Behind Every Successful Person, There’s a Mentor

GUEST MENTOR Wendy Lea, CEO of Get Satisfaction: Having a mentor that guides you throughout the various stages of your career is a necessity for all of us, regardless of industry, experience, age or gender. Mentorship, like any business relationship, comes with expectations, challenges and plenty of considerations, too. Any time you consciously decide to identify a trusted business relationship based on professional needs and personal vulnerability, there’s a lot to consider.

Finding a mentor, for example, includes an entire cycle of activities; but understanding what the role of a mentor is and knowing what specific qualities to look for in a mentor are challenges in and of themselves. I’ve had lots of experience as both a mentor and mentee. The insights I’ve gained into what it means to be a good mentor, how to find the right mentor and what qualities mentees should be looking for — depending on the type of mentor they need — are important to share.

See what others have to say about finding a startup mentor.

There are two types of mentors: Those who serve as a coach, and those who serve as a counselor. It’s important to first figure out which type of mentor is right for you. The role of the coach is to offer more balanced and objective feedback based on specific growth milestones, as well as share knowledge and domain expertise through their own relevant expertise and years on the job. The coach is essentially there to provide operational guidance and feedback, or what you can think of as feedback on your growth “playbook.”

The role of the counselor is to provide more emotional and psychological support. They can help you untangle facts from feelings, people from the process, product from the market and the individual issues from the organization’s structural issues. They are empathic listeners, helping you unclutter your emotional pathways so operational feedback can actually sink in and be applied to the situation.

Both the coach and the counselor serve important roles, and if you need help or advice in both of these areas, it’s a good idea to find two different mentors who can support you as a coach and as a counselor, as it’s rare to find both of these skills in one mentor. I personally have had both types of mentors throughout my career, and still do.

When I took on the role of CEO to grow Get Satisfaction, I needed more expertise and perspective on the workings of a freemium business model. It was a Rubik’s Cube of decisions around product flows, the billing challenges, the packaging and pricing options and even the conversion standards. To get help, I sought out operational mentorship from colleagues that had similar business models — including Dave Goldberg, CEO of SurveyMonkey, Ryan McDonough, former CFO of Ning, and Chris Yeh, VP of Marketing at PBworks. Each of them mentored me on the pros, cons and practices of freemium.

But I’ve also really benefitted from having mentors that have served as counselors. Growing a business is an emotional roller coaster and a lonesome spot to be in sometimes. During the last four years at Get Satisfaction, I’ve depended on two people who have helped to balance out the emotional knots — especially when I was raising capital. Because of her own experiences as a CEO and her several decades of experience working as a VC, Heidi Roizen has been a great mentor to me. Bob Pasker, serial entrepreneur and founder of WebLogic, has also been a helpful sounding board mentor in the product and engineering area of our growth. His honesty and tough love have always helped me make difficult yet important hiring decisions.

It’s essential to note that mentors aren’t there to give you all of the answers. Mentors are there to assist you in untangling whatever it is that you are grappling with — again, this can be either operationally or emotionally. Mentors essentially serve as a set of objective eyes and ears. In the end, it’s completely up to the mentee to take the knowledge that mentors pass on and apply it.

Good mentors are neutral about how much — if any — of their perspective gets applied short term, long term, in part or in whole. Their main role is to serve you as the mentee, not their own careers. These days, it’s not as hard to find a great mentor as it was back when I was starting out my career. I’ve noticed a real inclination among my peers to want to give back to others, and it’s likely because we’ve all been there before and remember the role our mentors played in lifting us up both operationally and emotionally at a critical time in our growth path.

When looking for a mentor, it’s important to be clear about what you need. Are you looking for a coach or a counselor? It’s a good idea to create a spec sheet — similar to what you do when you’re looking for a board member — in which you list a set of specific attributes that you’re looking for in a mentor. Once you know exactly what you want, you’ll be more effective (and efficient) in your search.

Mentorship has taken on a high profile these days, so it’s not hard to create a pipeline of prospective mentors. Talk to people you respect, go on LinkedIn, check with your personal network and go to events where people who have the expertise you’re interested in would likely attend. But remember, just because someone is an expert in an area you want help in doesn’t mean that they’re the right mentor for you. That expertise has to be toned, packaged and exchanged in a particular way. You have to be able to have good chemistry, the right conversational rhythm, and feel safe and insanely curious to access the jewels of wisdom from their perspective.

Good mentors must be compassionate, rather than just empathic. I’ve come to realize there’s a real difference between empathy and compassion, and some mentors fall prey to the heart tugs of empathy. What I mean by this is that some mentors want to walk in the shoes of their mentee too much and when you do that you lose perspective and objectivity. The reality is that as the mentor, there’s no way to have experienced what the mentee is going through, because you’re not in their heads, hearts or daily routine.

What I find helpful is to be completely compassionate—meaning open but detached—about the scenario my mentees are describing and what they need help with. That way, I can really hear the problems of my mentees and not lose myself trying to be them. This allows me to help them help themselves be creative in discovering a solution, rather than being overly attached and prescriptive based on a surface level understanding of the situation and too much alignment with the mentee’s description of the situation.

Before taking the plunge, make sure you are really ready to be mentored. It’s important to realize that one of the requirements of being a good mentee is the ability to be vulnerable. This means being able to admit, “I don’t know this,” or “I need help, council or advice.” This isn’t simple to do; it’s just not part of our human nature. It is, however, important, to be open to a level of vulnerability with a mentor.

Having a good mentor is essentially like having access to “help on demand”—and the help depends on the type of mentor you have. But simply having a mentor isn’t going to change anything unless you actively process, experiment and apply the information and knowledge you’re getting. Just having the conversation doesn’t solve anything, unfortunately—you still have to go out and actually act on the advice

Cleveland Clinic’s newest joint venture targets hospital supply chain for cost savings | MedCity News

Cleveland Clinic’s newest joint venture targets hospital supply chain for cost savings | MedCity News

As hospitals feel the squeeze to cut costs, they have many places to look. Some are evaluating how things are done in the operating room ^[1]. Others are mining data for clues as to what causes extended hospital stays ^[2], high costs or undesired outcomes.

