Webvan Senior VP Takes on Retail Challenge

SAN MATEO (07/17/2000) - It has become a common tale in Silicon Valley, perhaps less of a myth than one might imagine: a meeting of minds at a local restaurant and a single "what if?" idea that turns into a business exploding onto the technology scene. In the case of Webvan Group Inc., it took two months of weekend meetings at a Los Altos, Calif., restaurant for Peter Relan, now senior vice president of technology for the online grocery delivery service, to buy into founder Louis Borders' vision of a company that could bring groceries right to people's doorsteps.

Then it took a little bit of work before Relan, who formerly worked at tech giants Hewlett-Packard Co. and Oracle Corp., got a handle on the ins and outs of the retail industry.

"I got a big crash course from Louis in about two months," Relan says.

"Everybody knows about retail because we're consumers, so we all think we understand retail from a very superficial perspective. But understanding how the industry works and where the margins are and how supply chains work and so on -- that's different. Once we had that common retail understanding, it was a lot easier for me to construct the infrastructure and technology architecture and models that would make this fly."

Founded in 1998, with service beginning in the San Francisco Bay area in 1999, Webvan seeks to become the spot where "the Internet meets your doorstep," allowing customers to order out for groceries -- and now items such as videos, books, and housewares -- from the Webvan Web site and choose a 30 minute delivery window. The orders are processed at an automated DC (distribution center), packed into tote boxes, and sent out in refrigerated trucks to be delivered to customers' doors by Webvan couriers.

It was up to Relan to build the infrastructure that would serve as the backbone and foundation if the company was to succeed. The task involved connecting the front-end Web site with the order processing and order fulfillment systems as well as synchronizing the entire system to make sure couriers were getting "the right stuff to the right place at the right time."

"I love ideas that change the world, and that's what jumped out at me," Relan explains. "Here's an idea that said let's just dramatically change retail, a 100-year-old industry. That was very appealing, and it was a very massive ... technical challenge in addition to being a fascinating business model."

Webvan is out to capture a slice of the $650 billion online grocery/prepared food/drugstore industry. After all, the online grocery market, projected to grow from current levels of about $350 million to $3.5 billion by 2002, is not small potatoes. The key to success in the market is merging immediacy with convenience, Relan says. Although shopping in brick-and-mortar stores may be immediate, as purchased items are in your hands and available to use right away, it is not always convenient given the time spent getting to and from a store and waiting in lines.

Online shopping, in comparison, may be more convenient, but it takes time to receive your purchases: anywhere from overnight -- if you pay for premium shipping -- to several days or more. Relan believes Webvan's system solves the discrepancy between the two, offering online shopping from home with guaranteed delivery of your order within a 30 minute window you select.

Webvan's service is currently available in only a few areas of the country: namely, the San Francisco Bay area, the Sacramento, Calif., valley (limited service only), and Webvan's newest service area, Atlanta, Ga. The company has plans to eventually open DCs in 26 areas across the United States. During the next year, service will expand to include Chicago, Seattle, northern New Jersey, and Baltimore. Each new city means rolling out more of a decentralized infrastructure -- built around local distribution centers; the piece of Webvan's system that Relan says sets them apart from other online companies.

"I always view what I do at Webvan very much like building planes," Relan explains. "You don't build a lot of them necessarily, but they're very big, expensive projects, very technology-intensive."

Still, Relan knows that technology is only half of his job at Webvan. As senior vice president of the Webvan platform, he is responsible for the technology, engineering, rollout, and infrastructure deployments but also oversees the business process, because at Webvan "there is no difference between the CTO and the vice president of engineering and technology -- it's me," he says. The balance of business and technology knowledge is, Relan says, what sets a CTO apart from other management and technical positions.

"Especially in a young company or a start-up, you have to have a completely even balance, a deep understanding of both business and technology," he notes.

"It has to be absolutely balanced, not 'Oh, you're basically a technical person and you kind of understand business.' I don't think that's good enough."

There is another quality Relan feels is necessary for being a good CTO or vice president of technology: a combination of passion and practicality.

"You have to have passion because you can't build great companies without passion," he says. "You have to have practicality because people can't relate to you if all you are is some kind of blue-sky, visionary type person. If you have one or the other, not both, you'll get divergence."

Although Relan dislikes having to deal with the problem of finding office space in Silicon Valley and admits that it's tough when an occasional customer complaint comes in that resulted from a technical miscue, the excitement and invigorating moments of pressure keep him on his toes.

"Whenever you're doing something like Webvan, you're very focused, you're very intense in your job; and as a result, you don't have quite the ability to step back and constantly be watching what's happening in the tech world, what's changing, what business models, what new technologies, what inventions [are emerging]," Relan says. "That's really what I view as the biggest challenge:

How do you keep up while you continue to successfully do your job? It's just the sheer volume and velocity of change and the very little time I have to keep up with it. It seems like things are becoming obsolete every week these days, and you have to be aware of everything to stay on top."

Peter Relan, aWebvan

Title: Senior vice president, platform group (technology and business process)Reports to: CEO George ShaheenMission: "The last mile of e-commerce"Education: Bachelor's in computer engineering from UCLA; master's in management from Stanford UniversityCareer path: 1988-94: Architect at Hewlett-Packard; 1994-98: Vice president of product development at OracleRole models: David Packard at HP and Andy Grove at IntelBiggest challenge: "I'll give you two words: keeping up."

Favorite e-business sites: webvan.com, yahoo.com, redherring.com, upside.comFavorite escapes: tennis fan, travel, ecology/environment

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