Are you developing a tech company or a tech-enabled one?
For some reason, we tend to believe that when/if we offer a service over the internet we automatically become a tech startup, and let’s face it: being a tech entrepreneur is super cool, right? We’re not trying to be sarcastic. But let’s be honest, it’s true.
So here’s the thing. Maybe your startup or corporate spinoff isn’t a tech startup, but a tech-enabled one. And that’s perfectly fine. There are technology companies and tech-enabled companies. The main reason why knowing your company’s actual type is important is to plan for your strengths.
What is a technology company?
Let’s break it down. A technology company is an organization that couldn’t be able to exist if it weren’t for technology. A single individual would have a problem answering a query/question like: “best restaurant Houston” in less than a second. And that’s what makes a company like Google a technology organization.
Technology companies can stem from academia or research papers but always require hundreds of man-hours to solve a problem. The one constant with tech companies is that they take longer to launch to market. These companies recognize the value of their venture is their Intellectual Property and they will protect it with patents and trade secrets.
Tech companies deliver a new product to the market in two ways:
- A technology push: where an organization or startup uses a new invention to create a new market. Percy Spencer decided he wanted to create a new market using radar technology to heat food. People didn’t know they wanted a quicker way to warm food.
- A market pull: when the market needs a certain problem fixed and a technology company creates a solution. The world needs a way to store electrical energy better, and technology companies are using nanotechnology and advanced chemistry to figure out how to do this.
Tech-enabled companies on the other side are integrators. The tech-enabled business focuses less on science and more on engineering. The tech-enabled business understands the technological and industrial trends, and applies them to a business model.
The tech-enabled business uses existing tools, libraries, and frameworks to either make a company more efficient, smarter or to provide a new service. Uber, for example, found a way to use GPS technology from the 60’s and combine it with a new platform — mobile computing, to revolutionize transportation worldwide.
Uber isn’t selling technology, they are offering the service of connecting people that need rides with drivers nearby. Uber and Lyft users are paying to get transported from Point A to Point B.
A tech-enabled business probably won’t do a technology push, but can respond to market-pulls. The name of the game for tech-enabled businesses is execution speed and time to market. The tech-enabled business understands the technological and industrial trends, and applies them to a business model.
Tech-enabled businesses do not create new technology. They use tech companies innovations like hardware and software to create something new, In the same way Reese’s combined peanut-butter and chocolate. A tech-enabled business doesn’t care as much about patents and trade secrets. They care about measuring KPIs and delivering a better return on investment.
Though tech-enabled businesses seem parasitic, both companies have a symbiotic relationship. If a tech-enabled business succeeds, it will buy more products from the technology company. Their successes depend on one another.
So which one is better?
Honestly, it doesn’t matter. There are 800-pound gorillas in both categories. Airbnb as a tech-enabled business is transforming the lodging industry. Phizer as a technology business is still growing strong.
These categories aren’t set in stone. Uber and Lyft are becoming technology businesses, in the same way as RackSpace is transforming into a tech-enabled company.
Uber and Lyft are working on self-driving vehicles, which is a Machine Learning and an Artificial Intelligence play. Both companies have created algorithms that maximize income and optimize pickup times.
Rackspace, one of the leading hosting providers has transitioned from being a technology company into a service organization. IBM has transformed into a consulting company with a strong technological footprint.
Why does this matter to you?
This matters because it can help you plan what you want to become and achieve. We might be going all business-major on you, but knowing what you are, what you are not, and what you want to achieve will help you pick your core competencies.
Once you have decided what’s your core competence and your main differentiator, you will be able to plan accordingly. If you want to be a customer driven company, what are the main activities you wouldn’t be able to outsource?
If you are thinking of creating a technology-enabled company, you might want to focus on customer service or brand experience. A great example of this is Zappos which competed against Amazon by being high-touch and customer focused.
Two sides of the same coin.
If you have decided to become a technology company, you will need to be aware of the associated risks, costs, and benefits. The main benefit is that tech startups and spin-off can raise VC capital easier since they are aligned with the Home-run model. The biggest con for a technology company is that time to market tends to be longer.
If you are launching a technological company you need to understand people are your most valuable resource. You will need to hire a team of top engineers and scientists and give them the freedom to discover and innovate. If you are not a technical person, you will need to partner with a person or company that can make sure you are hiring the right staff.
Since your core activity will be innovation, you can outsource your design and communication needs to an agency (like NUU). We’d would also recommend hiring a top intellectual property attorney and try to stretch your runway as much as possible.
As a tech-enabled company, you will be able to get cash faster and with a better return on investment. The downside of a tech-enabled organization is that barriers of entry are lower and you will need to stand out in the market with either an amazing brand, efficient customer acquisition and retention or cost-efficient engineering.
Take your next steps.
Decide what you want to do, and act accordingly. As an entrepreneur or intrapreneur (is that right?), the most important element is to have a product and a corporate vision.
