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Chapter 9:
Exploiting Technology
“We live in a society exquisitely dependent on science and technology, in
which hardly anyone knows anything about science and technology.”
- Carl Sagan
which hardly anyone knows anything about science and technology.”
- Carl Sagan
The diffusion of technology in our society is an interesting way to see how products and services evolve over the lifespan of industries. Marketing, pricing and application strategies can all change as the cost of technology decreases and the diffusion of a product increases. Some very powerful observations in the world of technology, such as Moore’s law, have helped us to understand the progression of technological capabilities and the effect on the price of those technologies over the same period. While Moore’s semiconductor observations are not necessarily relevant to this chapter, generalizing his law can beget some powerful observation tools. Generally speaking, technological capabilities will increase over a period while the price of those technologies stays the same or decreases over the same period.(11) Every day, more and more powerful technologies are becoming cheaper. When this happens, it opens up new markets in which the application of such technology can become financially viable for use. Technologies that were price prohibitive to some industries in the past are now ripe for integration. Entrepreneurs can capitalize on such a phenomenon. The interesting thing about technology is that many industries know that great potential exists in some technologies but have no idea how to integrate it for competitive advantage. This is your opportunity. It is up to you to determine the future states of industries and how technology can be used to create them.
The idea that technology can revolutionize industries is pretty obvious. But few people watch technology day to day. Few people realize just how far things progress. Few people realize the efforts that must go into making breakthroughs happen. Even if they do, even fewer understand it. It is unfortunate because most people trying to innovate are not focused on researching and following ground breaking technologies. Most people trying to innovate are walking around brainstorming ways to produce flash in the pan gadgetry or novelty items. Instead of reading industry magazines and researching industry uses for the latest breakthroughs, we walk around thinking about how to create self-cooling cup holders or dream about opening a niche pet salon. But if you are dreaming of making it big time in this life, that mindset is pretty counterintuitive. One of the first things you can do to have the innovation lens of technology at your fingertips is to start learning. You do not have to know how to create the next semiconductor chip, but at least start understanding what technology exists and read where people think it is headed for the future. You’ll be surprised with just how little you do know about most of the ideas and equipment that are appearing in the marketplace. Take the internet as a generic example. Most people these days have access to it, know how to generally navigate it and might be able to pull off a few cool tricks with it. But how many people understand it? What separates you from the founders of Youtube or Facebook? Probably not a whole lot. Take the time now to realize how technology creates and destroys industries. Take stock of what exists and where it is going. Take the time to get a general knowledge of what is coming in the world of technology and brainstorm as to how you could use it to start your own venture.
Let’s look at an example to show just how powerful technology can be. I am going to refer to the movie industry multiple times in this book, but specifically for this chapter think about the technological advances of the industry. Consider the history of Hollywood and take a look at how fast technology can revolutionize industries. If you had thought about producing a major motion picture 40 years ago, people would have called you crazy. They still may call you crazy. Access to making major motion pictures was an uphill climb considering the initial resources required to undertake such a venture. The technology was in its nascent stages and took a lot of skill to be able to shoot, edit and produce a full-length film. Back when television and film were in their beginning stages, professional grade cameras were almost the size of refrigerators.(12) They produced low end pictures and were limited in their applications. The film that motion pictures were shot on was clumsy and even had a tendency to melt. Editing was done with razor blades and scotch tape, not USB cords and digital studios. This was the technology of the 1960s. Over time, the video camera evolved. It moved to briefcase size and then shoebox size. Video Cameras made the move from the Hollywood set to the American living room. The evolution of technology allowed a whole new set of consumers the chance to shoot their own videos outside of any studio walls. Now-a-days the video quality on most cell phones far exceeds the capabilities of video cameras of past generations. At the same time that hordes of consumers bought video cameras to capture home movies, high end cameras were getting cheaper and more refined. In today’s world the average consumer can purchase a camera of the same quality as that of a major studio for about $4000. Videos of today operate on digital film and are streamed into TVs and computers in High Definition. Recent hits such as Saw, 28 Days Later and Napoleon Dynamite were bootstrapped on very low funds, no name actors and a few nice cameras. The picture and production quality of the major studios was out of reach until now. The technology was cost prohibitive until recently and the effort to create a high quality product in the past took lots of effort. Thanks to the phenomenon like the type described by Moore, high end technology is becoming available to entrepreneurs at very economical prices. The technological capabilities have been increasing exponentially over the years while the price has been falling. This phenomenon changes the rules of the game and allows for a new industry structure. It allows for innovation by a whole range of people as opposed to the select few. These advances have spawned a generation of do it yourself videographers and published amateur material. It is opportunities like this that technology presents to the entrepreneur. As technology becomes more readily available, what is going to be its impact in the future? What industries and what consumers will embrace it to change the way things are done?