The Cleveland Clinic, for one, is evaluating how and from where it gets its supplies. To make that process less costly and more clinically integrated, the Cleveland Clinic has formed a joint venture ^[3] that it says “will transform traditional group purchasing approach into a strategic sourcing model.”

The Clinic spends about $1.6 billion a year on supplies and services, according to Modern Healthcare ^[4], and used to contract with Premier healthcare alliance on some of those supplies. Now, it’s shifting how it handles the purchase of pricey physician preference items and other supplies to an LLC formed with VHA ^[5], a Texas-based network of national not-for-profit health organizations.

“It will leverage Cleveland Clinic’s strategic approach of physician integration, clinical excellence and proven clinical sourcing with VHA’s best-in-class analytics, unique ability to foster strong member networks and market-leading contracting expertise through its contracting company, Novation, to create an innovative offering for value-based sourcing,” the Clinic said in a statement ^[3].

The joint venture also aims to lower supply costs, reduce operating expenses, enhance product standardization, improve visibility into supply chain costs and allow for more integration with physicians, the Clinic said.

This isn’t the first time a health system has formed a joint venture in an attempt to reduce costs associated with physician preference items. Last year, West Coast health system Dignity Health paired up with UnitedHealthcare and other unnamed systems to form a GPO ^[6].

Telehealth startup 2nd.MD CEO says he got encouragement from Eric Topol | MedCity News

Telehealth startup 2nd.MD CEO says he got encouragement from Eric Topol | MedCity News

The keys to its service are speed, access and reducing healthcare costs. Here’s how it works. Users request a second opinion, usually when they have received a diagnosis or recommendation for a medical procedure. They are typically asked ahead of time to provide lab and test results, a physician’s assessment or recommendation for treatment for the patient’s condition. Within a few days, users can speak with two to five specialists, depending on their condition, through a 20-minute phone or video conference session. They can also access a summary of the opinions

How Entrepreneurs Come Up With Great Ideas

There is no magic formula. But that doesn't mean there's no formula at all.

Look at What's Bugging You
Founder and CEO, TechStarsYou're Never Too Old
Vice president of academics and innovation, Singularity University  Founder and CEO, NewME AcceleratorIdeas Are Abundant; Drive Isn't
Chairman of the global board, Entrepreneurs' OrganizationLet Your Subconscious Do the Work
Co-founder and CEO, ClearFitAttack Practical Problems
Founder and CEO, Trunk ClubHead Into the Weird Places
Co-founder, CEO and managing director, T2 Venture CapitalSearch for a Better Way
Fashion designerThink Big
Venture partner, General Catalyst PartnersTaking It to Market
Clinical professor of entrepreneurship and executive director of the Michael P. Polsky Center for Entrepreneurship and Innovation at the University of Chicago Booth School of BusinessListen to People Who Know
Co-founder and president, Growthink Inc.Get Inspired by History
Founder and president, Dogfish Head Craft Brewery Inc.Be Prepared to Shift Gears
Associate professor of entrepreneurship and Frederic C. Hamilton chair of free enterprise, Babson CollegeYou Can't Rush the Brain
Isidore Horween research associate professor of business administration, University of Virginia's Darden School of BusinessWhat Not to Do
Author and former chief evangelist of Apple

At the heart of any successful business is a great idea. Some seem so simple we wonder why nobody thought of them before. Others are so revolutionary we wonder how anybody could've thought of them at all.

But those great ideas don't come on command. And that leaves lots of would-be entrepreneurs asking the same question: How did everybody else get inspiration to strike—and how can we work the same magic?

To find out, we turned to the experts—the startup mentors who discuss launching businesses at our Accelerators blog, as well as other investors, advisers and professors who have seen and heard countless success stories, and entrepreneurs who have written success stories of their own. They saw inspiration coming from all sorts of sources—everyday puzzles, driving passions and the subconscious mind.

Here's what they had to say.

Ideas for startups often begin with a problem that needs to be solved. And they don't usually come while you're sitting around sipping coffee and contemplating life. They tend to reveal themselves while you're hard at work on something else.

For instance, one company of mine, earFeeder, came about because I wanted news on music I loved and found it hard to get. So I created a service that checks your computer for the music you have stored there, then feeds you news from the Internet about those bands, along with ticket deals and other things.

David Cohen 

***

Mark Zuckerberg with Facebook, Paul Allen and Bill Gates with Microsoft, Steve Wozniak and Steve Jobs with Apple —those success stories lead some people to think that coming up with big ideas is a young person's game. But the tech entrepreneurs who rose to early fame and fortune are just the outliers. The typical entrepreneur is a middle-aged professional who learns about a market need and starts a company with his own savings.

Research that my team completed in 2009 determined that the average age of a successful entrepreneur in high-growth industries such as computers, health care and aerospace is 40. Twice as many successful entrepreneurs are aged over 50 as under 25, and twice as many over 60 as under 20.

Vivek Wadhwa 

***

Start your brainstorming with problems that you are personally invested in. Building a business is hard as hell and takes the kind of relentless dedication that comes from personal passion.

The next big question is "How?" Great ideas and innovations come from executing on your idea in a different way than everybody else is attacking it, if they're attacking it at all. A great way to do this is to look outside of your industry to see how others are solving problems. Approaches that they think are routine might be out of the ordinary for you—and inspire great ideas.

Also, most businesspeople tend to ignore our creative side until we really need it. Making sure that your life has a balance of the arts is a great way to stay engaged creatively.

This last tip will seem insanely obvious. However, in the world we live in, it's easier said than done: Simply be present in life.

I'm sure you can relate to how overconnected we all are. Something as simple as having a cup of coffee becomes a juggling act of replying to emails and managing schedules. It's easy to miss a potential piece to your innovation puzzle when it's right under your nose if you aren't there.

Angela Benton 

***

Perhaps the greatest factor that determines whether or not an entrepreneur will be successful isn't the business idea itself, but rather the entrepreneur's willingness to try (and keep trying) to turn the idea into reality. Great ideas are abundant, but it's what we decide to do with them that counts.

Samer Kurdi 

***

When the mind is occupied with a monotonous task, it can stimulate the subconscious into a eureka moment. That's what happened to me. The business model for my company, ClearFit, which provides an easy way for companies to find employees and predict job fit, hatched in the back of my mind while I was driving 80 miles an hour, not thinking about work at all.

