THE NATIONS NEWSPAPER

BS2003-04

Collegiate Case Study

Some CEOs stand by their companies
By Matt Krantz 4

www.usatodaycollege.com

Entrepreneurs
The ability to identify a need in society that can be turned into a profitable business or service requires both creativity and a strong sense of business. Entrepreneurs have the ability to explore new ways to enter existing or new market segments. While corporate CEOs epitomizing greed, corruption, and obfuscation have dominated headlines for the past 18 months, another breed of leader has quietly emerged, combining creativity and ethics to establish new models of success. Based on a notion of "to be" rather than "to do", successful CEOs can translate corporate mission to galvanizing slogans, and adopt flexible and fluid management styles to foster individual creative efforts in the service of organizational goals. Several companies provide vivid depictions of this new economy leadership ethic, and are worthy of closer examination. This case study analyzes business models in this vein, reviewing companies that successfully balance customer satisfaction in a virtual marketplace, encourage personal commitment through innovative ownership schemes, and bridge the old economy and new. These studies focus on approaches to leadership and creativity from which students can derive essential principles and practices of businesses. Students will be poised to prosper in the 21st century as the new entrepreneurs.

Study: New company failure rate not so high

By Jim Hopkins 5

JetBlue soars on CEOs creativity

By Chris Woodyard 7-9

EBay faithful expect loyalty in return

By Jon Swartz 10-12

Fewer entrepreneurs set up shop last year

By Jim Hopkins 13

Minority women go it alone in starting their own businesses

By Jim Hopkins 14

Cover Story

Case Study Expert

Carol Majors Senior Director, Ewing Marion Kauffman Foundation
USA TODAY Snapshots
America is the best place for entrepreneurs
The USA is considered the most entrepreneurial1 country:

Card crafter uses creativity to carve out niche

Ethnic-based products show off humor, sentiment
By Lorrie Grant USA TODAY NEW YORK -- Greeting-card maker Karen Mitchell-Raptakis lacks the financial might of institutions Hallmark and American Greetings but not the passion to be just as big. Raptakis, a bookpublishing assistant by day, is a new voice in the $7.5-billion greeting-card business, specializing in the fast-growing ethnic card genre. Karen & Co. Greeting Cards publishes both humorous and sentimen-

64%

11% 3%

Germany

Japan

USA

1 Opinions based on access to capital, the right regulatory and tax environments and positive social and cultural attitudes Source: Accenture survey of 880 senior executives, politicians, political advisers, academics, journalists, think tank analysts and researchers in 22 countries By Darryl Haralson and Frank Pompa, USA TODAY

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put in time to strengthen the business, taking courses in guerrilla marketing, licensing, branding, financial strategy and more. "I don't have any successful entrepreneurial role models in my family," she says. She was raised in Brooklyn, N.Y.; her dad was a postal worker and her mom a clerical worker. At one point, Raptakis was ready to give up on her fledgling business. "I was going through a patch of discouragement not knowing where this business was going," she says. A major distraction was comparing the business with other businesses, where the successes seemed obvious. "I was going through some strategy sessions with other business owners, and everything with their businesses was great. They were making money, and here I was, still with my day job and not making money." Since that time two years ago, she has regained her confidence by doing what comes naturally -- creating cards. One proved pivotal for her emotionally. It beat 1,100 other cards from 160 companies worldwide for the prestigious Louie award, the industry's equivalent of the Oscar. It won in the fast-growing Friendship/Encouragement category for cards sold in 2000 and priced above $2.25. The message for the award-winning card, featuring abolitionist Sojourner Truth on the cover, reflected her personal struggle for recognition in an unforgiving business: "Your Spirit Will Not Be Broken." The card celebrates the perseverance of those who struggled in hopes that future generations will have a smoother path.

Photos by Todd Plitt, USA TODAY

Her spirit will not be broken: Karen Mitchell-Raptakis has her greeting cards on display at the Sacred Thoughts store in Jersey City. Cards include versions for Father's Day and for birthdays.

tal cards, with forthright messages steeped in nostalgia and executed in bold colors. "Every shut eye ain't sleep, every good bye ain't gone," is the quip on the cover of one with an image of an attentive little girl. The inside message: "No matter how old you get, don't forget what Mama taught you. Happy Birthday!" Creating the cards is the easy part, she says. "My mother and Great Aunt Jo used that pearl of wisdom as I was growing up, and I just saw it on a greeting card." After she has put words to the idea, illustrator Fred Harper helps capture her vision, which is often inspired by everyday experiences.