Movies are just one example. Think about what a desktop computer could do ten years ago that can now be done on a cell phone in most places in the world. What used to take minutes to download on the laptop at the office can now be retrieved wirelessly from your iPhone in the subway. We have gone from main frame computers to desktops to laptops to palm pilots and cell phone computing in the course of two decades. This example has tremendous implications for the entrepreneurial thinker. Technology is being diffused throughout markets daily. Every day, technologies that could revolutionize markets creep closer to economic viability. The question is, will you be ahead of the curve to see it coming? Every time you think about a technology you should be thinking about where else it could be used and a timeline for when it will become economically viable to do so. Think about the possibilities outside of where everyone is watching. Everyone is eyeing up the next computer gadget, but in places like the good old boys group in Hollywood, the revolution is just beginning. Within the next few years access to powerful, cheap technology could reshape an entire industry. No one knows how or what will work. Your guess is as good as theirs. Now see where else this phenomenon could have an impact. Revolutionize an industry that people didn’t think would be touched. Use your cognitive abilities to spot opportunities and technological gaps. Extrapolate on where technology is going for the future based loosely on ideas such as Moore’s law. Look to places that you know are going to leave unexploited gaps in the future states of things and see how you could put the pieces in motion to fill those gaps.
Technology that is increasing in capability while becoming more inexpensive is only one opportunity that this lens of innovation can provide. Let’s go beyond cheap new technology. If faster, better technology is being sold everyday for less, what is happening to technology of our recent past or even outdated technology? Think about how cheap technology that is past its “prime” can be. What is outdated garbage for the forward-looking computer industry may well be a giant leap forward for some other industry out there. Integrating old technology into completely new areas can have just as much of an innovative effect as lowering the cost of brand new stuff. Older technology is limited compared to the newest gadgetry, but if it never existed in an industry in the first place, then the integration of it may as well be a revolution.
A great example of this type of innovation can be seen in the company Microchip Technology and the man in charge, Steve Sanghi. Sanghi’s company thrives by using technology straight out of the 1970s. He and his company use microcontrollers as their primary product for innovation. Microcontrollers are generally a slow, rudimentary chip that the likes of Intel and AMD have more or less abandoned for years.(13) They are on par with some of the slowest laptop chips available on the consumer market. However, Microchip continues to find ways to make profitable businesses with them. Sanghi has taken this type of chip that most people would view as junk and has implemented it in places outside of the realm of computers to create waves. While the other chipmakers focus on producing super chips where one component runs all the functions, Microchip focuses on multitudes of less advanced chips, each controlling a small function within the overall scheme of the operations. Sanghi has used microchips in such products as the Segway scooter, the Adidas-1 running shoe, the Tesla roadster and the underwater LED display at the Wynn casino in Las Vegas. Each product is as different as the next, yet they all have similar, modest processing needs. These products didn’t need the fastest, most advanced processor in the world. Adidas-1 running shoes, for instance, needed a processor to soften of stiffen the shoe based on the impact with the ground. While any modern chip would suffice, the price would not. A simple microcontroller based on technology from 30 years ago does the trick. This tactic brings technology never seen before to the shoe industry, while keeping the price tag in line with what consumers might shell out for such a device. While Sanghi’s competitors look for the next implication of Moore’s law, he looks to industries that were never influenced by such a law. He creates innovation with outdated technology in industries that have rarely seen its influence. Sanghi is a great example of how a unique perspective on innovation with technology can have a profound effect in industries people never saw coming. Using old technology in new places can be as equally entrepreneurial as trying to predict the technological landscape of the future.
