“Innovators are the leaders of humanity who usher the world to a new and inspiring future.”
Lofty words indeed. But all the innovation, inspiration and leadership in the world isn’t going to get you very far if you don’t have the tools to enable success.
Jake Nielson of The Innovation Manager details the two most important factors for enabling innovation as business model innovation and technology innovation. He describes them as a critical element to success, acting as runways to a “… new and inspiring future.”
In the storm of excitement that is generated by an innovative new product or service, entrepreneurs can fail to give adequate consideration to the development of new business models and new technology; or opportunities to exploit existing pathways to market. Often overlooked, it can be one of the simplest ways to gain competitive advantage.
The Runway of New Technology
The Tesla electric car is regarded as one of the most significant innovations of our generation. Eion Musk’s brainchild is a true innovation, but it is also one that has been enabled by both new technology and new business models along the way.
As the development of a commercially-viable Tesla electric car has advanced, so too has the technology around lithium cell batteries. Other the last decade, lithium battery technology has improved such that the cost to consumers has nearly halved. In 2008, the $/kwh for a lithium ion battery was around US$1,000. In 2012, the $/kwh had reduced to US$550. And we can expect to see even further developments in this technology when Tesla’s Gigafactory is fully operational. The technology progression has lead to transformational change for Tesla and one that enabled the product to smash through some major barriers.
In the world of startups, there are plenty of examples of new technology that has enabled great ideas to get to market. Some of these have included cloud computing, mobile apps and WiFi.
The Runway of New Business Models
In the solar panel industry, there has always been hesitancy from the market regarding cost. It has been a challenge to convince consumers to accept the pricey installation cost versus the long-term savings of panels. To combat this, solar panel manufacturers have developed new business models to help get the technology to market. Manufacturers have created solar leases and power purchase agreements (PPAs) to cut through the market’s reluctance to purchase.
Apple did a similar thing in 2007 when it first released the iPhone. Rather than selling phones through a third party phone company or retailer, Apple set up their own direct to consumer retail stores. The stores not only gave Apple’s brand huge exposure, but it also provided a medium for staff to directly educate the public on what the innovative (at the time) new product offered.
Tesla also embraced new business models when they launched their electric vehicles to the market. Resisting the traditional model of selling vehicles at large dealership lots, Tesla opted to sell its vehicles from small direct to consumer stores. The Tesla outlet looked like a standard retail store, held no on-site inventory and allowed customers to process orders online.
Business model innovation enables new startups by making accessibility easier and improving convenience and desirability. New business model innovation that we have seen in recent years includes crowd funding, freemium services, and on-demand services like Uber.
Can you afford it?
For many new startups, investing the time and resources into developing new technology simply isn’t feasible. Let alone meeting the level of technical know-how required to develop new technology.
On the other hand, the development of a new business model presents a significantly easier path for enabling innovation. While technology innovation may initially fuel new customer applications, innovative business models are the true engines of evolution.
Being first doesn’t always give a competitive advantage. Lasting impact comes from building on what came before, by learning from those that have blazed a trail and tweaking to refine the existing model.
Avoid following the pack and instead, take an existing business model and turn it inside out. Figure out what the incumbent is doing wrong and what their vulnerabilities are. You can then devise a new way to deliver your product or service to an existing market that is underserved. If you have the tenacity to change the dominant way of doing things, then you have the opportunity to rewrite the rules to your advantage.
Entrepreneurship and innovation go hand in hand because they both require a leap of faith. Exploring distant horizons and unknowable futures is easier when you have first identified the best pathways to lead you there.