The business side has been much tougher going, however. As with any small business, the challenge of carving a niche and gaining market share is intense. That is magnified here because the goliaths -- Hallmark and American Greetings -- have freestanding branded stores that are ubiquitous, as well as exclusive supplier deals at other outlets. Also, they now serve myriad niche categories in addition to their more general cards. But it is a big market, with about 7 billion cards sold annually. About half are seasonal and holiday cards. The rest are for everyday card-sending situations, with birthdays the most popular, the Greeting Card Association says. Against that competitive backdrop, any niche player must be long on creativity and business acumen to succeed. Raptakis, 46, shows off her creativity with every card, but continues to

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"I send cards that I would like to get to encourage me, and 'Your Spirit Will Not Be Broken' is the card that I needed, so I had to create it," Raptakis says. But the success has been bittersweet. Even with the industry's recognition, she faces ongoing entrepreneurial hurdles: v Financing. The business remains self-funded. She says she'll have to show her husband, Dimitrios, an accountant, a sharper view of the numbers behind her vision before risking a small-business loan. v Staffing. Part-time help is being considered to handle administrative tasks, including follow-up calls. "Sometimes customers are too busy to call me to place an order. So I could have someone call them and ask, 'How are the cards doing? Would you want to place an order right now?' " v Marketing. Sales are concentrated along the East Coast, but she has the South in mind. "I would do very well, because they have more of a spiritual base, and some of the cards I have would hit a nerve there," Raptakis says. v Venues. More than 80 retailers carry the cards, but the mom-andpop shops lack the foot traffic of larger retailers. "I need to change my marketing strategy. I'm in a lot of small stores that are struggling also." The cachet of the Louie might help in the long run. It establishes winners as real greeting card publishers and bolsters their ability to get representation by independent card sales agents. It has for Pat Kane. Her year-old Seattle-based Postcards from the Moon won the Louie as Patriotic card

and card of the year (for cards sold in 2001 and priced above $2.25). "(The award) absolutely opened doors for us. We now have distribution in 34 states and eastern Canada," Kane says. "My husband, Gabe Palmer, contacted (sales) representatives recommended by stores that are our customers. Once the reps heard we were recipients of card of the year, they were willing to look at our stuff." Kane's business now has nine people, enabling her to develop seven more lines. Raptakis' business remains a onewoman shop without a steady sales rep, so she's had to learn to take rejection from buyers herself. But her love for meaningful greeting cards has kept her going. And she's encouraged by statistics showing that of the 5.8 million small companies (fewer than 500 employees) in the USA, those owned by minority women are growing four times faster than all other companies, according to the Small Business Administration. Raptakis remains committed to cards that cheer and give hope. And she dreams of the day when Karen & Co. Greeting Cards will be able to stretch with card lines that appeal to broader audiences as well as calendars, journals and other stationery products. Right now, her cards have a heavy bent toward "girlfriends." "If you don't have that one girlfriend who you can tell things to or who you know can lift you up, you're in a bad state. I do think of my friends when I create cards: What will make somebody laugh? What will they want to hear in the way of encouragement? What kind of card can I send them just to say that I love them?"

Funding will play the biggest role in how soon she can expand, but she's armed with her homemade brand of optimism. "The achievements of a people are based on the persistence and the perseverance of the individual," reads the cover of a card with an image of a runner wearing No. 1 and crossing a finish line. The encouraging inside message: "I say, 'You go girl!' "

Her tips for entrepreneurs

v Absolutely love what you do, or it won't work. "This business is not making money yet, but I am determined to give it my best shot. Greeting cards are my passion." v Be comfortable with rejection. "Other businesses don't take you seriously when you're starting out." v Listen to the little voice inside. "It will say, 'Go this way,' even when the people closest to you may be saying, 'Go the other way.'" v Know the industry you're getting into. "I worked as a receptionist in an alternative greeting card company just so I could learn about the industry. The pay wasn't great, but the experience was invaluable." v Get objective opinions of your product. "I would carry the card prototypes with me all the time and would show them to women in the nail salon or on the New York City subway while on my way to work. Their excitement about my product encouraged me to make it a reality or discard it."

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Some CEOs stand by their companies

Execs bet on falling shares, offer loans to show support
By Matt Krantz USA TODAY At a time when headlines are full of charges of executive greed, some top brass are going to great lengths to show they believe in their companies. Rather than stealing from their companies or dumping stock as investors get wiped out, these CEOs and chairmen are doing just the opposite, taking such rare steps as lending their money to the struggling companies or buying the stock even as it plummets: v Jeremy Barbera, CEO of MKTG Services, has bought the marketer's stock 12 times since the 2000 market peak -more than any other CEO of a struggling firm. He's part of a rare breed. Only seven CEOs have repeatedly bought their stock since 2000 after price declines of 20% or more, says Kevin Schwenger, insider-trading analyst at Thomson Financial. But even faithful CEOs can get hammered. Barbera, who declined to comment, has watched MKTG's shares slide 94% to pennies a share. MKTG's auditors question whether it can continue operating. v William "Trip" Hawkins, CEO of 3DO, lent the videogame maker $3 million to help it though rough times that have driven its stock down 93%. The six-month loan gives 3DO another gasp of air by allowing it to tap a $15 million credit line from GE Capital. GE Capital's loan was contingent on 3DO raising $4.6 million in additional funding. To be sure, Hawkins will collect 9.5% interest. But 3DO, without Hawkins' loan, would have been in a tough financial bind. "I'm putting my money where my mouth is. Other CEOs typically want to use other people's money," Hawkins says. "You can call me stupid, but you can't say I don't have integrity." v Paul Lego, CEO of software maker Virage, has held onto every share of stock he owns as the stock plunged from

Buying all the way down

Since the March 2000 market peak, only seven CEOs made multiple purchases of their company's stock after the shares dropped 20% or more in price. Executive Steven Dodge Daniel Glassman Andrew Filipowski Donald Moorehead Henry Fong Anthony Fant Jeremy Barbera
Source: Thomson Financial