If the idea of the theorizing the future of new radical technologies had you a little worried, then the idea of employing outdated technology in new industries should be a bit more comforting. It is an area that you can start brainstorming about right now. This lens of innovation with technology is actionable today. Most of us are aware of technologies that are no longer practical for the industries they initially were intended for. We encounter them everyday. We all own technology that is outdated and technology that is on its way to being forgotten by the major markets. It is these types of situations where innovative people can thrive. And in the case of outdated Tech, thrive relatively cheaply. It is about brainstorming other industries in which the outdated technology could be a major improvement. It’s about projection. It is about extrapolation. The capabilities of recent and outdated technology are well known. Where else could these capabilities be useful? What other industries need processing speed? Even beyond that, what other industries would it just be cool and novel to infuse technology and processing speed? (I.e. the Adidas-1 and the shoe industry) Projecting the task that is accomplished by outdated technology and then comparing and locating similar markets to implement it in can be a great source of ideas for the entrepreneurial thinker.
A third area for innovating with technology lies with the idea that technologies of today that are not quite good enough for some markets might be beyond “good enough” for innovation in other markets. This might include technologies that can’t be classified as ultra new and at the same time they are not classified as outdated. They are technologies of the present that are simply not up to par for the industries people have envisioned for them. These technologies might still be in their development stages and can still be pricey due to the low levels of diffusion. This idea of “not quite good enough” was expounded on by Clayton Christensen in his series of books on innovation starting with The Innovator’s Dilemma.(14) In essence, the major industries that are expected to be revolutionized by a technology are waiting. The technologies have to be “good enough” efficiency-wise and available at a specific price point in order for it to make sense for implementation. They are waiting for the technology to live up to the expectations for it before they utilize it in their markets. While these major industries are waiting, what is happening to the technology? It sits and waits. This is where the entrepreneur can be savvy in the marketplace and use this to her advantage. There are opportunities to take technologies that are “not quite good enough” in some industries and apply them to other industries where such a capability would be a leap forward. Take, for example, the electric engine. The technology was and still probably is a ways off from being viewed as a viable alternative to the combustion engine. We have yet to see mass adoption of the technology. It is not outdated and the technology is not cheap. So while everyone is waiting for the R&D labs to come back with a practical version for cars, what else could we be doing with these inferior electric engines? What other industries could benefit from an inferior electric car engine? It’s a simple mind exercise. Where else could it be used? For starters, what else uses an engine? Sure, they can’t run a car practically yet but could they run a lawnmower? Could they run a snowmobile? Could they run a dirtbike or 4-wheeler? You’ll find many industries that could replace the output of combustion engines with an electric engine but do not necessarily need the energy required by an automobile. Why not insert the inferior electric engine there? Technology that is “not good enough” for some industries is a prime source of innovation in others. Understanding all three of these applications can shed light on ways in which entrepreneurs can redefine industries. It is about taking in stimuli and actively pursuing opportunities using technology that can empower the entrepreneur.
Technologies of yesterday, today and the future all represent opportunities for the entrepreneur. It is when you begin to realize the implications of all three types that the entrepreneur begins to see how powerful a source of innovation that technology can be. It is not a hard source to begin thinking about. You can begin with what exists. You can see it, touch it and use it. Many times, technology is something tangible for us to experiment with. From there it is about learning. It is about looking around you. It is about asking questions. It is about projecting products, concepts and ideas. There are literally thousands of industries at varying technological levels. There are thousands of industries that could be revolutionized by creatively utilizing past, present and future technologies. Take stock of what is out there and now you have the tools to theorize what is to come.
