Startup School – Technology as a competitive advantage: Lessons learned

2 mins read

Few people understand how IT creates and delivers value. Very few have mastered the art of restraining technology projects to remain a static and achievable target versus the runaway train they normally become. To this mix add business and technology teams speaking in different languages, working from different sets of expectations, and not willing to bridge the gulf between them. Not understanding the technology factor leads to understating the commitment, the cost, the timelines, and the eff ort required to rein in the technology demon. Who suffers from the impact? Deadlines, deliveries, customer perception, survival, and future.

With this list of complex conditions, shouldn’t technology investments earn economic rents rather than just accounting profits? Shouldn’t the difficulties in getting technology right represent a substantial barrier to entry?

I think not. Yet businesses overemphasize the contribution technology makes in business or product success. Any time I see a business plan for a venture that uses technology or a technology-related factor as a crutch for a value driver or a competitive advantage, I know the management team has not done its homework and has taken the easy way out.

Technology is not a competitive advantage; intellectual property (IP) is. Technology is a facilitator, an accelerator, a requirement, but not a competitive advantage. Competitive advantage un-levels level playing fields. It is available to a small set of players and the restricted access represents the edge. Not everyone can build it, buy it, store it, steal it, use it, or license it.

Technology without IP, on the other hand, allows you to do all of the above (build, buy, store, steal, use, or license) and levels the playing field. It is an enabler. Without the latest technology you are certainly at a disadvantage, but with it you are only as good as most of your competitors. Not better, faster, or cheaper—just at par with the benchmark.

A competitive advantage breaks the benchmark. A sustainable competitive advantage ensures that it stays that way for the life of the advantage. Tariq, the Pathan Greek god, master of the 800 meters and 1500 meters events, had a sustainable competitive advantage over me. No matter how much effort, time, money, or heart I threw at the difference, I could never make it up. Tariq had a gift; I didn’t. The track and field training was an enabler. In a field of beginners, my training showed and I could outrun and outpace all of them; in a field of professionals, I could keep up with most of them; in an event filled with talented and gifted runners like Tariq, I stood no chance. Technology is like that—track and field training in the 800 meters heat at Beijing, 2008. It will get you there; it won’t help you win the race.

Capital, irrespective of its shape or form, is not free. With capital comes partners; with partners come questions of allocation of ownership and equity. The allocation occurs on the basis of contribution of implied capital—ideas, services, network, relationships, or cash. In failed ventures, implied capital is often not contributed: Ideas are held back, services are not delivered, networks are locked away, relationships disintegrate, or cash infusions come too late.