Company American Tower Bradley Pharmaceuticals Divine EarthCare Equitex HEI MKTG Services

above $30 to less than $1. Hoping to comfort employees, he bought an additional 200,000 shares in August when the stock hit 72 cents a share, bringing his total holdings to 1.6 million shares. "I believe in this company, and I put my money where my mouth is," Lego says. v Dennis Gillings, chairman of Quintiles Transnational, is offering $11.25 in cash for shares of the pharmaceuticaltesting company he founded. That's a 35% premium to the stock's price before the offer was made -- at a time when the company is struggling and its share price is down 36% this year. Gillings and Quintiles declined to comment. And there's still controversy. Some investors have filed a securities class-action lawsuit against the firm. Jonathan Moreland, director of research at InsiderInsights, is encouraged that at least some executives are standing by their companies. "Wouldn't you rather put your money on a company where executives are at least signaling they still like it?" he says.

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Study: New company failure rate not so high

67% of start-ups successful after four years in operation
By Jim Hopkins USA TODAY SAN FRANCISCO -- New companies don't fail as often -or as fast -- as thought. Instead, 67% of new ventures are successful after four years, says a study that contradicts the widely held belief that 90% of start-ups fail in year one. The study of 12,185 companies found that 17% were wrongly considered failures because they had closed. Instead, owners deemed them successful, and closed them after retiring or selling them, says Brian Headd, Business success a U.S. Small Business After four years, the percentage of Administration econostart-ups that are: mist. He says many Successful would-be entrepreneurs 50% are scared by the 90% failure number, and that the new research could encourage would-be entrepreneurs at a critical time. Unsuccessful, and Successful, but
sold or closed sold or closed

v A college-educated owner. Education gives an entrepreneur more resources to keep a business going, Headd says. Cecilia Chavez-Protas, 45, who worked for AT&T in human resources for 13 years, earned a business management degree so she would be better prepared to start a company. That helped in 1998, when she accepted an AT&T buyout and started Competitive Edge Consulting in Mesa, Ariz. v A home office. Companies begun at home have lower start-up costs because the owner doesn't pay office rent. Also, such entrepreneurs likely enjoy working from home, so are more likely to keep a struggling business going longer. Kim Rowley, 30, started an online shopping service at her home in Pierce, Neb., in 1999 because she wanted to be closer to her four young children. No local employer would let her telecommute in her 1,774-population town. Rowley's Shoppingbookmarks.com helps consumers find discounts on products from apparel to videos. It has $75,000 in annual revenue, and a new, potentially lucrative deal with Procter & Gamble.

Entrepreneurship, which leads to the small By Marcy E. Mullins, USA TODAY businesses that create most new jobs, is hitting speed bumps. The share of all U.S. workers who are selfemployed hit 50-year lows during much of last year. Venture capitalists have cut investments in start-ups since the technology bust and the stock market's swoon. Ventures most likely to survive begin with:
Source: U.S. Small Business Administration

33%

17%

v More than $50,000 in capital. Many companies fail because founders don't start with enough to cover expenses while they build revenue. Ted Jordan, 42, set aside $50,000 to cover his salary and the cost of computers, travel and other expenses when he started his computer consulting firm in 1998 in Cleveland. JordanTeam Consulting had $45,000 in annual revenue and was profitable last year.

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Behind the Story: A Reporter's Notebook

Entrepreneurship is intertwined with U.S. history. Indeed, patriots Paul Revere and Ben Franklin were small-business owners. Entrepreneurship gave a leg up to millions of immigrants. And it continues to inspire U.S. workers today amid the corporate upheaval that is sending millions of workers into the job market. As many as 800,000 business Jim Hopkins ventures -- possibly more -- are Reporter, Money started annually in the USA. Those that survive and prosper could become the next Microsoft or Wal-Mart -- huge enterprises that employ hundreds of thousands of workers and create innovations that affect every American. To chart this diverse subject, I often start with academic research -- then bring it to life with examples drawn from the real business world. In particular, I rely on a database of more than 2,000 small-company owners for the latest on trends. Such research led me to two stories about: v Minority female entrepreneurs, Oct. 22, 2002. I pay a lot of attention to any trends in minority business ownership because the number of such companies is growing faster than all other firms. This story, based on data from the Center for Women's Business Research, noted: "The study of 807 women paints one of the most detailed portraits yet of the USA's 1.2 million minority female entrepreneurs.'' Among other interesting details, the study showed that minority female entrepreneurs, more than white women, are likely to run their businesses by themselves. That has implications for their future business growth. v Falling start-up rates, May 30, 2002. The fact that just 12% of adults took part in start-ups in 2001 vs. 17% the year before shows the dramatic impact of factors that include terrorism and the shortage of venture capital. It also reflects the pendulum's swing back from the crazy atmosphere of the late 1990s, when dot-com ventures were being created without adequate business plans. Jim Hopkins writes about entrepreneurship, venture capital and other business news for USA TODAY's Money section. He has been a reporter and editor at Gannett newspapers since 1987. He specializes in analyzing data using spreadsheet, database management and other software tools. Hopkins grew up in Providence, R.I., where he received a bachelor's in English from Brown University.

