entreSociety

Building an entrepreneurial society

Business model versus technology innovation

When you mention innovation people often jump straight to R&D and think about the development of technology breakthroughs.  The key measurement often used is the amount of R&D spending per employee or number of patents.  While these are interesting measures they don’t tell the whole story.  The true questions is how much money does the company make from products using these technology breakthroughs?  Does the company make money from new products and processes or are the usually extensions of existing products?  Clearly, just spending money on R&D and filing patents does not alone make a company innovative. 

A difficulty entrepreneurs have with technology innovation is that it often requires deep technical skills in science and engineering and large funding commitments.  Further, much of the R&D spending fails to produce successful breakthroughs or take years to do so.  However, there is another type of innovation that is available to anyone and that is business model innovation.  This type of innovation involves establishing a form of business structure that serves a market in a unique way.   To use some of the terms from prior posts, the business model helps customers with their jobs to be done in a way that is disruptive to the market.

Many people believe that the technology exists today to solve most of the jobs to be done in the world, both big and small.  Whether or not you believe this is true you, have to agree that there is more technology available than people are able to use to its full potential.  There is also more data being produced than we are able to process effectively.  Entrepreneurs can find ways to tie some of these technologies and information together in ways that have not been tried before through business model innovation.  This new business model might create the ability to offer a product or service at a cost new customers can afford, the creation of a distribution channel that opens up information or services to previously unreachable markets or the simplification of complex products for less sophisticated users.

Some ventures could use a combination of both technology and business model innovation.  The entrepreneur could find a job to be done that can be improved, determine how to deliver the service and then build some software or other technologies to suit the business model.  Another person could use an existing technology, develop a business model to utilize it and then customize the technology to fit the business.

The power of business model innovation, in combination with the jobs to be done and disruption, is that they are often hard to replicate.  Technology, on the other hand can be leapfrogged, making it instantly a commodity or obsolete.   A business model can be designed in a way to swap in advances in a technology further enhancing the model.  

The important takeaway from this post is that an entrepreneurial venture does not mean having to conduct R&D, take big risks and create a technology breakthrough.  The most efficient first step is to look at what technology already exists and determine how it could be used in a unique way to solve a customer’s job to be done.  Avoid the idea that you have to create your own technology all of the time.  Even if you succeed in building something that is better than what is out there it may not be worth the money invested or the delay in launching the product or service.     

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