The Matchmaker

A look at how a catalog retailer and his start-up provides customers with hard-to-find batteries.

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Need new batteries for your laptop? Don't know what kind or where to get them? Catalog retailer Power Express thinks it can become a big business by putting you and the right manufacturer together -- electronically

Ken Hawk had more than just a diploma when he graduated from Stanford Business School, in 1993. He had a fledgling company -- complete with an A+ business plan, two backers, and a part-time employee. Now in its third year, Power Express, Hawk's company, sells specialty batteries by mail order and over the Internet to users of laptop computers, camcorders, cellular phones, personal digital assistants, and other expensive electronic gadgets.

Selling batteries wasn't an idea Hawk would have had on his own. In the fall of 1992, the then-29-year-old M.B.A. student received a letter from a Stanford alum "looking for someone at the business school to take an idea and develop it into a company." John Mackall, a lawyer in Santa Barbara, Calif., briefly laid out the battery scheme, suggesting that replacement batteries for the millions of electronic devices in use were no one's principal business. The idea had come to Mackall when he couldn't find a replacement battery for an AST laptop at the very store that had sold him the machine just two weeks earlier. "The salespeople were focused on computers, not spare parts," he recalls. Hawk immediately grasped Mackall's logic. Before entering business school he, too, had conducted frustrating battery searches as a portable-gadget-wielding sales rep.

As copresident of the Stanford Entrepreneurs Club, Hawk shared Mackall's letter with his fellow members, but he was secretly pleased that no one else showed interest. He also shared the idea with two classmates. The three of them were looking for a business-plan topic to fulfill a course assignment. In describing the idea, however, Hawk did not mention Mackall -- for good reason.

An electrical engineer by training, Hawk approaches projects methodically, with scientific rigor and analytical dispassion. He went to business school expressly to acquire the additional tools he'd need to launch his own company, and he ticks them off: "I already had sales and engineering, but needed to learn finance, operations, how to lead people and build a good team -- plus have time to think about it all." In their search for a business-plan topic, he and his teammates had devised a grid they could use to score various ideas, based on suggested businesses' ability to meet the trio's preselected criteria. In not mentioning Mackall, Hawk wasn't claiming the idea as his own. He feared that an idea that came with a willing investor attached "would bias the criteria," he says.

Of the 16 businesses the team considered and scored, the battery idea emerged on top. It met the most criteria, including "non-location-specific" (since the three had uncertain futures at the time), "high tech" (the course was called Entrepreneurship and High Technology), "low start-up capital" (for obvious reasons), "takes advantage of a trend" (trends are a lot easier to ride with than against), and "ability to build up barriers to entry" (an idea taken from Harvard Business School professor Michael Porter's theories on competitive advantage). Only then did Hawk tell his teammates about Mackall.

Since batteries aren't sexy, Hawk proposed an idea to keep his classmates interested: "Let's get the investor to pay us to write the business plan." Even a small sum, he reasoned, would "hook the investor into being very committed and into giving good feedback." Hawk wrote to Mackall that he and his associates would need 10 weeks to develop the plan, that they would provide him with weekly status reports, and that when the plan was done they would like his decision about investing as well as permission to find other investors if he opted out. And they would like $1,000 to cover their costs. Mackall agreed.

By surveying other students, the team confirmed their hunch that owners of laptops tended to own additional portable electronic devices, such as cellular phones and camcorders. "The weak link, and only consumable part in these products," the three wrote in their business plan, "is the rechargeable battery." What's more, they added, "there are over 1,000 different portable batteries," which, according to their research, "never last long enough between charges, wear out too soon, cost too much, and are difficult to purchase."

Finally, they checked their plan against Porter's theory, outlined in Competitive Strategy: Techniques for Analyzing Industries and Competitors (The Free Press, 1980), which held that five forces drive competition in any industry.

They decided that force one, the bargaining power of suppliers, wouldn't be a problem, since, as Hawk figured, "no single battery manufacturer or assembler makes every single battery in the world, and none of them has a total lock on distribution." Plus, the suppliers were selling to large, established networks of dealers and distributors, not to the end users Hawk and company were targeting.

The bargaining power of buyers, Porter's second force, didn't seem to pose a threat, either. Market research confirmed Hawk's own experience that for traveling businesspeople, the battery-draining devices they used were not luxury items but vital tools. When those people need batteries, they need them now, and "their time is worth a lot more than the cost of the battery," he says.

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