You’ve come up with an idea for a product that the public would crawl over glass to adopt. It’s so technologically advanced -- unlike anything the world has ever seen -- that you’re sure it will blow people’s minds. They’ll line up to buy it the way people used to queue up for a new iPhone. What’s not to get excited about? After all, having a true technical edge can drive engagement at every stage of adoption -- and make switching to your product a foregone conclusion. And an untouchable technical edge can create a barrier to entry such that you will have virtually no competition in the marketplace.
Who wouldn’t salivate at the thought of having a ready-made monopoly on their hands?
But before you dive into R&D with your surefire technological breakthrough, do yourself a favor. Check yourself before you go too far down that path and put all your proverbial eggs in one basket. Yes, investors love a perceived barrier to entry -- but success ultimately hinges on whether customers really would be as drawn to your product as you think they would.
Of course, the concept of creating a “barrier to entry” is a large category, encompassing a number of potential factors. In a California Management Review study, “Overcoming Barriers to Entry In An Established Industry: Tesla Motors,” the authors note that: "Numerous factors … including economies of scale, learning curves, access to distribution channels, patents, unrecoverable up-front R&D expenditures, and other capital requirements can serve as barriers to entry." And a technical edge is another kind specific and very powerful barrier to entry …. potentially. Tesla Motors is a notable example of a company that was able to strategically account for the many roadblocks and barriers in their way in order to parlay their innovative technical idea into a success. We’ll discuss that in more detail in a bit. That said, along with the possibility of creating a barrier to entry for other companies, a technical edge can throw up some insurmountable barriers for you as well. And it’s only an advantage if your product can be implemented, distributed, and ultimately adopted by the public.
There’s no way around the fact that pinning your success on your product’s supposedly singular technical prowess is a big risk, and should be interrogated before you proceed. A brand new, cutting edge, “out there” technology is often fraught with impediments to its successful realization. But how do you know if your technical advantage is real .. or just a (costly) illusion?
To get some perspective, let’s first talk about a technologically advanced product that failed to find its edge: the Alpha Chip. The Alpha Chip was very ahead-of-the-curve for its time. The 64 bit microprocessor ran at 200 megahertz, far faster than anything else out there at the time. When the Digital Equipment Corporation introduced it in 1992, they no doubt thought they had a surefire success on their hands and an unbeatable technical edge. But it didn’t quite work out that way. They failed to account for some crucial conditions and ran into serious adoption problems:
- It couldn’t run most of the existing applications. There simply wasn't a network to support its widespread implementation
- The perceived pain of adoption was very high, as it required people to learn a whole new OS -- the 64 bit tech couldn’t run on Windows
- At 6K per machine, it cost an arm and a leg
- The lack of OS and apps to support the Alpha Chip begs the question: was this product really filling a need at all? Yes, people needed more processing speed, but this “solution” created more struggles and obstacles than it solved.
Intel, meanwhile, created a product that was less “out there” than the Alpha chip, but still had a technical edge. But the Intel processor was set up to work with the existing ecosystem and, because it didn’t require learning a new OS, had a much lower perceived pain of adoption.
In short, Alpha fell into the trap of thinking that technical wizardry is enough to succeed. As Pip Coburn put it in The Change Function, “Brilliance and innovation alone do not create new markets, despite how much technologists would like to believe that they do.”
So, with that in mind, how can you avoid the Alpha Chip trap? First and foremost, it’s important to interrogate your assumptions honestly. Run your brilliant idea through a checklist. To have a true technical edge that ferociously drives adoption, your idea should fill a real need and avoid certain traps -- and you should have a workable plan to overcome the barriers that stand in your way. That’s what Tesla Motors did when the founders came up with their idea for a product that would fill a need no other product filled: a sexy, high-performing green sports car that would appeal to the luxury market. The barriers to entry into the automobile industry were great, but Tesla did a masterful job of assessing the value of the product and anticipating roadblocks, as we'll see.
So, to get a better handle on whether you have a future Alpha Chip or Tesla Roadster on your hands, consider the following points:
Does your product fill a real need better than anything else out there?
Great ideas are nice things to have, but if your product doesn’t fill a real need then all the technological advances in the world won't make it desirable. Be honest with yourself: Does your product do a job like no other out there? Sure, the Alpha chip promised faster processing … but all things considered it didn’t do the job as well as the Intel chip, as we saw. And the Tesla founders came up with an idea for a product to fill a need that no other product was doing -- a sexy green sports car.