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JetBlue soars on CEO's creativity

As rest of industry flounders, Neeleman's discount airline flies
By Chris Woodyard USA TODAY NEW YORK -- Even as he talks about his passion -- the airline he founded -- David Neeleman fidgets. He fingers the airport identity pass he wears around his neck. He plucks a model airplane off the tabletop and scans its underbelly. Sometimes when you talk to him, his head seems elsewhere. "Out in space," he readily admits. "Where do you go when you do that?" he recalls someone asking. "I had some thought in my mind," he replied nebulously. Far from lacking in mental acuity, Neeleman is CEO and the mercurial driving force behind JetBlue, the discount airline that's become one of the few shiny spots in a tarnished industry. He attributes his scatterbrained nature to attention deficit disorder (ADD). Neeleman, 42, was diagnosed with ADD about three years ago after reading about it. Symptoms of ADD -- estimated to affect 4% to 6% of the population -- can include being easily distracted, forgetfulness and restlessness.

Yet Neeleman views his hyperactivity as an asset. He won't take medication for fear - David Neeleman, he might be robbed of the creCEO of JetBlue ativity and energy propelling JetBlue to rapid growth through intense customer service and innovations such as 24 channels of live TV at every seat. Neeleman's sometimes erratic approach to life is just one of the quirks making him one of the fascinating leaders in an industry long known for larger-than-life characters. Those who know him are often asked to draw comparisons to such colorful figures as Southwest Airlines Chairman Herb Kelleher, a chain-smoking, whiskey- loving prankster, or Continental's Gordon Bethune, a brash former naval aviation mechanic who still swears like one.

"I don't care if they respect me. I could care less. I'm not in this business to gain respect from other airline CEOs."

By Leo Sorel for USA TODAY

Flying high: David Neeleman, playing airplane with 3-year-old daughter Isabel, has used his hyperactivity to nourish the creativity that could make JetBlue a start-up to be reckoned with.

But Neeleman is an original. He's a night owl who prowls the Internet for airline developments after his family goes to bed, phoning subordinates as late as 2 a.m. before catching four or five hours of sleep. He flies his own airline at least once a week, announcing over the intercom that he's aboard, then greeting all passengers -- 162 on a full flight. An entrepreneur at heart, he uses cocktail napkins to scribble passengers' suggestions, which get attention as soon as the plane lands. He's a father of nine who is so deeply religious that he charters planes or buys blocks of seats to fly Mormon faithful and potential converts to church conventions. He lacks the patience for hobbies, and he rarely watches television or reads books other than scripture.

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He develops routines. He always puts his wallet and keys in the same place when he's at home. He wears a Casio Databank watch, typing reminders of ideas or appointments. He buys the watches four at a time, expecting them to either break or disappear. Once, Vicki Neeleman couldn't find her husband during a backyard barbecue. He had driven away and "left the chicken to burn," she says. His excuse: "Oh, I had to go buy a watch." Just as he loses watches, he has trouble hanging on to just about everything. "If someone gives me a fancy pen, it's gone in a day," he says.
By Leo Sorel for USA TODAY

All in the family: David and Vicki Neeleman hang out with six of their nine kids. Clockwise starting at bottom front: Vanessa, 9; David; Daniel, 14; Victoria, 12; Hannah, 5; Isabel, 3; Vicki; and Seth, 7.

CEO focuses on passion: JetBlue

"He's always intrigued me because he's a little off the beaten path, and I can't always read him," says Vicki Neeleman, his wife of 21 years. Certainly, he doesn't make it easy. Some of Neeleman's employees compare him to nuclear fission. Whether it's championing a crusade within the company -- his latest is the notion of separate lavatories for men and woman on planes -- or scouting for new routes, he bounces from issue to issue like a free neutron. "It's challenging because he wants to be everywhere all the time," says Tim Clayton, a JetBlue vice president. He's always unloading ideas, "because if he doesn't get it out now, he'll forget it." One thing that Neeleman can focus on is JetBlue. That's one of the hallmarks of the disorder, he explains: the ability to concentrate on one central interest. For him, it's airlines. Neeleman is succeeding where others have failed. The 2-year-old airline is adding 15 planes this year and hiring 1,000 workers at a time when major airlines are slashing fleets and laying off workers. Service to the 20th destination, Las Vegas, starts Thursday. While the industry expects to lose more than $6 billion this year, JetBlue earned $27.6 million in the first half of 2002 on the strength of low operating costs and cheap fares. It has among the highest load factors in the industry -more than 80% of seats filled compared with 72.3% for the industry in the first eight months of the year. Routines get him through To keep his airline on top, Neeleman has tried to inject order into his life, whether he's at the office near New York's Kennedy International Airport or home in suburban Connecticut. From his wife to his executive staff, he surrounds himself with people who are naturally organized.

