Barry J. Uphoff, ’93
Partner, Diamond Technology Partners

Brian A. Johnson
Partner, Andersen Consulting

Moderator: Luigi Zingales
Professor of Finance

Ellen Carnahan-Walsh, ’84, knows the traditional way of doing business. A 13-year VC veteran who’s now a general partner with William Blair Venture Partners, Carnahan-Walsh can attest to the significant changes to venture capital brought on by the rise in e-commerce.

“When searching for a management team, then, you wanted someone who had done it before. Now, you look for someone young and smart with an idea. Then, they came to you. Now, you go to them,” Carnahan-Walsh said.

“When it came to market attractiveness, then, the Internet was a research project and there was no World Wide Web. Now, the Internet is everything. Then, you built your business in sync with market development. Now, there is a need for speed and to be the first mover, even if the market hasn’t developed yet,” she said.

“When it came to a business model, then, you needed to have one. Now, if you have one, it changes constantly. Then, a company tried to minimize the external capital required. Now, use whatever it takes. Use the public as a VC.”

As the rules for how to develop a business are changing, VCs are keeping a closer watch on their Internet upstarts.

“You see the development of more consulting services, so rather than just supplying capital, they also are sharing their technological expertise,” said Barry J. Uphoff, ’93, a partner in Diamond Technology Partners.

That is the essence of Brian Johnson’s job at Andersen Consulting. Johnson and fellow partner Jay Farmer operate Andersen’s Chicago Dot-Com Launch Center, which identifies new technology start-ups and potential spin-offs and provides capital and consulting services for the new ventures.

“The key factors of a start-up success are having a dynamic, plau-sible business plan; rapid revenue growth; rapid scaling of technology operations and management teams; and potential for global cloning/replication,”said Johnson.

But don’t look for venture capitalists to simply fund a hot dot-com company in the future. Wall Street has grown skeptical and seems to be gravitating back to old traditions.

“E-commerce and the Internet created a bubble. We’re coming out of the bubble now,” Carnahan-Walsh said.

James A. Yost, ’74
Vice President and Chief Information Officer, Ford Motor Company

Peter Skarzynski, ’88
Director, Strategos

Moderator: Toby E. Stuart
Fred G. Steingraber-A.T. Kearney Professor of Organizations and Strategy

How will legacy firms survive the dawn of dot-coms and the 21st century? According to Toby E. Stuart, large legacy firms will have to overcome disadvantages not shared by e-businesses. Large firms are notoriously “complex, bureaucratic, political, slow-moving, and complacent,” while start-ups possess an “attacker’s advantage” and can change strategies quickly.

“Businesses do well when they serve their customers well, but the problem is then they are locked into a customer base, which can discourage fundamental change and forward movement,” said Stuart. Of the world’s largest 100 companies in 1920, only 19 percent were fully operational in 1990, and 39 percent had been liquidated, Stuart said.

Among the 19 percent to survive was Ford Motor Company, whose vice president and chief information officer James A. Yost, ’74, offered the following survival strategies:

• Aim for global competitiveness.
• Achieve high standards of quality.
• Focus on satisfying the customer.
• Lead change, embrace “enabling technologies” such as the Internet to better serve customers, speed internal operations, and cut costs. At Ford, customers now can search the Internet for the best deals and even obtain financing from the company. The automobile manufacturer orders materials, supplies, and parts via the Internet, speeding transactions and drastically cutting fees for purchase orders. Employee communication also has been enhanced.
• Realize that while start-up busi-nesses can move quickly, they do not possess brand loyalty or well-established distribution channels.

Peter Skarzynski, ’88, director of Strategos, a global consulting boutique, observed that “innovation is not necessarily getting the technology right” but more “a process that slices diagonally through an organization.”

Rakesh Kaul, ’76
President and CEO, Hanover Direct

Michael Peters
Senior Vice President, Leo Burnett

Moderator: Pradeep Chintagunta
Robert Law Professor of Marketing

Advertising spending on the Internet is on the rise and is predicted to reach $33 billion by 2004. Many businesses are taking advantage of this new me-dium, though some are proving better suited than others to marketing online.

The Internet poses distinct advantages for business-to-business commerce, such as cutting the cost of transactions drastically, said Michael Krauss, ’76, partner and chief marketing officer of Diamond Technology Partners.

Likewise, Michael Peters, senior vice president for Leo Burnett, said, “Business-to-business commerce will rule the www.coms with measurable efficiencies, measurable cost savings, and logical aggregation.”

Some emerging goals of e-commerce are to complement distribution channels and create purchase experiences that link related services or products. “Think line of the customer, not line of the product,” said Krauss.

Many businesses are still mystified by the new medium. Krauss criticized a St. Louis shopping mall for shying away from e-commerce but lauded another small company for issuing Palm Pilots to shoppers, allowing them to continue to shop online.

For businesses targeting consumers, privacy has become an important issue, even a liability, said Peters, recommending that businesses seeking to obtain customer information through Internet transactions seek legal counsel.

“The tracking of Internet interactions can result in multiple data streams, which can be highly valuable, but only to those who achieve correct interpretation,” Peters said. “Those who do the analytics can rule the universe.”

Chat rooms can lend a sense of community and build brand loyalty. “If you can get customers talking to one another, they’re going to be there a long time,” said Krauss. “You’re going to earn the rent.”

Professor Pradeep Chintagunta said online efforts can be most successful when combined with direct marketing: “If you can send a catalog to a consumer, it’s a help.”