The subconscious mind runs in the background, silently affecting the outcome of many thoughts. So, take a break and smell the flowers, because while you're out doing that, your mind may very well solve the problem that you are trying to solve or spark a solution to a problem you hadn't considered before.

Ben Baldwin 

***

Make a note whenever you encounter a service or a customer experience that frustrates you, or wish you had a product that met your needs that you can't find anywhere. Then ask yourself, is this a problem I could solve? And how much time and money would it take to test my idea?

That last point is crucial. As my sage Stanford professor Andy Rachleff encouraged me, "Make sure you can fail fast and cheaply." In business school, I had a couple of big ideas. One was improving domestic airline service—which would have cost millions and taken years. I decided to pursue another opportunity that was a lot cheaper and would show results faster—a clothing line called Bonobos.

In the end, it took me just nine months and $15,000 of startup funds to get a little traction and market feedback.

Brian Spaly 

***

For entrepreneurs to stretch their brains, they should seek out the unusual.

Watch and listen to weird stuff. I enjoy watching obscure documentaries and listening to unusual podcasts. It's thrilling to find cool ideas lurking just a few clicks away.

Walk in weird places. I take walks in hidden suburban neighborhoods, department stores, community colleges. When you're walking with no purpose but walking, you see things in fresh ways, because you have the luxury of being in the present.

Talk to weird people. Striking up conversations with people who are different from you can be powerful. I still remember random conversations with strangers from decades ago, and how they shaped me.

Victor W. Hwang 

***

As one goes about their daily life, it is useful if they routinely ask themselves, "Isn't there a better way?" You would be surprised at how frequently the answer is, "Yes." Other sources of inspiration for me are existing products. One should never feel that just because there is a product out there similar to yours that you can't execute it and market it better.

Liz Lange 

***

There are several factors an entrepreneur should consider when choosing a business idea or opportunity.

Go big or go home: There are opportunities to make money by building businesses that marginally improve on existing products or services, but the real thrill sets in when the decision is made to go after an enormous idea that seems slightly crazy.

Make the world a better place: The best kind of entrepreneur pursues a business that simplifies or improves the lives of many people. He or she repeatedly asks "what if" when thinking about how the world works and how the status quo could be dramatically improved.

Fail fast: As overall startup costs decline and markets move much more quickly, it has become easier to test ideas without devastating consequences of failure.

Pivot quickly: Many of the most successful companies exist in a form that is entirely different from how they were first envisioned. A successful entrepreneur will realize when a company is moving in the wrong direction or is missing a much larger opportunity.

Kevin Colleran 

***

It is important to look at an idea in two ways: first, to consider the initial inspiration for the business, and second, the often very different concept that ends up being executed to create the new company. We typically think of these ideas as the thing that sets these great entrepreneurs on the path of success. However, an idea is only that until you do something with it. Great entrepreneurs also discover the strategies to deliver the new innovative solution to the market.

Ellen Rudnick 

***

Entrepreneurs come up with great ideas in a number of ways. Here are some of the best.

Get customer feedback: Listen to customers and create products and services that give them more of what they like and/or remove what they dislike.

Listen to front-line employees: The workers who manufacture the widgets, interact with customers and so on see what takes too long to accomplish, what is too expensive, what causes problems. Talk to those workers, or even do those jobs yourself.

Reverse assumptions: Many great entrepreneurs come up with ideas by reversing assumptions. For example, the old assumption was that a bank needed to have tellers and branch locations. The ATM concept asked: How can we offer banking services without having a branch location and tellers?

Dave Lavinsky 

***

You often hear about the pursuit of the new new thing. But I believe entrepreneurs have a lot to gain by looking into history for inspiration.

In the mid-'90s, some beer enthusiasts and experts called us heretics for brewing beers with ingredients outside of the "traditional" water, yeast, hops and barley. So, I started researching ancient brewing cultures and learned that long ago, brewers in every corner of the world made beer with whatever was beautiful and natural and grew beneath the ground they lived on.

We now make a whole series of Ancient Ales inspired by historic and molecular evidence found in tombs and dig sites.

Sam Calagione 

***

Entrepreneurs need to understand two things. For one thing, their first (or second or third) idea is often not the real opportunity. In fact, it might stink. They have to be on the lookout for whyit stinks and be willing to shift course.

But they also need to understand that even if their idea has problems, there's often a good opportunity buried within it. They need to talk to people and continue tweaking and transforming it. In the process, they encounter setbacks, rethink their approach, try again and redefine what they're doing.

For all that, the idea may fail—it's happened to many successful entrepreneurs. But they weren't deterred by failure. They kept at it and were better positioned to recognize and shape the next idea into something truly great.

Donna Kelley 

***

I don't know where great ideas come from. I am not sure anyone does. I am not even sure how I come up with my ideas. The brain does its thing, and out pops an idea.

While you are waiting for the brain to get its act together, do what you can do. Do the doable. Meet with people, schmooze, have a laugh or two. Build mock-ups and prototypes. At the very least, collect other people's problems. That's always a guaranteed doable.

The deep idea here is that action has a creative aspect distinct from thinking. And thinking need not come first. Mostly it doesn't.

Saras D. Sarasvathy 

***

One thing that isn't a rich vein of entrepreneurship gold: reading a market forecast from a big-name consulting firm and deciding to create a product to serve that need.

Guy Kawasaki 

Wharton's 2013 Business Plan Competition: Health Care, Kids, Fashion and More

AlphaX

This is an anti-inflammatory drug currently in development that seeks to give relief to patients with early-stage rheumatoid arthritis, a common autoimmune disease that causes pain, swelling and loss of function in the joints. Its cause is unknown. Administered orally, AlphaX would be the drug of choice in a $12 billion market because current treatment requires injections. It would also be substantially cheaper, says team leader Stanley Lim, a senior in Wharton's undergraduate program.

AutoAlpha

AutoAlpha is an asset-light, subscription software program designed to reduce tedious paper shuffling in the finance industry, particularly for poorly managed private equity and venture capital firms. After spending years in private equity before coming to Wharton for his MBA a year ago, team leader David Wynee says he knew there had to be a better way. His program will allow companies to analyze portfolio performance, often aggregating multiple Excel files, to improve productivity and reduce error. So far, he has identified 600 firms in the New York area that could use his product.