Vicki smiles and shakes her head. She takes his quirks in stride. "You can't get mad at everything or you'd be mad at him all the time," she says. In fact, David Neeleman thrives on distraction. Every few minutes, he checks the BlackBerry device strapped to his waist for new e-mails. He gets a message whenever a plane leaves its gate late. He wanders out of company meetings whenever he gets bored, which is frequently, usually ending up in the marketing department for a few minutes before going back. He loves to shop at Costco, a store swirling with activity. He brings home so many bags, they fill the kitchen floor. His father, Gary Neeleman, says his son was restless even as a youth. "David hated fishing," he says. "He didn't have the patience. He would start fishing, and 2 minutes later, he is throwing rocks in the pond." Where it all began Born in Sao Paulo, Brazil, where his father was a wire service correspondent, David Neeleman learned entrepreneurship as a boy while helping at his grandparents' grocery in Salt Lake City.

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He later returned to Brazil as a Mormon missionary, baptizing more than 200 converts and learning fluent Portuguese. After dropping out of college, Neeleman became interested in the air charter business. He teamed with a travel operator, June Morris, to create low-cost Hawaii packages for Utah families. That led to the creation of Morris Air, a low-fare carrier that was bought by Southwest in 1993. Neeleman netted $20 million in the deal. He went to work for Southwest but chafed under a structure that he perceived as thwarting his best ideas. Kelleher fired him after five months. Restricted by an agreement not to compete in the USA for five years, Neeleman helped found a Canadian discount carrier, WestJet Airlines, and a ticketless reservation system, Open Skies, later sold to Hewlett-Packard in 1999 for $22 million. He also says he dabbled in some bad investments -- from medical devices to pretzels. All the while, he marked time until he could jump back into the airline business. His vision: a better Southwest. Like the Dallas-based discounter, JetBlue's fleet would be one type of plane -- Airbus A-320s. And people would buy their tickets on the Internet or from reservations agents. To improve the experience over Southwest, JetBlue would offer assigned seating. Also, JetBlue would be the only airline to offer live television via satellite at no charge. Having TV has proved so valuable that JetBlue bought the provider to protect its advantage over rivals.

Unlike other start-ups, JetBlue would be one of the best financed ever. At most recent count, before it bought the television system company, JetBlue had $295 million on hand. The airline didn't apply for federal loan guarantees like United, US Airways and other major airlines. "He has deep convictions on how to run a business and give the customer quality," says GCW Consulting President Morris Garfinkle, who workswith the industry and knows Neeleman. The San Francisco venture-capital firm Weston Presidio took a 20% stake as one of the original investors in JetBlue after Neeleman more than tripled the firm's investment profits in Morris Air in 14 months. "David was the king of execution," says Weston partner Michael Lazarus, who became JetBlue's chairman. Lazarus, who is Jewish, says he jokingly promised Neeleman he would become a Mormon if his firm made back 10 times its investment on JetBlue. "I'm getting dangerously close," he says. Utah Gov. Michael Leavitt calls Neeleman "a genius when it comes to making airlines work." Besides serving Salt Lake City, JetBlue has hired 750 workers in Utah, most of them stay-athome, $8-an-hour reservations takers. Neeleman has an 8% stake in JetBlue, worth $117.6 million. He draws a $200,000 salary. But he's more than willing to give some of it back: He's matching employee contributions to a worker welfare fund dollar-for-dollar. Yet although he has amassed a fortune, he and his family remain remarkably humble. "I can't stand snobby people," he says. He drives a silver 1999 GMC Yukon awash in shoes, cellphone cords, a three- quarters-empty bottle of

Snapple Prickly Pear, a few company reports and Mormon literature, which he is quick to offer guests. The seven Neeleman children at home, ages 3 through 16, bunk two or more to a room. The family sold a 12,000-square-foot house in favor of one that's 8,000 square feet because Vicki wanted one that's easier to clean. She's raising the kids without a nanny and says she hopes for a 10th child -- a "caboose," she says. On a single Saturday earlier this month, the Neeleman clan collectively bounced among four soccer games, a football game, a track meet, a movie, a baptism and an interview. Neeleman just made the cover of Forbes magazine and is being profiled by CBS' 60 Minutes II. But he doesn't believe his fellow airline CEOs give him a second thought. "I think they think we're another start-up. But I don't care if they respect me. I could care less. I'm not in this business to gain respect from other airline CEOs," he says. Sure enough, top executives at other airlines didn't want to talk about Neeleman. But he has himself as his own harshest critic. He says it's another hallmark of ADD, a constant fear of failure even in the face of clear success. He calls it "an inability to celebrate." Says Neeleman: "There's no end in sight to the meltdown in the airline industry. To think we aren't affected by those events would be naive." But with JetBlue flying ahead of the pack, everyone else seems to be celebrating. And Neeleman says he wouldn't change a thing. Even having ADD. "If I could take a magic pill that would get rid of it, I wouldn't," he says.

