A New Way of Doing Business
| Category: Business Development | Date: 2003-10-22 |
Want to create a successful Internet company? Find a new way to do business. Most of the recent stellar online companies go beyond simply presenting products and services over the Internet. Instead, they create new hooks, unique ways of selling, innovative techniques to interact with customers. Ebay matched buyers and sellers in an unlimited 24-hour flea market. Priceline set up a system where buyers could propose prices for airline tickets. And now Accompany.com links small buyers into a groups to obtain volume discounts.
Accompany’s concept is simple. Manufacturers offer substantial price reductions for products such as computers and phones to large corporations that by a few dozen or a few hundred at a time. Accompany creates buying pools of small business owners and consumers to create volume buys. Say you want a Kodak DC240 digital camera -- the list price is $699.99. If you join an Accompany pool, when the group hits between six and ten buyers, the price goes down to $440.95. Pools gather and fill in a 24 hour period, so the wait is barely longer than any other online catalog order.
The founders of Accompany came up with the idea through two day-long sessions of brainstorming. The founders realized that if they were going to be successful, they had to be more than an online catalog. Their challenge was to find a new way of doing business. They wanted to come up with a business model that would draw on the unique interactive capabilities of the Internet. We wanted to find a convergence of trends, said Accompany CEO, Jim Rose. The convergence is a company that uses the connective and community natures of the Internet, said Rose.
Rose was a business consultant in San Francisco when he called two friends, Salim Teja and Jonathan Ehrlich who worked at CYBERplex in Toronto. The friends started to brainstorm ideas. They wanted to create a businesses that could not exist offline. They came up with a very rough concept of volume buying. In June 1998, Teja and Ehrlich flew to San Francisco for a weekend of brainstorming at Rose’s office. Saturday was fruitless. They couldn’t get over the problem of warehousing and fulfillment. The economics just didn’t work.
On Sunday they scrapped the idea of warehousing and fulfillment. Let the manufacturers do the heavy lifting. The friends decided to create a network instead of a catalog operation. I’m not a retailer, said Jim. Accompany’s not a retailer. We’re a network. We’re the glue that holds the transaction together. Accompany initiates a sale, hand-holds the sale, brings buyer and seller together, but Accompany doesn’t sell anything. Profits come from a percentage of the transaction, much like a credit card.
With the details of the winning idea under wraps, the rest of the launch was mechanical. Protect the idea. Round up a few hundred thousand to shop the concept. Be careful of how much you give up to get first-funding. (The Internet is littered with great-idea founders who were tossed from their swiftly moving companies when the money bunch got nervous about the odd habits of the sandal-footed cyber-managers.) Rose and his friends put together $4 million, with more coming later to promote Accompany on the media street.
The idea is a gem. The owners are young. Rose is 25, Teja, 26, Ehrlich, 30. When they decided to create a net company they had one thing in mind. They wanted to make a company that is not just another brick-and-mortar business with online access. They wanted to create a model for commerce that can’t live offline. When we saw Priceline, we realized that future Internet winners would have to bring together the community and connectivity of the Internet, said Rose. These young lions figured out a way to harness the unusually powerful properties of the Internet. They caught a glimpse of the future’s future.
About the author.
Robert Spiegel, the Shoestring Entrepreneur, is the author of The Complete Guide to Home Business (AMACOM) and The Shoestring Entrepreneurs Guide to the Best Home-Based Businesses (St. Martins Press, due Feb. 2000). For questions or comments,to email Robert see details below.
spiegelrob@aol.com.
Accompany’s concept is simple. Manufacturers offer substantial price reductions for products such as computers and phones to large corporations that by a few dozen or a few hundred at a time. Accompany creates buying pools of small business owners and consumers to create volume buys. Say you want a Kodak DC240 digital camera -- the list price is $699.99. If you join an Accompany pool, when the group hits between six and ten buyers, the price goes down to $440.95. Pools gather and fill in a 24 hour period, so the wait is barely longer than any other online catalog order.
The founders of Accompany came up with the idea through two day-long sessions of brainstorming. The founders realized that if they were going to be successful, they had to be more than an online catalog. Their challenge was to find a new way of doing business. They wanted to come up with a business model that would draw on the unique interactive capabilities of the Internet. We wanted to find a convergence of trends, said Accompany CEO, Jim Rose. The convergence is a company that uses the connective and community natures of the Internet, said Rose.
Rose was a business consultant in San Francisco when he called two friends, Salim Teja and Jonathan Ehrlich who worked at CYBERplex in Toronto. The friends started to brainstorm ideas. They wanted to create a businesses that could not exist offline. They came up with a very rough concept of volume buying. In June 1998, Teja and Ehrlich flew to San Francisco for a weekend of brainstorming at Rose’s office. Saturday was fruitless. They couldn’t get over the problem of warehousing and fulfillment. The economics just didn’t work.
On Sunday they scrapped the idea of warehousing and fulfillment. Let the manufacturers do the heavy lifting. The friends decided to create a network instead of a catalog operation. I’m not a retailer, said Jim. Accompany’s not a retailer. We’re a network. We’re the glue that holds the transaction together. Accompany initiates a sale, hand-holds the sale, brings buyer and seller together, but Accompany doesn’t sell anything. Profits come from a percentage of the transaction, much like a credit card.
With the details of the winning idea under wraps, the rest of the launch was mechanical. Protect the idea. Round up a few hundred thousand to shop the concept. Be careful of how much you give up to get first-funding. (The Internet is littered with great-idea founders who were tossed from their swiftly moving companies when the money bunch got nervous about the odd habits of the sandal-footed cyber-managers.) Rose and his friends put together $4 million, with more coming later to promote Accompany on the media street.
The idea is a gem. The owners are young. Rose is 25, Teja, 26, Ehrlich, 30. When they decided to create a net company they had one thing in mind. They wanted to make a company that is not just another brick-and-mortar business with online access. They wanted to create a model for commerce that can’t live offline. When we saw Priceline, we realized that future Internet winners would have to bring together the community and connectivity of the Internet, said Rose. These young lions figured out a way to harness the unusually powerful properties of the Internet. They caught a glimpse of the future’s future.
About the author.
Robert Spiegel, the Shoestring Entrepreneur, is the author of The Complete Guide to Home Business (AMACOM) and The Shoestring Entrepreneurs Guide to the Best Home-Based Businesses (St. Martins Press, due Feb. 2000). For questions or comments,to email Robert see details below.
spiegelrob@aol.com.
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