(11) http://www.webopedia.com/TERM/M/Moores_Law.html (Moore’s Law Generalization)
(12) http://www.internetvideomag.com/articles2002/historyofcamcorders.htm
(13) Parks, Bob. “Tiny Chip, Giant Ambition.” Business 2.0; Oct. 2006, pp. 98-103.
(14) Christensen, Clayton. The Innovator’s Dilemma. Cambridge, MA: Harvard Business School Press, 1997.
The idea that technology can revolutionize industries is pretty obvious. But few people watch technology day to day. Few people realize just how far things progress. Few people realize the efforts that must go into making breakthroughs happen. Even if they do, even fewer understand it. It is unfortunate because most people trying to innovate are not focused on researching and following ground breaking technologies. Most people trying to innovate are walking around brainstorming ways to produce flash in the pan gadgetry or novelty items. Instead of reading industry magazines and researching industry uses for the latest breakthroughs, we walk around thinking about how to create self-cooling cup holders or dream about opening a niche pet salon. But if you are dreaming of making it big time in this life, that mindset is pretty counterintuitive. One of the first things you can do to have the innovation lens of technology at your fingertips is to start learning. You do not have to know how to create the next semiconductor chip, but at least start understanding what technology exists and read where people think it is headed for the future. You’ll be surprised with just how little you do know about most of the ideas and equipment that are appearing in the marketplace. Take the internet as a generic example. Most people these days have access to it, know how to generally navigate it and might be able to pull off a few cool tricks with it. But how many people understand it? What separates you from the founders of Youtube or Facebook? Probably not a whole lot. Take the time now to realize how technology creates and destroys industries. Take stock of what exists and where it is going. Take the time to get a general knowledge of what is coming in the world of technology and brainstorm as to how you could use it to start your own venture.
Let’s look at an example to show just how powerful technology can be. I am going to refer to the movie industry multiple times in this book, but specifically for this chapter think about the technological advances of the industry. Consider the history of Hollywood and take a look at how fast technology can revolutionize industries. If you had thought about producing a major motion picture 40 years ago, people would have called you crazy. They still may call you crazy. Access to making major motion pictures was an uphill climb considering the initial resources required to undertake such a venture. The technology was in its nascent stages and took a lot of skill to be able to shoot, edit and produce a full-length film. Back when television and film were in their beginning stages, professional grade cameras were almost the size of refrigerators.(12) They produced low end pictures and were limited in their applications. The film that motion pictures were shot on was clumsy and even had a tendency to melt. Editing was done with razor blades and scotch tape, not USB cords and digital studios. This was the technology of the 1960s. Over time, the video camera evolved. It moved to briefcase size and then shoebox size. Video Cameras made the move from the Hollywood set to the American living room. The evolution of technology allowed a whole new set of consumers the chance to shoot their own videos outside of any studio walls. Now-a-days the video quality on most cell phones far exceeds the capabilities of video cameras of past generations. At the same time that hordes of consumers bought video cameras to capture home movies, high end cameras were getting cheaper and more refined. In today’s world the average consumer can purchase a camera of the same quality as that of a major studio for about $4000. Videos of today operate on digital film and are streamed into TVs and computers in High Definition. Recent hits such as Saw, 28 Days Later and Napoleon Dynamite were bootstrapped on very low funds, no name actors and a few nice cameras. The picture and production quality of the major studios was out of reach until now. The technology was cost prohibitive until recently and the effort to create a high quality product in the past took lots of effort. Thanks to the phenomenon like the type described by Moore, high end technology is becoming available to entrepreneurs at very economical prices. The technological capabilities have been increasing exponentially over the years while the price has been falling. This phenomenon changes the rules of the game and allows for a new industry structure. It allows for innovation by a whole range of people as opposed to the select few. These advances have spawned a generation of do it yourself videographers and published amateur material. It is opportunities like this that technology presents to the entrepreneur. As technology becomes more readily available, what is going to be its impact in the future? What industries and what consumers will embrace it to change the way things are done?