Kidsworld

Shopping in Southeast Asia can be a "nightmares for parents": Traffic is horrendous, supplies are inadequate and price gouging is rampant. Team leader Ramji Sundararajan hopes to change that by creating an e-commerce startup for children's products and family services, such as nanny agencies. With a combined size of 350 million customers and a 6% average annual growth in GDP, Southeast Asia is one of the fastest growing regions in the world. Kidsworld, which emphasizes its free delivery service, says it would offer access to the best retailers.

MacuLens

Glare from bright lights at night can be dangerous and painful. This company will market a polymer patented by ophthalmologists at the University of California San Francisco that can be applied to eyeglasses, contact lenses, car windshields and headlamps. The current domestic market for anti-glare technology exceeds $790 million, according to team leader Frank Brodie, a first-year Wharton MBA and medical school student.

Athletes and patients who suffer from complications following Lasik surgery, cataracts and macular degeneration will be targeted first. The team also has identified the non-prescription market, valued at $1.9 billion.

OmniSom Solutions

Sleep disorders are so common that bricks and mortar clinics can't keep up with the demand. That, plus the fact that patients dislike spending a night in a strange bed wired up with sensors, convinced team leader Taylor Jamerson, a freshman at Wharton and the youngest presenter at the competition, that the system needs a makeover. Her company would deliver diagnostic equipment, called Lyra, to a patient's home, collect it the next day and process the data.

By making the test less burdensome to the consumer, Jamerson estimates that six million more people a year would take it, creating $8 billion in untapped health care revenue.

Quantaviz

Better imaging for patients with osteoarthritis and degenerative disc disease would reduce trial and error in diagnosis, produce a more targeted and faster treatment plan and potentially save health care dollars.

Siemens, one of the largest manufacturers of magnetic resonance imaging machines (MRI), is exploring the technology with team leader Ari Borthakur, a doctor and first-year Wharton executive MBA student. Borthakur says the company, which will operate as a contract research organization (CRO), is ready to officially launch. Quantaviz has negotiated the option to license the patents from the University of Pennsylvania Center for Technology Transfer.

Top Trender

Skinny belts are "in" one year and "out" the next -- when everyone starts favoring a wider style. Indeed, fashion trends are harder to predict than the weather. Still, buyers for major retailers have to make their best guesses every season, thereby putting billions of dollars at risk, notes team leader Ben Cann, a second-year Wharton executive MBA student. He plans to increase predictability by crowd sourcing among fashion-conscious consumers. His company would offer retailers the opportunity to showcase new styles on a hand-held device, asking consumers to vote their preferences. In return, participants would receive discounts on merchandise or fashion show invitations. The plan is an interactive, real-time spin on popular fashion magazine features, such as "Who Wore It Best?" and "Hot or Not?"

Zenkars

Already up and running, this is an online retailer of cars. The goal, states team leader Jean-Mathieu Chabas, a second-year MBA student, is connecting buyers directly with commercial sellers -- bypassing auto auctions, wholesalers and dealers. The company shares all available information on its cars, lists non-negotiable prices and delivers to buyers' homes with a six-month premium guarantee. "We hope to redefine used car buying -- a $50 billion market -- by changing it from a painful experience to a peaceful one," says Chabas.

And the Winner Is ...

Zenkars won the top $30,000 prize and the $1,000 committee award as the overall favorite. Maculens took second prize -- $15,000 -- plus the $3,000 People's Choice Award. Top Trender came in third, taking home $10,000, plus another $1,000 for presenting the plan most likely to disrupt the retail industry.

Chabas of Zenkars says the prize money will go toward marketing. So far, he and business partner Venkat Jonnaia, also a Wharton second-year MBA student, have invested $30,000 of their own money. The venture also received $20,000 from the American Dream Fund. "The website is [up and] running and we've already sold three cars," Chabas notes. "Next, we will apply the best marketing strategies we've learned."

Rob Bressler, a first-year Wharton MBA student and a business partner in MacuLens, says his company will bring the technology to reduce night glare direct to consumers via the Internet. One of the team's first endeavors will be to place viewing boxes in ophthalmologists' offices so patients can see the difference between lenses with the polymer applied and those without.

According to Cann of Top Trender, the prize money is just what he and his team need to launch a pilot with a major retailer, the first step in saving the industry huge sums by predicting what buyers want.

If history is an indicator, this year's winners will join a litany of student teams that launched successful business plans at prior Wharton competitions. Last year's grand prize winner, RightCare Solutions, has passed Round A, a critical step in funding from investors. RightCare is a software program that helps identify hospital patients most likely to be readmitted.

Winners from the 2010-2011 competition -- Stylitics and baby.com.br -- have closed various funding rounds and received extensive media coverage.

Many-stop Shopping? How Niche Retailers Are Thriving on Internet 2.0

A decade after pets.com and a string of other early Internet specialty retailers collapsed, a new wave of start-ups -- enabled by the power of cloud computing, advanced delivery systems and deep social relationships with customers -- is shaping e-commerce.

From diapers and eyeglasses to pool tables and, yes, pet products, entrepreneurs are developing specialty businesses to compete alongside one-stop shopping giants like Amazon.com and Walmart.com.

"There is a new generation -- Internet retail 2.0," says Wharton marketing professor David Bell, noting that after the 2000 dot-com bust, activity in online specialty retailers dried up as financing became difficult, or impossible, to get and industry executives struggled to evaluate failed business models. Now, engineers have dramatically reduced obstacles to creating web-based businesses, and entrepreneurs have learned more about how to capture online consumers.

Many of these small players are working in affiliation with Amazon or other major online retailers that assist with the marketing platform and/or delivery fulfillment. Others are folding into bigger sites. This month, Seattle-based Amazon paid $545 million to acquire Quidsi, a New Jersey retailer that delivers diapers and baby products under the name diapers.com and recently started selling soap and cosmetics. Last fall, Amazon paid $1.2 billion for Zappos, the specialty shoe retailer.

