The Entrepreneur’s Paradox

The macro picture

Most people associated with business strategy and the challenges of cultivating innovation are familiar with a classic business book by Clayton Christensen called “The Innovator’s Dilemma”. In this seminal work, Christensen examines the impact of new technology on existing industry incumbents and the dilemma that they face in sustaining current business at the same time as embracing disruptive technology.

A recent business magazine article identified that the pace of disruption was accelerating as multiple technologies come together and as innovators constantly try to leverage these technologies for new goods and services. In most cases, the implementations fail but these failures have a significant benefit as they enhance the collective learning of both the innovators and the customers with each new product cycle. This learning aspect for customers is critical because they are becoming familiar with new experiences and technology. Consequently, when the right combination of experience and technologies is eventually created, the market is more receptive as customers are already familiar with it, meaning that the concept goes viral faster and becomes disruptive more rapidly.

In past blogs I have talked about the concept of “boundary blurring” between industries as the impact of combined ICT technologies changes the value propositions and business models of industries such as banking, health, retail and automotive. We have also described a phenomena we call “digital life” which is the osmosis-like process of digital technology absorption into people’s everyday lives. Most individuals do not recognize the degree to which they have adapted to the new technologies around them. However, the stage is set for the emergence of viral disruption in multiple industries in the next couple of years as entrepreneurs, small startups and companies within ICT see the opportunity to apply these new technologies.

The micro picture

Against this macro picture that I have been sharing through my consultancy work over the past 5 years, I have witnessed several opportunities for businesses to cross boundaries and create disruptive new products, services and business models. Together with a partner, I am now in the process of creating a new startup that applies hardware and software technology, systems thinking and creativity to an industry ripe for disruptive innovation. In developing this venture, however, I have stumbled across what I call the “entrepreneur’s paradox” which is the corollary to the innovator’s dilemma.

The paradox occurs because of the above mentioned macro aspects necessary to create ripe market opportunities: the customers are ready, the industry has old and established business models and market perspectives, and mobile and technology startup companies are winning early adopters.

To enter this industry it requires considerable time and investment to develop the product and value proposition. It also requires the exposure of the idea/product to investors, customers and potential partners in order to test the idea and to prove it can create a sustainable business model. Angel and VC investors are notorious for not signing confidentiality agreements in early stage discussions.  In other words, it requires putting the idea out into the public domain, which is the nub of the paradox, because it works against the other desirable attribute of a tech startup – namely, a patented product or idea.

In order to submit a provisional or full patent filing, and claim “first to file” status, it requires no prior public disclosure. So how do you know that what you are filing justifies the cost in terms of being able to create a viable business? And how do you know that the time you spend developing your invention isn’t going to be preempted by someone else fast-cycling a product concept with target customers? The paradox here is: should you file first or seek customer feedback first by creating a prototype product but, in the process, run the risk of the idea being stolen or preempted?

There is no simple resolution to this but as cycles of technology, learning and consumer adoption accelerate, they are bound to challenge the fine balance between the need and desirability for patents versus the finite market opportunity that may exist and needs to be proven. Not an easy decision to make!

Steve Bell, President, KeySo Global

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