Movies are just one example. Think about what a desktop computer could do ten years ago that can now be done on a cell phone in most places in the world. What used to take minutes to download on the laptop at the office can now be retrieved wirelessly from your iPhone in the subway. We have gone from main frame computers to desktops to laptops to palm pilots and cell phone computing in the course of two decades. This example has tremendous implications for the entrepreneurial thinker. Technology is being diffused throughout markets daily. Every day, technologies that could revolutionize markets creep closer to economic viability. The question is, will you be ahead of the curve to see it coming? Every time you think about a technology you should be thinking about where else it could be used and a timeline for when it will become economically viable to do so. Think about the possibilities outside of where everyone is watching. Everyone is eyeing up the next computer gadget, but in places like the good old boys group in Hollywood, the revolution is just beginning. Within the next few years access to powerful, cheap technology could reshape an entire industry. No one knows how or what will work. Your guess is as good as theirs. Now see where else this phenomenon could have an impact. Revolutionize an industry that people didn’t think would be touched. Use your cognitive abilities to spot opportunities and technological gaps. Extrapolate on where technology is going for the future based loosely on ideas such as Moore’s law. Look to places that you know are going to leave unexploited gaps in the future states of things and see how you could put the pieces in motion to fill those gaps.
Technology that is increasing in capability while becoming more inexpensive is only one opportunity that this lens of innovation can provide. Let’s go beyond cheap new technology. If faster, better technology is being sold everyday for less, what is happening to technology of our recent past or even outdated technology? Think about how cheap technology that is past its “prime” can be. What is outdated garbage for the forward-looking computer industry may well be a giant leap forward for some other industry out there. Integrating old technology into completely new areas can have just as much of an innovative effect as lowering the cost of brand new stuff. Older technology is limited compared to the newest gadgetry, but if it never existed in an industry in the first place, then the integration of it may as well be a revolution.
A great example of this type of innovation can be seen in the company Microchip Technology and the man in charge, Steve Sanghi. Sanghi’s company thrives by using technology straight out of the 1970s. He and his company use microcontrollers as their primary product for innovation. Microcontrollers are generally a slow, rudimentary chip that the likes of Intel and AMD have more or less abandoned for years.(13) They are on par with some of the slowest laptop chips available on the consumer market. However, Microchip continues to find ways to make profitable businesses with them. Sanghi has taken this type of chip that most people would view as junk and has implemented it in places outside of the realm of computers to create waves. While the other chipmakers focus on producing super chips where one component runs all the functions, Microchip focuses on multitudes of less advanced chips, each controlling a small function within the overall scheme of the operations. Sanghi has used microchips in such products as the Segway scooter, the Adidas-1 running shoe, the Tesla roadster and the underwater LED display at the Wynn casino in Las Vegas. Each product is as different as the next, yet they all have similar, modest processing needs. These products didn’t need the fastest, most advanced processor in the world. Adidas-1 running shoes, for instance, needed a processor to soften of stiffen the shoe based on the impact with the ground. While any modern chip would suffice, the price would not. A simple microcontroller based on technology from 30 years ago does the trick. This tactic brings technology never seen before to the shoe industry, while keeping the price tag in line with what consumers might shell out for such a device. While Sanghi’s competitors look for the next implication of Moore’s law, he looks to industries that were never influenced by such a law. He creates innovation with outdated technology in industries that have rarely seen its influence. Sanghi is a great example of how a unique perspective on innovation with technology can have a profound effect in industries people never saw coming. Using old technology in new places can be as equally entrepreneurial as trying to predict the technological landscape of the future.
