You’ll often hear experienced investors repeating that the winner in a crowded and competitive marketplace isn’t always the first or most obvious candidate. Sometimes it isn’t even the best.
Facebook wasn’t the first social media platform. Google wasn’t the first search engine. Spotify was far from the first music streaming service. Yet these have all become household names and entered our lives in a way that would make us feel a deep void if they ever disappeared.
All have been revolutionary in their own way, but perhaps less revolutionary than their predecessors that helped pave the way and make them possible. And yet, when was the last time you used MySpace, AskJeeves or Napster? Ultimately, what was it that made the difference?
Whole books have been written on this so I don’t profess to have any secrets you haven’t already heard. But what is obvious is that the likes of Google and Facebook hit gold with their combination of an awesome user experience, answering a specific market need, and fortunate timing.
If we look at the world of aviation, we can see a classic example of the best tech not necessarily being the best market solution. For all the amazing technological advances that have been made in aviation in recent years, the most revolutionary and innovative commercial planes in the world haven’t actually been flown in years.
There is a technology that was developed way back in the 1950s and 60s, when the dream of supersonic commercial aircraft became a reality. Long before most of us were born, the ultimate status symbol of our parents’ generation was to take a trip on Concorde and fly from London to New York at twice the speed of sound in just over three hours.
And yet, despite this incredibly advanced technology, Concorde hasn’t flown since 2003. A combination of unfortunate events – the aftermath of a tragic accident in 2000, a slump in the entire air travel industry following September 2001 and, above all, increasing costs for a hugely expensive luxury service – meant that the best technology was no longer the best market solution.
While the technology itself is astonishing, perhaps it was just ahead of its time. Sometimes these things need a greater runway than we might anticipate. Just look at the mobile phone industry, which has created any number of millionaires and billionaires over the last twenty years or so.
But many of the original visionaries who spotted the potential of this life-changing technology lost a lot of money when they invested in the space back in the 1980s. Why? It was impossible to know how long it would take for this brilliant tech to be adopted by the mainstream public at a price that was realistic and affordable. It’s only in the last fifteen years or so that this has really been achieved.
So, these investors didn’t lose money because they were bad investors or because the technology wasn’t good. They simply didn’t foresee how long it would take to catch on, and didn’t have the runway to stay in the bet.
What are the lessons from all this? Well, economics professors have written whole theses on the subject…
But from an investor’s point of view, these are great examples of not simply being so wowed by innovation that it blindsides you to certain market realities.
A great idea or piece of tech will only get you so far. It is the application of that tech, the quality of the execution, the user experience, and the potential for mainstream adoption that turn a great concept into a great investment.
So, for all the founders out there, it’s important not to ignore the market into which you are launching your product. When you sit with potential investors, remember to talk not just about the tech but also about your customers and how they will interact with it.
However good your product is, if you haven’t thought of how it can be commercialized and monetized, with revenue streams and a go-to-market strategy, the best tech in the world may forever be forgotten, gathering dust at the back of a drawer.
None of this is to downplay the importance of the tech itself. Without a good product, all the marketing in the world isn’t going to get you very far. Innovation is what keeps this industry fresh, vibrant and exciting. Innovation is the key to the future we are all looking to create.
But this is to highlight that innovation alone does not a good business make. For that, you need to consider its application, its adaptability to a wider market, and how consumers can actually use your product to enhance their lives.
The best innovation doesn’t always win. It’s about delivering results too.
By Ricky Margolis