Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
Husband and wife docs are back in school, this time studying the intricacies of Internet retailing.
To furnish their home, Donna Hoffman and Tom Novak have purchased online virtually everything but the kitchen sink. Correction: They bought that on the web, too.
For them, however, buying online is more than just shopping-it’s academic research. Every addition to their cart is potential fodder for another paper from the husband-and-wife team that runs the Sloan Center for Internet Retailing at the University of California at Riverside. “The worst part is that when I do go into a store, I feel frustrated because I can’t click on a product and read more about it or compare prices,” Novak says.
Hoffman is co-director of the center and chair of the department of management and marketing at the university’s A. Gary Anderson Graduate School of Management. Novak also is co-director of the center as well as a professor of marketing. Most Internet retailing professionals may not realize it, but they know Hoffman and Novak-by their ideas, if not by their names.
They were the first to identify the “digital divide” between the Internet haves and have-nots, and the racial and economic factors that characterize it. Their seminal 1998 paper was published in, of all places, Science-a journal more likely to feature the rat genome than the ruminations of business professors. Virtually every paper and magazine from the New York Times on down covered that story, and it kicked off a host of federal, state, local and privately funded programs to help bridge the divide.
They also were the first to study the concept of “flow” in the web browsing experience. Browsers experience flow whenever they go online and hours later find themselves absorbed in a web site far afield from their original destination. One of their missions is to figure out ways to harness that tendency to improve the e-retail experience. One of their papers, “Measuring the Customer Experience in Online Environments,” is the most-cited article in the journal Marketing Science during the last decade.
Further, Hoffman and Novak were among the first to recognize that e-commerce was not only a revolutionary phenomenon but a subject that easily could occupy an entire academic career. Or two.
Theirs was a graduate school romance. Both earned their doctorates in quantitative psychology at the University of North Carolina at Chapel Hill in 1984. They followed each other to teaching appointments in New York and Dallas before alighting at Vanderbilt University, Nashville, in May 1993-shortly before retail was about to change forever.
They set up their Unix workstations in their new offices and Novak was ready to begin analyzing data when he took a colleague’s fateful suggestion to download a piece of software called X-Mosaic from the National Center for Supercomputing Applications at the University of Illinois. There went the summer: Novak and Hoffman were rapidly seduced and consumed by web surfing.
“Two things captivated me at first,” Novak says. “With a simple click of the mouse I literally felt transported somewhere else. We take web pages for granted these days, but at the time this was a truly unique experience. Second, this was content that anyone could put up for anyone to see. I spent much of the summer thinking about the implications of this and the way it made me feel transported to other places. This led to our research on flow.”
Hoffman was equally dazzled. “As business professors we thought this would change the world,” she says. “We had tenure so we decided to study this, and our careers organically evolved from there. We attracted research funding and started publishing papers. And then we were off. It was a fun period because there were not many of us studying the Internet as a scholarly topic, and we all believed it was starting a revolution while everyone else thought we were crazy.”
One person who was not amused was the dean of Vanderbilt’s business school. It took until the late ‘90s at the height of the dot-com boom to persuade him they were onto something more than a passing novelty. Hoffman and Novak became heroes, and started the first MBA program with a concentration in electronic commerce. They scored funding from Paul Allen’s Interval Research Corp. to study the marketing implications of commercializing the web. With money from Vanderbilt they established an online panel of volunteer evaluators (now called eLab) that retailers could use to test and refine new ideas. And they were publishing papers at a rapid clip.
Then came the crash, and the business school pulled the plug. “It was just asinine,” Hoffman says. “We had all this funding from companies and foundation grants and there was more interest than ever, but deans everywhere were saying, ‘That fad’s over.’”
Enter the Alfred P. Sloan Foundation, which funds 26 academic centers to study industries such as finance, trucking, airlines and auto manufacturing. The idea behind the foundation is to get professors out of the Ivory Tower and into industries, observing business in action, says foundation program director Frank Mayadas. When Hoffman and Novak came to the foundation in 2001 with a proposal for a center on Internet retailing, Mayadas wasn’t initially convinced that it counted as an industry.
After considerable discussion, though, he came around, intrigued by e-retailing’s potential to transform industries and build the economy. “We said, ‘OK, we’ll give you some support if you can show us evidence of matching money,’” he says. With grants from several retailers, including Lands’ End and Wal-Mart, the Sloan Center for Internet Retailing set up shop at Vanderbilt in 2003. Before long it became the preeminent academic institution for studying electronic commerce, industry observers attest.
“The center is rather unique in what it’s doing,” Mayadas adds, “and a lot of people have taken interest.”
While the center didn’t do contract research for companies, it did take their problems as fodder for students to use in semester-long projects, which yielded critiques of new web sites or competitive analyses of major sites in certain sectors. The center also hosted workshops, seminars and roundtable discussions on various aspects of electronic commerce.