Online sales continue to outpace overall retail spending growth. In 2010, U.S. e-commerce sales totaled $165.4 billion, up 14.8% from 2009, the U.S. Department of Commerce reported. Looking forward, eMarketer, which tracks the digital marketplace, estimates online sales will rise to $188 billion in 2011 and $269.8 billion in 2015. According to eMarketer, 87.5% of U.S. Internet users over age 14, or 178.5 million people, will browse or research products online this year. Of that group, 83% will make an Internet purchase in 2011.

The Internet lends itself to specialty retailing because it allows companies to offer huge product portfolios without having to stock inventory in bricks-and-mortar shops. Wharton marketing professor Stephen Hoch notes that Amazon itself began in 1994 as a niche player selling books only. Now, the $34 billion company markets everything from fine jewelry to industrial supplies.

According to Hoch, improvements in computer technology and graphics allow consumers to get a better sense of what they are buying online. "People, especially young people, have grown up on this and are more trusting and more confident about buying online." Zappos, for example, made it easy for consumers to buy shoes -- "the one thing that really has to fit right" -- online with liberal return policies. And eyewear e-tailer Warby Parker will ship sample frames to customers. The site also has an interactive feature that allows shoppers to upload their photo to see what they would look like in different styles.

In the earlier days of online retailing, Bell notes, companies overestimated the value of "eyeballs," or the number of visits consumers made to a site. Retailers now understand more about converting visits into sales, often by building relationships through social commerce tools, including blogs, Twitter and Facebook. "Companies are learning how to turn their own customers into their sales force," says Bell. "The whole social media platform wasn't around in the first boom."

Jeffrey Grau, principal analyst at eMarketer in New York City, predicts that social connections will continue to drive growth for Internet retailers as mobile technology expands. "There are a lot of creative business models coming out all the time that involve social commerce or mobile commerce. There's a lot of innovation going on in e-commerce."

Pitching to New Parents

But Wharton marketing professor Peter Fader cautions that e-tailers hoping to evolve small niche lines into national mega-brands face difficult, if not impossible, odds. He cites the marketing law of "double jeopardy" and research showing that big brands enjoy higher sales and more brand loyalty than their smaller, more specialized counterparts, which tend to appeal only to the most avid buyers.

He uses the example of a consumer who buys a specialty brand of gentle laundry detergent for people with sensitive skin. That person is probably still buying name brands such as Tide to meet his or her other needs. A business based on the specialty detergent could never scale up enough to capture significant sales from the major brands, Fader says. Online specialty retailers can be successful if they understand their limitations, and construct logistics and marketing operations to suit that size.

"Unfortunately, too many small brands don't view themselves as a specialty," Fader points out. "They think they can compete with the big guys." As a result, the company spends too much on broad-based advertising and other attempts to drive scale. Ultimately, Fader says, they "get crushed.... If you admit that you are a small brand, go after the specialty angle and say, 'People will buy us only occasionally' -- and you keep costs down and keep the message focused -- then you can be okay." However, he adds, "That [approach is] not sexy and doesn't sell well to the venture capitalists."

According to Wharton marketing professor Leonard Lodish, diapers.com retailer Quidsi, founded in 2005 by Marc Lore and his business partner Vinit Bharara, has the important characteristics for an online specialty retailer today -- strong execution and lavish customer service. Lodish, who served on the board of Quidsi before its acquisition by Amazon, says the firm developed highly efficient distribution networks revolving around state-of-the art information technology. Its warehouses are equipped with sophisticated robots handling automated fulfillment. In addition, Quidsi developed a software program, called Boxem, that calculates the best sized box for any individual order, saving on shipping and other costs.

However, Lodish says the company's most important asset is its relationship with new parents, fostered through its own customer service staff, not a remote call center. "Their customers love them," notes Lodish. "Their reputation with young mothers is better than anybody else by far. People talk about them and refer friends to diapers.com when they have new babies."

After battling Quidsi on diaper pricing, Amazon offered to buy it. "The present value of what Amazon was offering was better than what [Quidsi] could do on its own -- That's the right way to look at it from the point of view of the shareholder of the company," says Lodish.

Wharton marketing professor Barbara Kahn describes Amazon's purchase of Quidsi as the online version of a long-established retail phenomenon known as the "wheel of retailing" in which large companies seeking scale and new capabilities often acquire specialty retailers to expand their offerings in a one-stop environment.

However, in time, new specialty retailers discover niches and create targeted organizations to meet those customer needs better than the large retailers -- and the wheel turns again. The differences between a company like Amazon and a small specialty player illustrate the disparities between a market-share model, designed to serve as many products to as many people as possible, and a customer-focused approach aimed at developing deep loyalty from shoppers, according to Kahn.

The new breed of Internet specialty retailer is reaching customers by building communities among customers, she adds. In traditional retail, the closest example of this kind of effort is at independent running stores where customers come together to form running clubs and train for races. "In the virtual world you can do that around any interest," Kahn notes.

Three Engineers vs. 40

Social commerce is critical to Davis Smith's latest venture. In 2004, he founded pooltables.com, which shipped pool tables made in China to consumers' homes. Smith sold that business to a competitor to focus on his next company, an online baby product retailer in Brazil called Baby.com.br -- modeled largely on diapers.com. While the margins on diapers are slim, Smith says, the new company's strategy will be to develop loyalty so that mothers return to the site frequently, not only for diapers but also for wipes and other baby products.

"In these niche markets, customers, especially mothers, expect great customer service and [significant] depth of products and they actually want a community," Smith says. The site, scheduled to open this spring, will have outlets for consumers to share their pregnancy and parenting experiences. "This whole idea of social commerce is very new. No one has really figured it out entirely yet. But a lot of people are coming in brand new with a lot of fun ideas."

Once he has a customer hooked, Smith figures families with two children will be loyal customers for at least six years. "When you find mothers coming back to the website to buy the wipes and the formula they need every week, there is a tremendous opportunity to up-sell and cross-sell other products." Those same mothers, he adds, could be converted to other consumer products because "they are not going to want to strap their toddlers into a car seat to run out to buy q-tips or Windex or toilet paper."

