The Dark Side of Innovation

I am always amazed at the distain many researchers and techies have for business people and investors. I was once at a university innovation conference when a panel of business types (including me) was introduced as ‘sharks’ that would steal researchers’ ideas. I get it. To a researcher whose passion and dream is an idea, the concept of having to sell that idea is distasteful. And so to many, the business side of innovation is a necessary evil. Pass the black cape because I guess that puts me in the camp of the dark forces.

Fundamentally every business is an investment product, and as such its objective is to provide a return to its owners. The reason Toyota exists is not to produce and sell cars, but rather to provide a return to its owners. It just so happens that Toyota has decided the best way to provide a good return to its owners is to sell cars. When you look at the business as an investment product, you realize the product and operations are the means, and the return is the end. You also realize that your business is competing with companies selling everything from derivatives and mutual funds to cars and mp3 players.

We spend a lot of time and energy talking and strategizing about technology and product development. But the truth is that it is not enough for a company to have a great product. A company needs to BE a great investment product. A company has to transform its products into economic value for its owners through its business model. And more than that, the company needs to sell itself as an investment product. Distasteful or not, this is the reality.

When most folks think of the sales function within an organization, they usually think of selling the products or services of that company. Toyota sells cars, Apple sells electronics, Hilton sells rooms, and Deloitte sells audit services. But investors don’t buy the company’s products. Their interest is in buying ownership/equity in the business itself, and like any product they have choices. They can buy a mutual fund, shares in Apple, or shares in your company. Knowing how to sell your company’s products versus selling your company as an investment product is vital. Technology innovators often forget this important subtly. They become so focused on how the product will change the world, that they forget put equal thought into how the business will create value for its owners.

So here is the point where I get on my dark soapbox and preach. I’m sorry, but this just cannot be said enough: for every technical innovation, there must be a corresponding business model innovation to realize the value of the technology. Business design is just as important as product design. You must put time and energy into developing, testing, refining and selling your business model. If you find this concept distasteful, go find another career.