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EBay faithful expect loyalty in return

Corporate moves rattle some
By Jon Swartz USA TODAY ANAHEIM, Calif. -- The Bubble Wrap Lady can't believe her good fortune. "Until I discovered eBay, I sat on my couch, doing nothing," says Karen Young, 43, a Crawfordsville, Ind., housewife who has achieved eBay fame selling shipping materials on the auction site. "The site changed my life." That's the kind of customer fervor the eBay Army -nearly 50 million strong -- has for the online auction site, which has pioneered a cultural and economic shift in how Americans shop. They're so faithful that 5,500 of them -twice as many as expected -- filled eBay's first Star-Treklike convention June 21-23. So faithful that 90% of them won't consider doing business elsewhere. So faithful that they don't see themselves "bidding" for items, as much as "winning" them. And so smitten that they refer to Meg Whitman, eBay's billionaire CEO, as simply "Meg." "These are innovation junkies -- like the people who used to follow the Grateful Dead around the country," says Eugene Fram, marketing professor at the Rochester (N.Y.) Institute of Technology. They also have the kind of fierce customer loyalty rarely seen in American business. The closest comparisons are the Macintosh faithful of Apple Computer, sweet-toothed fans of Ben & Jerry's ice cream and HarleyDavidson's hog-wild bikers. Brand experts say eBay, the Internet's most successful venture, could become the next Wal-Mart, a perfect marketplace where supply meets demand in real time. But that's largely contingent on the continued devotion of eBay's fans, and eBay is starting to feel some relationship pangs. As it reaches out more to big business customers such as

Photos by Susan Goldman for USA TODAY

Fan following: Meg Whitman, CEO of eBay, is swamped by autograph seekers at eBay's first convention in Anaheim, Calif., on June 23. Hundreds waited in line to get her signature.

IBM and Sears, the mom-and-pops that made eBay the place to trade Beanie Babies and other collectibles are feeling a bit like jilted lovers. "Our fear is eBay will become so wrapped up in corporate sales, we'll be forgotten," says John Davidson, 45, of Lakeside, Calif., a Lost in Space collector. "Look at the site: eBay Motors, Disney, Gateway, Dell. What about us?" At the conference, most booths were dominated by corporate names such as Microsoft and IBM. "Where were the collectors? Why weren't there more services for smaller buyers?" asked art seller Linda Woods, 33, of Valencia, Calif. "(The conference) was hokey and poorly put together." Earlier this year, eBay customers complained bitterly in e-mail messages and phone calls when eBay raised its commission on goods sold. There was a similar outcry when eBay introduced a 5-cent fee to use its "Buy it now" feature. A 'love-hate' relationship Time for a therapist? Not yet, eBay analysts say. But managing a rabid customer base is tricky business. "Anytime you have a strong brand, you risk vulnerability," says branding consultant David Aaker. "Expectations are so high that if you slip up, there's a danger of backlash. Look at Martha Stewart."

Dedicated: Clare "abuttonlady" Bazley shows buttons and a shirt bought on eBay.

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Some suspicious of big business feelers

came from everywhere, including Australia, Alaska and New York, to schmooze, swap tips and bow to the eBay altar. "It's like a reunion of people you've never met," says Clare "abuttonlady" Bazley, 43, an avid button collector from Anaheim, who met other "posters" she frequently exchanges messages with on eBay bulletin boards. EBay has been so effective in developing a sense of community that it said June 24 that it would offer eBay PowerSellers, who sell more than $1,000 a month on the site, group health insurance. EBay also points out that, despite its Fans: Sisters Teri, left, and Lori Gof stand near characters modeled on eBay founder Pierre push for corporate customers, momOmidyar and CEO Meg Whitman. The sisters attended an eBay convention in June. Shares of Martha Stewart Living Omnimedia have tumbled 40% since reports surfaced questioning the timing of her sale of ImClone Systems stock. Stewart has denied any wrongdoing. She is a close friend of Sam Waksal, the former CEO of ImClone who has been charged in an insidetrading case. For Stewart, the domestic doyenne whose main asset is image, any indiscretion could alienate trusting consumers, brand experts say. EBay's customer-relationship challenges might be especially daunting because of the company's origins. EBay collectors such as Davidson "feel they built the business," says Ina Steiner, editor of AuctionBytes.com, an online newsletter that follows eBay. Those close ties, Steiner says, have fostered a "love-hate relationship." Love was exactly what eBay founder Pierre Omidyar, who started thenAuctionWeb in 1995, envisioned. He wanted to "empower people to change their lives," and the eBaysian philosophy struck a chord with consumers. "Omidyar wanted his corner of cyberspace to be a place where people made real connections with each other, and where a social contract prevailed," writes Adam Cohen in The Perfect Store: Inside eBay. Despite some dissenters, that sense of community was evident at the conference. Hundreds waited in line for Whitman's autograph. Hundreds more waited to spin a giant wheel to win free eBay caps, T-shirts, yo-yos and coolers. Fans hugged Pinkliners, eBay employees who moderate company bulletin boards. EBay trading cards, introduced June 21, are already a hot commodity on the site. The devotees and- pop sellers account for more than 90% of its revenue -- and that won't dip below 80% for several years. Non-corporate sellers are the company's "bread and butter," says Bill Cobb, eBay's senior vice president of global marketing. "We can never lose touch with them." Making the magic happen Better not. Frenzied customers not only boost sales with purchases but also preach the benefits of their favorite brands to others. "Fringe buyers come and go, but these people are like an extension of the company sales force," says Aaker. He and others note that customers are fiercely loyal to brands that are consistently superior in quality, distinctly different and let users express their values and interest. While Harley-Davidson motorcycles appeal to the macho mores of its

