Creating technology differentiation

This article answers the following questions:

• What is technology differentiation?
• Why do we care?
• How do we get it?

WHAT IS TECHNOLOGY DIFFERENTIATION?

Competitive differentiation is usually defined as some aspect of a company or institution that helps it create some sort of  value which is hard for a competitor to copy. The company is differentiated by the “hard to copy” thing. Classical management theory (“theory” might be too strong a word, since many things grouped in with management theory often don’t have much of an empirical basis) says that once a product or service is undifferentiated then it becomes a commodity, and it will be chosen from its peers based on its price to acquire (that price may include how difficult it is to acquire – so corner stores will sell commodities at higher prices because there is a relatively high cost to travel further to the supermarket). Of course it is all shades of grey to some extent since a differentiator might be about status rather than function (e.g. private schools over public schools), or tribal orientation (surf wear vs sports wear), but it is a good starting point in a competitive analysis: how differentiated is the company, and how long can it sustain that differentiation? (In fact I think* its the most important thing by a country mile, but am happy to accept empirical evidence to the contrary 😉 )

Technology differentiation is the competitive differentiation brought about by some sort of technology. Technology differentiation (or any differentiation) is not found by buying off the shelf products unless they are integrated with something that is differentiated. There is a great article by Michael Porter in HBR:

Michael Porter What is Strategy? where he says”The essence of strategic positioning is to choose activities that are different from rivals”.

It talks about the frontiers of operational effectiveness, and how the search for operational effectiveness does not provide any sustainable advantage.

Technology differentiation is interesting to me because I’m much more interested in paradigm shifts, and big changes in behaviour brought about by technology, rather than the use of technology as a commodity. Technology development often brings about large increases capability.

However I think technology differentiation is more than just beating the competition, it’s also:

• About choosing a tech strategy that has a direction, a focus, which helps align people within a venture.
• Its about being able to better build a foundation from hard won knowledge and leverage that foundation.
• Its about the brand – the customer’s perception of you – whether German cars still have a engineering advantage over other manufacturers is a moot point – they are perceived to have an engineering advantage.
• It provides adaptive capacity – sure if you have no capability in any tech you could quickly switch between technologies and try and skim off some meagre profits using a dash of snake oil. If an organisation has however have a certain technological expertise, then there will be many ways to leverage that technology to achieve a competitive differentiation.
• It offers a way to assuage a human need to being involved in creating things.
• And finally it can aid in the creation of a larger ecosystem of competitiveness. If in Australia we had a billion dollar company hiring hundreds of scientists expert in gene therapy / CRISPR, which developed many med-tech products, there would certainly be flow on effects into the wider community, helping to provide a foundation of more technology creation (leading to flow on positive feedbacks into the company). If instead the country was to have a billion dollar company that makes to-do lists or process oriented tools, this would not in any way help build a substantial technology foundation for the community to leverage .

WHY DO WE CARE?

There were a  few reasons mentioned above, but the primary one is that its by far the best way to get people to use (and therefore buy or invest) your products and services.

HOW DO WE GET IT?

The 64 million dollar question, in fact that is how much it can cost to develop technology differentiation, 64 million dollars!

In broad strokes below are most of the things that I think are important in developing a technology competency and building a differentiated technology platform. The list is coarsely ordered – though many things might happen simultaneously, experiments and their feedback might fork the pathway etc. Also, sometimes the devil is really in the details.

• Determine what is the vision – what are the broad goals of the technology (platform), how will help the business?
• Determine the business model(s) and how it creates value.
• Determine the opportunities and risks. What are the likely direction changes/options given certain market reception to an MVP, or as a result of experiments (e.g. that flying car just does not fly -> lets make a flying boat).
• Determine how we integrate the tech and the domain, how does tech add to the domain?
• Determine the range of possible product options. Without a technology infrastructure we can’t do a fine grained jobs to be done. I see building a technology platform or competency as providing many possible products or services – rather than building a tech platform from scratch for one particular job/product/service.

As an aside: This process doesn’t ascertain for example that people really want a low impact way to get from A to B and then build a bicycle design capability (I guess a company could just buy the bikes from someone else and rent them as a business model – but its not going to particularly differentiable is it?) Instead the bicycle design capability is built and then one further expands what products and services are possible given that capability – so a push then pull model – rather than a pull then push.

• Determine what technology or people are missing in order that we can build our tech – after ascertaining that, build the team and culture.
• Determine the technology architecture, what combination of technology gets where we want to go (modularity vs integration)
•  IP strategy – eg what artefacts or processes might create long term value creation?
•  Bootstrap architectures – what are the initial architectures that get us to coal face (experimenting in real conditions) as quick as possible?
•  Do the applied research, do experiments and make prototypes.
• Make sure there is organisational learning – so making sure that lessons/knowldege throughout the process are retained.
• Execution and iteration and adaptation.

This todo list isn’t really that revelatory, the more interesting question from my point of view is what structures, what architecture, what components do we need to create in an ecosystem so that we can reliably create deep technology competencies in that ecosystem?

*note: I reserve the right to change my mind about things should new data come to light

*also note: This was republished with minor changes from r1xlabs.com. Originally published 30/11/2017