Beyond logistics and customer relationships, some of the new web entrepreneurs are focused on creating their own products. Bonobos, a men's apparel e-tailer, designs, develops, sources and merchandises its own clothing brand. "So unlike Zappos or Quidsi, we are not about offering the deepest selection of brands on the market," states Bonobos founder Andy Dunn, who started the company in 2007. "Rather, we want to curate brands, and go so far as to actually create and own the very best of those brands." Dunn calls the strategy "vertical web retailing."

Even pet food is getting a second look. Petflow.com, founded in 2009, is delivering food and other pet supplies on a new subscription model that relies on regularly scheduled deliveries. Julie Wainwright, former CEO of Pets.com, says specialty retail start-ups today are operating in a completely different world than when Pets.com folded after famously promoting its business with commercials starring a sock puppet during the Super Bowl.

First, Wainwright notes, the number of people with Internet access, including mobile devices, has grown from 250 million in the early part of the decade to around five billion today. In addition, technology has evolved with new plug-and-play solutions that had to be custom designed for e-commerce firms in the first wave of online retail. For example, new start-ups today can buy a digital shopping cart from a software company. Pets.com had to design its own. Wainwright says three people can now do the work of creating a site that took 40 to 45 highly skilled engineers a decade ago. Back then, cloud computing was unknown. Each individual e-commerce site had to operate its own servers and backup systems.   "Now, it is pretty easy for any mom and pop to set up an e-commerce site," states Wainwright, who is currently running a health consultancy.

Wharton's Bell says that in addition to mom and pop entrepreneurs, many top business school graduates are looking for ways to start their own firms rather than migrate to finance as they had in recent years. And as Wainwright notes, online retailing today is becoming an increasingly creative outlet. Rather than simply moving products out of warehouses, online retailers now have the opportunity to build elaborate sites incorporating photos, video and music that can express a personal vision.

Subsidiary or Competitor?

For some, the long-term strategy may be to scale up and sell to Amazon or cash out in a stock offering. Others, according to Bell, seem driven to build their firms and remain in control. While Quidsi and Zappos agreed to be acquired by Amazon, he notes that Groupon rejected Google's $6 billion offer. "It comes down to the vision of the individual founder and the size of the opportunity to be had."

Dunn, the Bonobos founder, says service-driven, product-depth players like Zappos and Quidsi are good candidates for acquisition by larger firms. "We don't want to compete with them at their own game, which is low-cost product depth," Dunn notes. "In the long run, we would be more honored to be their competitor than their subsidiary. But we've got miles to go to even think about that possibility."

Not all entrepreneurs are drawn to the online world. Patrick FitzGerald is working on another diapers-oriented venture, Nanny Caddy. The company provides vending machines stocked with diapers and other baby items, such as pacifiers, wipes and sunscreen, to child-oriented locations, including zoos and museums. FitzGerald's prior start-up, RecycleBank, provides incentive programs for recycling. "You can't get more in the physical world than trash and vending machines," says FitzGerald. The key difference between managing an Internet and an offline company is the relationship with customers, which he argues is more powerful in a company that works primarily in the physical world. The downside is that a business like Nanny Caddy requires significant travel and hands-on involvement. "The logistical component of moving Nanny Caddy and delivering nationwide is not so easy. I have much bigger forearms than I did before."

FitzGerald stresses that first-hand feedback on the ground is critical. "You learn very quickly where the holes are," he says. "It's easy to sit in a room and pound away at spreadsheets, but sometimes you have to get your hands dirty."

Online or off, retailers will always face the pressure to generate profit, Wainwright notes. The online retail marketplace has a lot of "clutter," and e-commerce companies face challenges, she adds. "The economics are not that much different than bricks-and-mortar stores.   The margins are slightly better, but they are still thin margins."

Wharton's Hoch also adds a note of caution: "In the future, there is a lot of opportunity for start-ups in specialized e-tailing. But it's also easy not to succeed. The barriers to entry are low, and the barriers to exit are low. A lot of people are trying things. Sometimes you just can't tell exactly what is going to work."

What Eyewear Startup Warby Parker Sees That Others Don't

Shortly after Neil Blumenthal launched Warby Parker, the e-commerce eyewear startup known for its $95 retro-cool frames, customers emailed asking if they could "stop by" the company's Philadelphia headquarters and check out the glasses for themselves. There was just one problem: Warby Parker -- the brainchild of Blumenthal and three Wharton classmates, Andrew Hunt, Jeffrey Raider and David Gilboa -- didn't have a showroom. So they improvised.

"We said, 'Sure, you can come to our... apartment,' and we laid the glasses on the dining room table," Blumenthal says.

When those would-be customers visited the makeshift shop back in 2010, "something special happened," according to Blumenthal, 32. "They saw us sitting on the couch working our laptops, responding to orders, talking on the phone with customers. They saw the people behind the brand, which is so rare," he says. "We realized we could learn from those customers -- what they liked and what they wanted. Those people became some of our best advocates."

Today, Warby Parker is a beloved and booming brand. The company's hipster eyewear, coupled with its customer-centric strategy and socially conscious business model, has won over shoppers and impressed top-notch investors. In February, Warby Parker closed a round of financing worth $41.5 million, including funds from Millard Drexler, the chief executive of J. Crew, and American Express. The retail world is watching as the company embarks on its latest venture -- an expansive store in New York City's Soho neighborhood, across from the Apple store and next to Ralph Lauren.

The store opened in mid-April. During the next three weekends, more than 4,000 people came through its doors. On Saturday, there were lines down the block to get in. According to Blumenthal, the store represents "uncharted territory," not just for Warby Parker but also for the future of retail. "This is the convergence of e-commerce and bricks and mortar. The idea that it's one or the other is ridiculous," he says. "E-commerce as a term will become obsolete in five or six years."

'Nerdy Cool Appeal'

Before co-founding Warby Parker, Blumenthal directed VisionSpring, a group that trains women in developing countries to sell affordable glasses in their communities. The job left an impression. "It helped me recognize the power of a pair of glasses to change someone's life," he notes. Research conducted by the University of Michigan demonstrated that users of VisionSpring eyeglasses experienced a 35% increase in productivity and a 20% increase in monthly income, Blumenthal points out. "In international development terms, that is a miracle."

His work there also exposed him to the vagaries of the economics of eyewear. "There's a big disconnect between what it costs to make glasses and what they are sold for in the U.S.," he says.