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Entrepreneur Case Study

AS SEEN IN USA TODAY MONEY SECTION, MONDAY, JULY 1, 2002, PAGE 1B

users, Apple, Volkswagen, Virgin Atlantic Airways and Saturn resonate with counterculture consumers. The magic of eBay: It's where buyers and sellers come together to forge deals and friendships. "It's the immediacy of a one-on- one relationship that you can't get from a big, impersonal corporation," says Marsha Collier, author of eBay for Dummies. What's more, eBay's appeal draws frequent comparisons with Wal-Mart. "Think Middle America, Ohio," says eBay Chief Financial Officer Rajiv Dutta. "There is a strong sense of entrepreneurial spirit and small-town values." But while Wal-Mart typifies traditional retailing with 3,200 stores, eBay is a virtual global marketplace where customers can buy and sell almost anything that Wal- Mart offers -- and much more. So far, so good Such attributes have helped produce the Internet's most successful company. EBay users exchanged 170 million items worth $9.3 billion last year. (Kmart's 2001 revenue was $36.2 billion.)

It shows no signs of slowing. Firstquarter net income more than doubled, to $47.6 million, on revenue that surged 59%. At a time when many companies are lowering expectations for the year, EBay is raising them. This year, in addition to the antiques, baseball cards and other items routinely sold on eBay, it expects to sell $2 billion worth of used cars and $1 billion worth of computers. Coming next: real estate, industrial equipment and event tickets. Analysts say there's no end to the number and type of goods eBay can sell, and they say the company is better managed now than ever. So far, too, eBay has successfully handled several growth challenges: auction scams have been limited and Web site outages have been reduced. "It's the future of global economic democracy," says Leland Harden, coauthor of The Auction-App, which explores the nation's fixation with auction Web sites. The company's stock, meanwhile, is holding up well despite a high-tech downturn. The

market value of the 6-year-old company is $17.4 billion, about two-thirds that of 99-year-old Ford Motor. "They continue to perform at an incredibly high level," says Derek Brown, a WR Hambrecht analyst. "The 'e' in eBay stands for execution." It could also stand for excitement. While some balk at eBay's changes, about 50,000 new customers hop on the site every day. And some, like the Bubble Wrap Lady, continue to find a higher purpose. Teri Goff, 44, a bookkeeper from Tustin, Calif. attended the convention hoping to learn how to prosper on eBay selling movie posters and Disney trading pins. "This could be a lifealtering experience," she said.

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AS SEEN IN USA TODAY MONEY SECTION, THURSDAY, MAY 30, 2002, PAGE 3B

Fewer entrepreneurs set up shop last year

By Jim Hopkins USA TODAY SAN FRANCISCO -- U.S. entrepreneurship hit a bump last year amid the recession and terrorist attacks. Just 12% of adults took part in start-ups vs. 17% the year before, says a recent study of 3,000 adults by Babson College and the Kauffman Center for Entrepreneurial Leadership. Sept. 11 and the weak economic recovery will depress start-up rates for the near future, the study's authors say. That hurts because start-ups create jobs. Experts say entrepreneurship is falling because of shifts in: v Priorities. Would-be entrepreneurs are taking fewer risks while focusing on family and personal priorities. Plumbing contractor Kelly Hall, 54, and his business-consultant wife, Tamara, are delaying the start of a company that will sell a device to keep pipes from freezing. After Sept. 11, the Halls, who live in Bozeman, Mont., decided to spend more time with family, including their new grandchild. Already, the Halls work a combined 100 hours a week. A new business would add at least 30 more. "Relationships matter more," says Tamara, 52. v Opportunities. Start-up financing, especially from venture capitalists, dried up. And corporations cut spending, making it harder for new companies to grow. But more people will start companies this year, predicts Kauffman researcher Larry Cox. That is because they are losing jobs and can't find new ones. Margaret Kulpa of Daytona Beach, Fla., launched her software consulting firm in January after quitting a job that was about to be eliminated. Kulpa, 50, concedes that a better time to start would have been the late 1990s, when corporate tech spending boomed. Kulpa will ride out the economic recovery by dipping into savings and by working from home. Last year's drop in entrepreneurship may be an anomaly caused by Sept. 11 and the tech-bubble bust, researchers say. Historically, entrepreneurship rises in recessions because people leave companies to take advantage of lower start-up costs. That is still happening, albeit at a lower rate. Shelley Lazar started SLO Limited, a music services company, two months ago in San Francisco. Office rents are about half what they were last year. Lazar helps Paul McCartney, the Rolling Stones and other celebrities coordinate ticket sales. Despite the challenge of starting a firm in slow times, she likes being her own boss. Plus, there are other rewards: McCartney sang Happy Birthday to her when she turned 53.

