Friday, February 3, 2012

Is it technology looking for a market or a market looking for technology?

Whenever I hear a company CEO say, "We have great technology and we're looking for new applications for the technology," I know this company is heading for trouble.  When I hear a CEO say, "We know this market and we're looking for new technology to solve problems that exist with users in this market," I'm interested.  So are investors!

It is so tempting for those who have developed a technology to think that there must be a market that can use this technology, that the technology developers lose objectivity and try to start a company to find the market that can use the technology.  This company is about 90% of the time doomed to failure. So, why don't the owners/developers get it?  Businesses succeed because there is demand (a market) for their products and services not because they have great technology.  OK, the most successful companies have great technology AND demand for their products or services.

But, you say, what about a market that will develop in the future and the entrepreneur who has a vision that the market will develop in the future?  Well, you've heard that timing is everything.  Most entrepreneurs who have a vision of a future market can't imagine how long it takes for a market to develop and exhaust their resources before there is a viable market.  Those that enter this nascent market just at the inflection point when a viable market is developing succeed while those who enter too soon fail.  This is particularly true for companies that have a new technology.

Don't get caught in the trap of having an interesting technology and believing you can start a company to find a market for the technology.  Knowledgeable investors know this is a formula for failure.


1 comment:

  1. Great article. Having spent several years working for a company focusing on search technology and unsuccessfully working to find that "market" for the technology, this definitely hits home for me. True innovation comes from identifying a consumer need and working to meet that need.

    My company, AlphaPoint, has identified a key need for data center managers; the ability to track and manage data center operations in a user-friendly and effective way. We have developed an industry-leading software solution for DCIM that has taken the data center management industry by storm.

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