An Industry Ripe for Disruption

A little background: One company -- Luxottica -- dominates the eyewear industry. As of 2012, Milan-based Luxottica's retail network consisted of more than 7,000 stores, including LensCrafters, Pearle Vision and Sunglass Hut stores. The company owns the optical shops in Target and Sears in addition to chains throughout Europe and Asia. It also owns Ray-Ban, Oakley and Oliver Peoples. And it manufactures, under license, for many designer labels including Versace, Prada, Burberry, DKNY, Chanel and Ralph Lauren.

It's an industry ripe for disruption, but because of Luxottica's heft, "it takes incredible creativity and brilliance" to go up "against an opponent that has that much power," saysBarbara Kahn, director of the Jay H. Baker Retailing Center at Wharton. "But they have it," she notes, referring to Warby Parker's founding team. The brand is urban, cool and quirky, and "they have the Midas touch when it comes to tapping into the hipster culture. They have a story -- an authentic and genuine narrative."

The origins of Warby Parker are a key part of the company's identity. According to the company's website, it was conceived "with a rebellious spirit" as a "collaboration between four close friends ... as an alternative to the overpriced and bland eyewear available today.... By circumventing traditional channels and engaging with customers directly through our website, Warby Parker is able to provide higher-quality, better-looking prescription eyewear at a fraction of the price."

Warby Parker's glasses are made from cellulose acetate, sourced from a family-owned Italian company. Its frames are assembled in China and crafted on the same production lines as many of its competitors, but because the company cuts out the middlemen, the prices are lower.

Until recently, Warby Parker was primarily an e-commerce company, which meant that the tone, usability and personality of its website were a critical part of its business strategy. The women depicted on the site look like funky grad students or magazine editors; the men look like architects or jazz musicians. Warby Parker offers customers a way to upload photos of themselves and virtually "try on" frames. It also has a mail order try-on program that allows people to test five frames at a time, free of charge.

"People have no clue how to buy eyeglasses," says Kahn. "It's a completely overwhelming chore. You go into a store where there are thousands of pairs, and you don't know how they're going to look and which frames are right for you. The salesperson 'helps' you by narrowing [your selections] down to five pairs. So how do you do this without the salesperson's expertise? Warby Parker figured it out with an offer to let customers choose five pairs of glasses for five days. You can try them on in front of your mirror, show your friends, post it to Facebook and get other people's opinions."

The home try-on program engenders loyalty, notes Davia Temin, CEO of Temin and Company, the brand consultantancy. "It doesn't say: 'You trust me and then I will trust you.' It says: 'I will trust you and you can trust me.'"

Then there are the glasses themselves. They come in many varieties, but they all have similar attributes: simple frames with slightly chunky temples that feature subdued colors: gray, crystal, blue and burgundy. The glasses have preppy, country club names like Chandler, Winston and Beckett. (The name Warby Parker is a combination of two characters from unpublished Jack Kerouac writings.) They are described in playful terms. The Linwood model, for example, is portrayed this way: "Sometimes less is more. With its trim, sleek (and incorrigibly smart-looking) shape, the Linwood is equally suited to poolside reading and boardroom-running."

"They're hip and they're cool," says Wharton marketing professor Leonard Lodish. "[Warby Parker's founders] have done what they needed to do to become known as the place where people who are in the know go to buy glasses."

They have a "nerdy cool appeal," adds Mike Tesler, a marketing lecturer at Bentley University and president of Retail Concepts, a Boston-based consulting firm. "It taps into the Kendall Square/Silicon Valley/New York City metrosexual vibe. They're not studly, but they've got brains. They're like the nerdy guys in the movies who end up with a beautiful woman."

A Price That's Right

Even apart from its stylish products and slick website, Warby Parker has another big selling point: price. The vast majority of its eyeglasses sell for $95; titanium frames cost $145. Shipping is free, as are returns. By comparison, The National Association of Vision Care Plans puts the average price of eyeglasses at $263.

"As customers, we're so used to being ripped off: We don't know the difference between a pair of $300 glasses and a pair of $400 ones," says Simon Blanchard, a marketing professor at Georgetown University's McDonough School of Business.

Another Warby Parker advantage: uniform pricing. "When all of your products are priced the same, people focus on something else," adds Blanchard, who notes that Swatch Watch was successful with a similar strategy. "In the case of Warby Parker, customers focus on the glasses that best reflect their personality and style."

The decision to price glasses at $95 comes with a back story. Wharton marketing professorJagmohan Raju recalls that when the founders broached their idea to him, they originally planned to sell their glasses at half that price. "I really liked the idea overall ... but after examining their analysis, I told them it's not going to fly. [At $45 a pair], there's no money [left over] for brand building; there will be no money in it for you and no money for investors."

In addition to squeezing the business, a price tag of $45 was "too low" to be seen as credible to customers, according to Raju. "It would have put [Warby Parker] in a category I believed they did not want to be in. There are many companies selling cheap eyeglasses. Anyone can go on the Internet and buy two pairs for $99. But there is a perception among customers that the quality is not as good."

The goal was to create a new price point that was still reasonable, but not low-end.

David Bell, professor of marketing at Wharton, served as an advisor to the founders in an independent study about pricing models and demand analysis. He recalls conversations around the social-psychological reasons for staying under $100. "There was a bit of discussion about what happens [psychologically to the customer] when you get to three digits," he says. "[At the same time], $99 gets you a little bit of extra margin -- $4 -- but it doesn't feel quite as classy. A price tag of $93 sounds more like a Walmart price: There's too much exactitude there."

The price had to be right for another important reason: For every pair of glasses Warby Parker sells, it gives a pair to someone in need. (According to the company, almost one billion people worldwide -- 15% of the global population -- lack access to glasses.) TOMS, the shoe manufacturer known for its simple cloth espadrilles made with recycled vegan materials, is perhaps the best known company that employs a buy one/give one business model.

That approach increasingly speaks to customers. According to a study last year by Nielsen, the customer information company, 46% of global consumers are willing to pay extra for products and services from companies that have programs to give back to society. A little over 60% of consumers are under age 40, and they say they consult social media when making purchase decisions and are most concerned about environmental, educational and hunger causes, according to Nielsen.