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AS SEEN IN USA TODAY MONEY SECTION, TUESDAY, OCTOBER 22, 2002, PAGE 3B

Minority women go it alone in starting their own businesses

By Jim Hopkins USA TODAY SAN FRANCISCO -- It's lonely at the top -- especially for minority female business owners, says a major study out today. v Viability. African-American and Hispanic women are more likely now than in the past to start their companies as full-time ventures. That's another sign that more women are treating start-ups as serious ventures that could grow -- adding jobs and expenditures on such things as computers and banking services. The differences between minority and white business owners are especially pronounced among AfricanAmerican women, who own more than 365,000 firms. For example, 72% of black women start or buy their businesses without a partner, vs. 62% of white women, the study says. They also are more likely to say they have altruistic business goals, such as serving their community or being a role model. Wanda Stephens, 44, started her computer training firm near Cleveland partly because she wants to schedule her day around Bible study and work she does for her husband, a minister.
Wanda Stephens What's more, 27% of AfricanAmerican women cite financing problems, vs. 14% of white women. Black women may cite more obstacles because they have less experience with lenders or may suffer more overt discrimination, says Patricia Greene, an entrepreneurship professor at the University of Missouri.

Women Inc.
The number of companies owned by minority women is growing four times faster than the number of all U.S. businesses. Here is a breakdown of owners: Hispanic African American Asian Native American 470,344 365,110 358,503 77,483

The study of 807 women paints one of the most detailed portraits yet of the USA's 1.2 million minority female entrepreneurs. The number of such companies is growing four times faster than all U.S. businesses, making them a major source of future economic growth.

One highlight of the survey is that minority women are Source: Center for Womens Business Research more likely than white By Quin Tian, USA TODAY women to start and run businesses by themselves. Their goals are often altruistic, such as serving their community. And many have more trouble than white women getting financing, says the study by the Center for Women's Business Research. Still, the top issues for female business owners -- hiring, boosting revenue and finding capital -- are largely the same regardless of race or ethnicity, says the center. Those issues mirror the concerns of all small-business owners. But minority women often differ from other business owners in how they manage, and in what drives them to start companies, the study says. Corporations want to learn these differences so they can better target their products and services, says Patti Ross, IBM's executive in charge of selling to female-owned firms. IBM, Wells Fargo and other big companies want to tap the market because of: v Faster growth. Although minority women own just 5% of the USA's 22 million companies, their fast growth is accelerating. The number of such companies grew four times the U.S. average in 1997-2002 vs. three times the average in 1987-1996.

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For discussion
1. What are the advantages and disadvantages, for a company, of CEOs using their own money to purchase declining stocks or to make loans to their companies? What are the potential ethical ramifications of such actions? In your opinion, are these CEOs demonstrating qualities of leadership? What are those qualities? 2. Discuss leadership attributes the ideal entrepreneur would possess. The ideal CEO? Are the attributes for the two identical? Why or why not? 3. Both JetBlue and eBay could be described as entrepreneurial companies. What aspects of the ventures contribute to their entrepreneurial nature? How are the two companies similar? How are they different? 4. What factors should a company consider when weighing the costs and benefits of growth vs. brand identification and customer loyalty? 5. Develop a list of personal characteristics you believe entrepreneurs demonstrate. Discuss whether these characteristics are unique to entrepreneurs, and if so, why. 6. Brainstorm strategies Karen Mitchell-Raptakis could pursue to increase her share of the greeting card market. Identify three strategies that you feel would be most successful and describe them. 7. Discuss the factors contributing to the success of start-ups. Which factor do you consider to be the most important, and why? What are other factors you feel might help start-up companies achieve success?

Future implications
1. Why are increasing numbers of minorities and women starting their own businesses? Do you predict this trend will continue, or not? Why? 2. Will the war with Iraq have an impact on the number of business start-ups? What will that impact be? 3. What do entrepreneurs contribute to society, and to the communities in which their businesses are located?

About The Expert

Carol Majors is a teaching and research fellow and Senior Director at the Ewing Marion Kauffman Foundation. She has been with the Kauffman Foundation since March 1, 1994. She works in the Children and Youth programs area. The Children and Youth area's focus is entrepreneurship education for individuals from kindergarten through grade 12. Carol's specific responsibilities include contributing to the development of Kauffman Center initiatives, educator training in entrepreneurship education programs, managing the publishing of curriculum materials, and mentoring and follow-up in program implementation. Programs with which Carol has been involved are the Mini-Society for elementary age children; The New Youth Entrepreneur curriculum for students in eighth through tenth grades; the EntrePrep program for high school students; and the Mother and Daughter Entrepreneurs In Teams (MADE-IT) program for teams of 7th/8th grade girls and their mothers. Each of these curricula/programs is designed to impart age-appropriate knowledge, skills, and experiences to enable young people to consider entrepreneurship as a viable option for themselves. Prior to joining the Foundation, Carol taught at Rockhurst College and at the University of Missouri-Columbia, where she served as director of the center for economic education. She also has taught at the elementary, middle, and high school levels.

Additional resources
Ewing Marion Kauffman Foundation (http://www.emkf.org) The Auction-App (http://books.mcgraw-hill.com/cgi-bin/pbg/0071387358.html) AuctionBytes.com (http://www.auctionbytes.com) EBay (http://www.ebay.com) Harvard Business School (http://www.hbs.edu/) Hesselbein on Leadership (http://www.josseybass.com/cda/product/0078796392500.html) InsiderInsights (http://www.insiderinsights.com/) JetBlue (http://www.jetblue.com/) Peter F. Drucker Graduate School for Management at Claremont Graduate University http://drucker.cgu.edu/

For more information, log on to www.usatodaycollege.com

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