If the idea of the theorizing the future of new radical technologies had you a little worried, then the idea of employing outdated technology in new industries should be a bit more comforting. It is an area that you can start brainstorming about right now. This lens of innovation with technology is actionable today. Most of us are aware of technologies that are no longer practical for the industries they initially were intended for. We encounter them everyday. We all own technology that is outdated and technology that is on its way to being forgotten by the major markets. It is these types of situations where innovative people can thrive. And in the case of outdated Tech, thrive relatively cheaply. It is about brainstorming other industries in which the outdated technology could be a major improvement. It’s about projection. It is about extrapolation. The capabilities of recent and outdated technology are well known. Where else could these capabilities be useful? What other industries need processing speed? Even beyond that, what other industries would it just be cool and novel to infuse technology and processing speed? (I.e. the Adidas-1 and the shoe industry) Projecting the task that is accomplished by outdated technology and then comparing and locating similar markets to implement it in can be a great source of ideas for the entrepreneurial thinker.
A third area for innovating with technology lies with the idea that technologies of today that are not quite good enough for some markets might be beyond “good enough” for innovation in other markets. This might include technologies that can’t be classified as ultra new and at the same time they are not classified as outdated. They are technologies of the present that are simply not up to par for the industries people have envisioned for them. These technologies might still be in their development stages and can still be pricey due to the low levels of diffusion. This idea of “not quite good enough” was expounded on by Clayton Christensen in his series of books on innovation starting with The Innovator’s Dilemma.(14) In essence, the major industries that are expected to be revolutionized by a technology are waiting. The technologies have to be “good enough” efficiency-wise and available at a specific price point in order for it to make sense for implementation. They are waiting for the technology to live up to the expectations for it before they utilize it in their markets. While these major industries are waiting, what is happening to the technology? It sits and waits. This is where the entrepreneur can be savvy in the marketplace and use this to her advantage. There are opportunities to take technologies that are “not quite good enough” in some industries and apply them to other industries where such a capability would be a leap forward. Take, for example, the electric engine. The technology was and still probably is a ways off from being viewed as a viable alternative to the combustion engine. We have yet to see mass adoption of the technology. It is not outdated and the technology is not cheap. So while everyone is waiting for the R&D labs to come back with a practical version for cars, what else could we be doing with these inferior electric engines? What other industries could benefit from an inferior electric car engine? It’s a simple mind exercise. Where else could it be used? For starters, what else uses an engine? Sure, they can’t run a car practically yet but could they run a lawnmower? Could they run a snowmobile? Could they run a dirtbike or 4-wheeler? You’ll find many industries that could replace the output of combustion engines with an electric engine but do not necessarily need the energy required by an automobile. Why not insert the inferior electric engine there? Technology that is “not good enough” for some industries is a prime source of innovation in others. Understanding all three of these applications can shed light on ways in which entrepreneurs can redefine industries. It is about taking in stimuli and actively pursuing opportunities using technology that can empower the entrepreneur.
Technologies of yesterday, today and the future all represent opportunities for the entrepreneur. It is when you begin to realize the implications of all three types that the entrepreneur begins to see how powerful a source of innovation that technology can be. It is not a hard source to begin thinking about. You can begin with what exists. You can see it, touch it and use it. Many times, technology is something tangible for us to experiment with. From there it is about learning. It is about looking around you. It is about asking questions. It is about projecting products, concepts and ideas. There are literally thousands of industries at varying technological levels. There are thousands of industries that could be revolutionized by creatively utilizing past, present and future technologies. Take stock of what is out there and now you have the tools to theorize what is to come.
(11) http://www.webopedia.com/TERM/M/Moores_Law.html (Moore’s Law Generalization)
(12) http://www.internetvideomag.com/articles2002/historyofcamcorders.htm
(13) Parks, Bob. “Tiny Chip, Giant Ambition.” Business 2.0; Oct. 2006, pp. 98-103.
(14) Christensen, Clayton. The Innovator’s Dilemma. Cambridge, MA: Harvard Business School Press, 1997.
