the venture. "The real lesson is that every business has its own nuances and complexities that, when you're not in the business, you don't realize are there," he says. "When [Looking Glass Partners] got into Y2K, we got into two businesses we'd never been in: licensing and retail. Both are brutal businesses, and sometimes when you're embroiled in something new, you tend to underestimate just how different each business is."
There were painful "six-figure surprises" to deal with, not to mention snide comments at a retail trade show about marketing Y2K-but that stuff won't stop Looking Glass Partners from pursuing another novelty brand in the future when the time is right. But, says Will, "My eyes [will] be wide open to the difficulties, and not just to the opportunities."
- ECSA Inc., (800) 353-2867, www.electoralcollegeusa.com
- Robert Hisrich, (216) 368-5354, Rdh7@po.cwru.edu
- Randy Komisar, www.hbsp.harvard.edu