And it’s not enough to do a job 1-2 percent better than a competitor -- there’s no incentive for people to switch to your product. Your product needs to be at least 20-30 percent better to have a real technical edge that will make switching a foregone conclusion.
Are you succumbing to the futurism trap?
It’s easy to get seduced by futuristic ideas. They’re fun, they’re exciting, and we think everyone else will get as excited about them as we are. But if your futuristic idea isn’t tethered to a real need, no one is going to want it. Just ask Google Glass.
Does the existing ecosystem or structure support it?
When a technologically advanced idea fails, it’s easy to blame it on “bad timing.” But that’s a myth. There’s no such thing as bad timing -- either your advanced idea can be supported by existing networks and systems … or it can’t. And if it can’t, you either need to figure out a way to implement those systems or adapt your idea to what’s already out there. Alpha Chip forged ahead without regard to these conditions, and it failed. Tesla overcame these “network externalities” by subsidizing a car charging network for their electric cars. If they hadn’t, their cars would have been DOA.
Is it too complex?
No matter how advanced your product idea is, you need to determine if the complexities involved in building it are too great to make it worth implementing. In addition, once it’s built, will it be too complex for people to use? Will they understand its value or will there be a massive amount of education involved? Before you sink all your money into a finished product, test an MVP to validate both your value proposition and the feasibility of construction. Elon Musk stressed the importance of starting small in the California Business Review article “The reason for strategy is that in order to take any technology to mass market it takes time and you’ve got to go through major design iterations.”
Can it actually be made?
Ideas that fill needs are great, but if your idea can’t even be built then it’s better off in your next science fiction bestseller. If Tesla had decided to move forward with a flying car, for instance, as exciting as that sounds, they would have been left vainly searching for engineers to actually build it.
Is it too expensive to build -- and sell?
Sure people will pay more money for a product that fills a real need. But how much more? Market analysis and solid value proposition testing are important tools to help to determine this. Alpha chip computers cost 6K … and that turned out to be simply too much money for the value users were getting. Roadsters, on the other hand, were $110,000 -- an amount that green-minded luxury car enthusiasts were happy to pay.
Is the perceived pain of adoption too high?
In order for people to want to adopt your product, the pain they’re feeling from their current need must be greater than they perceived pain of adopting your product. In the case of the Alpha Chip, learning a new operating system -- not to mention shelling out 6K for the privilege -- was insurmountable. For those who felt a need to be green in a luxury car, there was virtually no perceived pain of adoption. (Imagine if Musk & Co had required customers to learn a new transmission gear shifting system in order to drive the Roadster. In that case, the story of Tesla may have ended very differently.)
Is your product merely chasing trends?
Trends come and go -- jobs and needs don’t change. So if your technical whizbang is just a complicated version of a pet rock, it’s not going to have staying power.
Can you overcome the cost of entry?
If you’re trying to disrupt a market that already has a high barrier to entry, do you have a plan to overcome the upfront costs of trying to crack it? Tesla handled this impediment by pairing up with Lotus for the motors of their limited run MVP. But whatever industry you’re trying to enter with your idea, make sure you have the means to get a toe in.
Will it scale?
As a general rule, to stay competitive -- or even to stay in business -- at some point you're going to have to scale. No matter how advanced your technology, if you can’t get it in the hands of enough customers, you probably won’t be able to sustain production. One approach is to devise a way to be profitable at low volume to start out, like Tesla did. According to Musk “The Tesla strategy has been the same from the beginning, which is to start out initially with a car that was expensive but low volume. It’s the only car that we could have really made and that was the Roadster sports car. ” The goal further down the road, Musk says, is to produce a lower cost, high-volume automobile.
As you can see, creating a wildly successful product with a true technical edge comes with a lot of considerations, potential barriers, and hoops to jump through. If you really think you have the next Tesla-style product idea on your hands, -- one that fills a real need way better than anything and ticks all the boxes we talked about above -- then go for it. If not, there are less risky, and more surefire ways to create a successful product that will drive adoption.
But whatever you do, don’t allow yourself to be seduced by the siren call of technology for technology’s sake. The California Business Review study noted Musk’s take on bringing product ideas to life, and it’s worth bearing in mind:
Although Musk believes in theorizing about how things might be, Musk is a strong believer in coming up with ideas that can be implemented (emphasis added). Musk says although he admires Nikola Tesla, ‘on balance I am a bigger fan of Edison than Tesla, because Edison brought his products to market and made those inventions accessible to the world.’ Musk recommends ‘being focused on something that you are confident will have high value to someone else.