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risk takers For eVineyard.com CEO Larry Gerhard, Slow and Steady WinsSometimes executive conservatism pays-even in the roller coaster world of …

risk takers
For eVineyard.com CEO Larry Gerhard, Slow and Steady Wins

Sometimes executive conservatism pays-even in the roller coaster world of Web business. Case in point: Two years ago when Larry Gerhard, CEO of online wineseller eVineyard, decided to cooperate with, rather than buck, the wine industry’s complex distribution laws, prospective venture capitalists and fast-moving rivals like Wine.com and WineShopper.com might have laughed at his slow-growth approach.

Since then, Wine.com and WineShopper.com merged to survive-and eVineyard scooped up Wine.com, the combined company, in April 2001. How? eVineyard concentrated on slowly building “logistics centers” that comply with state wine distribution laws. Meanwhile, rivals Wine.com and WineShopper.com together burned through more than $240 million in advertising and lobbying costs focused on changing wine-selling regulations. By late 2000, Gerhard knew his company would win. “One of the turning points came when we saw rival wine retailers having trouble [during third and fourth quarter] raising their next rounds of money,” he said.

“Very early on, we spent a substantial amount of time learning the statutes in each state,” Gerhard said. “Our business plan leveraged building a logistical infrastructure that was legal.” At times, remaining patient during the slow build-out of that infrastructure was exhausting. By late 1999, the company had spent its initial capital as it went through the slow motions of establishing legal logistics centers in states like New York and Texas. “The process was a lot more painful than anyone would believe,” he said, noting that it took 13 months to attain a license to sell in New York.

What can other CEOs learn from Gerhard? Build slowly and locally, rather than rapidly and nationally. Other tips: Set up a logistics network that works with distributors, but don’t hold product in-house if it hasn’t been sold yet. eVineyard paid wholesale prices on wine and wine-related products, but never stocked inventory unless the products had already been purchased online. (Wine.com, Gerhard notes, had $8 million in inventory sitting on its warehouse shelves before closing.) And consider the impacts of distribution on shipping costs: Because eVineyard has physical facilities in states that require them by law, shipping costs were lower than those of its rivals, which often had to ship wine over significant distances.

think locally
Turning Kansas City Into Biomed Valley
Can American Century founder and chairman Jim Stowers turn Kansas City, MO, into Biomed Valley?

First Stowers built American Century Cos. into a $3 billion mutual fund giant. Then he beat prostate cancer and stood by wife Virginia as she fought breast cancer. The Stowers might reasonably have spent their golden years recuperating from these life experiences. Instead, the duo founded a world-class biomedical institute dedicated to research of genetic diseases, including cancer, that is a model of philanthropy and local economic growth benevolent CEOs might consider emulating during-or before-their own retirement.

The Stowers Institute, opened in April, uses high-tech facilities, an innovative profit-sharing program for resident scientists, and a generous endowment from the Stowers to create a center capable of generating $1 billion in research annually within 20 years. The Institute plans to launch a separate company by the end of 2001 called Biomed Valley Discovery.

The Institute promises scientists a 50/50 share of profits from commercialization of their ideas. “If you don’t develop and market these discoveries, you’re not going to get the best scientists,” Stowers says.

To increase the likelihood of commercialization, Biomed Valley Discovery will take appropriate intellectual property, patents, and research findings from the Institute and match them with initiatives at area universities, hospitals, corporations, or outside capital. “I want this to be recognized as the best place in the country for biomedical research in the next 25 years,” says Stowers.

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