The buy one/give one approach is not just the standard lip service to corporate social responsibility (CSR), according to Bell. "These founders, who are in their late 20s and early 30s, are not traditional managers. They are a new generation of managers who are more globally aware. It's a generational thing. This is not CSR business as usual -- where we pollute the environment and charge customers a lot of money for goods but we also give a bit of money to the local Little League. They are trying to change an industry."

Eyes on Expansion

According to a report by Global Industry Analysts, a market research company, the worldwide market for eyeglasses is expected to reach $95.66 billion by 2015. Warby Parker represents only a sliver of this industry, but a growing one. The company has 175 employees; it does not disclose financial details, but Blumenthal says it "has grown several hundred percent each year" since its founding.

Over the past two years, Warby Parker has partnered with boutiques to open "stores-within-stores" in cities such as L.A., Nashville and San Francisco. The success of those prompted the company to open its flagship store at 121 Greene Street in New York City. "We chose Soho because it has an art and literary history," says Blumenthal. "Our store is near where many of the 'Beat' writers used to eat and drink. It has a great mix of New Yorkers and tourists, and our office is only a few blocks away."

Inspired by classic libraries, the 2,500-square-foot space is lined with books and old-school rolling library ladders. An in-store optometrist is on hand to perform eye exams seven days a week for $50. Shoppers may track their appointments on the appointment board, designed after the train arrival and departure boards at Grand Central Station. Another store is planned for Boston.

Wharton's Lodish says that the stores could attract new customers. "There are some people who are skittish about buying eyeglasses online," he points out. "They want to make sure they fit right and that the measurements are right. The brick and mortar storefronts may give Warby Parker a lot more customers. The question is whether the cost of acquiring those customers is worth it."

That said, he is confident about Warby Parker's expansion plans. "If they launch a sister brand, I would take a look at it ... because you can associate the good feelings you have with Warby Parker with the new brand." One founder, Jeff Raider, recently launched Harrys.com, a razor and shaving cream company.

Blumenthal says that he is open to such ideas -- just not quite yet. "This is a brand that resonates with a lot of people for a lot of different reasons, but we have not spent a lot of time thinking about the next product category. We're only in the bottom of the first inning."

Lessons from the Mcommerce Summit: State of Mobile Commerce 2013

Why does engagement matter? Because it drives customer satisfaction, utility and value.

And, according to Walgreens senior director of mobile commerce Tim McCauley, the best way to foster engagement with customers is through a multichannel marketing approach with mobile at its core.

This was a sentiment echoed by, well, nearly everyone who spoke last week at the Mcommerce Summit: State of Mobile Commerce 2013, organized by Mobile Commerce Daily.

Dose of mobile
Mr. McCauley’s presentation showed how the United States’ largest drugstore chain has leveraged a host of online and mobile properties – five ecommerce sites and 10 applications and mobile Web sites – that have earned many industry awards and rank high in customer satisfaction.

How does Walgreens engage its customers so well?

Here is an example: one if its app’s most popular features is the ability to use a mobile device to scan the bar code on a medication bottle, initiating an automatic refill order.

Through this utility-first approach, customers are initially engaged while they are outside the store, but then the engagement comes full circle when they come in to the store to pick up their medications. It is likely the customer will make some impulse purchases during that in-store time.

Clearly, the investment is paying off, as customers engaged on all channels are Walgreens’ best, spending six times more than customers who just interact with the company in-store alone.

The pharmacy chain is filling one prescription from a mobile device every single second.

Mobile by design
Here is a quick look at a few other great presentations I got to watch during the Mcommerce Summit:

For upscale furniture and décor retailer Design Within Reach, according to vice president of marketing and ecommerce Mark Simmons, engagement and ROI begins with knowing who the company’s customers are.

In DWR’s case, that would be a higher-income, tech-savvy audience with a passion for beautiful design. 

The company, Mr. Simmons, “follows its customers’ path.” Of course, this increasingly means the smartphone and the tablet – and often both.

DWR’s iOS apps are designed with clean lines and bold colors that draw attention and please the eye.

Customers using the iPad app – a “curated product tool” – can pull up photos of fully-furnished and decorated showcase rooms.

For more information about a product in the image and its designer, all they have to do is tap it with a finger.

Knowing what its customers like and using that to keep them engaged has pushed up DWR’s Yelp scores and kept tablet traffic and sales growing steadily.

Engaging customers through mobile could also be more economical for a company.

Bank on it
David Godsman, senior vice president of online and mobile solutions for Bank of America, said during his presentation that, not only are mobile logins to the BofA site set to outnumber desktop-based online logins by next year, fully-digital customers cost 42 percent less to service than non-digital customers.

Mobile, according to Mr. Godsman, “is now in BofA’s DNA.”

The company has introduced “Tetherless Banking,” a money-management solution that works seamlessly across platforms including desktop, smartphone and tablet.

Last year, it launched nationwide for mobile devices its Bank AmeriDeals rewards program, which sends targeted offers based on previous transactions for maximum relevance.

The bank, which also uses social media to connect with customers, has been seeing growth of its social channel – which is increasingly being accessed through mobile – of over 200 percent month over month.

Mobile, Mr. Godsman said, has helped BofA boost customer retention by 90 percent.

So, how do these successful companies know what kind of mobile messaging to serve up for top relevance and engagement? They measure it.

These marketers analyze the data created by customer interaction, which tells them which mobile messages work and which do not by painting a detailed picture of individual customers’ preferences.

And it is clear that where these business bellwethers go, the rest are sure to follow.

According to Forrester Research, mobile will play an increasingly large role in how consumers buy goods and services over the next few years, with tablets outpacing smartphones for shopping from home and smartphones becoming the preferred channel for location-based contextual campaigns.

AS MOBILE marketing budgets and message volumes grow, the need to measure the impact of those messages – and to quickly adjust messaging that is not yielding results – has never been greater.

Measurement techniques such as action analytics, A/B split testing and retargeting can give marketers the data they need to know what their customers want, plus the ability to respond in real time and tweak messages for maximum engagement and ROI.

The mobile analytics industry is ready to help these companies stand out from the pack, driving conversions now and for years to come.