- Technologies
have life cycle stages from emerging,
to viable, to growth, to maturity
and then to decline.
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- A company
needs to understand the cycles, the
applicability of the technology, and
its capabilities to exploit it.
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- The goal
is to distinguish the different technologies
within the products and the different
market segments.
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- Technology
is sometimes the key to sustainable
advantage; however meeting customer
expectations will determine superior
performance.
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- Technology,
although an important factor, is just
one of the many ingredients required
for success.
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Developing new technology and building a company on the
back of it requires a very flexible but disciplined approach.
In order to take advantage of emerging technologies, an
understanding of the linkages between the technologies,
products and the markets is critical.
New technologies, or repackaging existing technologies in
different ways, may have a profound impact on a company’s
competitive position and its sustainability.
Technology is sometimes the key to sustainable advantage;
however it is the creation of products and meeting customer
expectations that determine superior performance.
Understanding the customer benefits, in terms of perceived
value, price, quality and performance will drive product
advantage and harness the benefits of technologies.
So how does a company harness the benefits of technology?
The benefits of technology can be harnessed in the following
ways.
- Understanding the technology, or combinations of technologies,
that make up new or existing products
- Involving marketing in the process from inception to
product launch. Finding the right market may be more difficult
than developing the technology.
- Building a company based on a range of technologies
and products. It is rare for investors or venture capital
managers to back a single technology or product company.
Investors are looking for companies with technology platforms
that are capable of creating multiple products.
- Developing the technological expertise to achieve the
multiple product approach.
- Patenting the unique know-how to defend the company’s
position
Technology development involves committing significant
resources over a period of time in the hope of securing
a return on that investment.
Research suggests that many large corporates exploit less
than 20% of all technology developed in their laboratories.
Figures are not readily available for smaller high growth
companies, but one would expect a far higher exploitation
rate by these companies.
Smaller companies tend to be more focused on developing
commercially orientated technologies within shorter time
frames.
However, testing the acceptance of the new technologies
with potential customers may be the major stumbling block
for smaller companies.
Technology and Product
Linkages
Technologies, like products, have life cycle stages from
emerging, to viable, to growth, to maturity and then to
decline.
Generally, these technology and product life cycles are
not aligned. In some cases, new products are developed from
mature technologies.
There are many examples of technologies developed in one
industry taking time to be transferred to another industry.
This may be due to the different industry adoption cycles,
or the convergence of several technologies.
To fully understand the technology and product linkages,
the technology needs to be well documented and understood
by more than one person in the company. The performance
limits need to be defined, along with potential improvements
and how much it will cost to develop the technology through
the various stages of its development.
It needs to be distinct from the general field of knowledge
and distinguishable in the different products. Distinctness
may be the source of future competitive advantage.
The company needs to understand the applicability of the
technologies, along with the capabilities to exploit it.
Unfortunately, there are many examples of brilliant technologists
who lack the commercial abilities and ruthlessness to use
that technology to build a successful company.
Sometimes identifying a gap in the market is all about being
in the right place at the right time, along with the ability
to execute and exploit the opportunity.
Ideally, the goal is to be able to distinguish the different
technologies in the different products within the different
market segments.
External investors and venture capital managers will be
trying to determine if the company has a proprietary technological
position and whether the company can leverage its current
resources to exploit the technology and generate profits.
The rate of technology adoption or its substitution needs
to be fully understood, as this will impact both the level
of infrastructure and the potential funding required.
Many technology companies have fallen by the wayside because
they have underestimated the time required for adoption.
Many factors influence the rate of technology adoption,
ranging from changing perceptions and attitudes, to changing
government regulations, to major global movements.
Product and Market
Linkages
Technologies are exploited through the development of products
to meet the needs of customers.
The most basic questions need to be asked:
- How are the technologies or products used?
- How will the technologies or products meet the customers’
needs?
- What key attributes provide product differentiation?
- What are the key product features for minimum performance?
Product features can be loosely grouped into three categories:
- Base level requirements of the customer
- Additional features required to win the customer
- Features required for retaining the customer.
These features need to be assessed relative to the features
of the competitive products in terms of price, performance
and maturity.
Products, like technologies, exhibit life cycle/maturity
characteristics. The different stages cover early commercialisation,
growth, maturity and decline.
Sometimes, the product life cycle will coincide with the
technology life cycle in technology-based companies. However,
these cycles are generally separate.
Due to intensity of competition and the pace of technology
development, these cycles are becoming shorter and shorter.
In order to meet the changing needs of the market, companies
need to:
- Develop new technologies to anticipate the changes
in customer needs.
- Monitor the technological viability of competitors’
products
- Monitor life cycles of both technologies and products
- Develop new technologies or technological capabilities.
The main point to remember is that business issues, rather
than technological issues, drive the development of successful
companies. Investors will look beyond the technological
issues when considering an investment position.
Technology, although an important factor, is just one of
the many ingredients required for success.
Peter T Gow is the Managing Director of Creative
Capital Pty Limited. He founded Creative Capital to accelerate
the learning skills of entrepreneurial CEO's and develop
their expertise in capital management, business and strategic
planning, cash flow management and market research and analysis.
Peter has over 12 years of experience in working with growth
companies and has been involved in the completion of over
30 financings in the software, manufacturing and medical
areas. His expertise covers company evaluation, strategy
and market analysis, capital raising, transaction structuring,
documentation and completion. Peter has also set up several
venture capital funds for a major financial institution
and appraised a range of venture capital managers.
Creative Capital Pty Limited
Peter T Gow
61 412 235 455
petergow@creativecapital.com.au
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