A Mistake Engineers Make When They Innovate: The Prototype

Engineers tend to be entrepreneurial people, whether as founders of startups or employees in established firms—if for no other reason than they like to create things. A large proportion of high-growth startup companies have a strong engineering component.  Yet engineers with the ambition and drive to innovate often make the same mistake: They believe that the ingredient for success is to develop a working prototype of their idea and that once the prototype is out there, success will follow. They are proud of their knowledge and how they have leveraged it on a great idea—and they are probably right. However, an idea or a prototype is only a small part of what makes a successful startup .

One case in point is an engineer who I was introduced to. He explained the idea, which could have some traction. Then he told me about what he had done. He had built a prototype. And then… a better prototype. And after that… an even better prototype. He never tested it, never considered pricing policies or planned the go-to-market strategy; the business side was secondary to him. Needless to say, nothing came of his efforts.

Innovation-Prototype-Entrepreneurship
Engineer Otto Lilienthal “Mount flight”, Lichterfelde (near Berlin), 29 June 1895. On 9 August 1896, Lilienthal fell from a height of about 15 metres (49 ft) and died there a few hours later. His last words to his brother Gustav were “Opfer müssen gebracht werden!” (Sacrifices must be made!).

The fact is, the business side is at least as important as the technology itself . Without a basic understanding of business, knowledge, technology and prototypes are all worthless. Engineers who do not understand this principle are bound to fail, because:

  • They refuse to see the business side of an idea as equally important as the technology, or they view their business partner—if they have one—as a second-class citizen.
  • They downplay business knowledge and in doing so, put themselves at a disadvantage.
  • They believe engineering is somewhat of a higher knowledge than business.

In reality, these two types of knowledge are simply different: Technology involves more tangible knowledge: it can be addressed using math, it is structured and follows a rather simple logic. Business is less tangible: it is a mix of economics, sociology, psychology and informed experience. It is harder to codify and thus harder to translate into engineering terms. Yet both are crucial to startups.

Technology prototypes without a business model do not even have a fighting chance in today’s markets. It has been proven over and over again that the best technology does not always win. And oftentimes, the company that makes it big is not necessarily the one that came up with the technology. This scenario is so common that the winners are called “fast seconds.”

Logitech (now Logi), a computer peripherals company, experienced this situation first hand. A successful engineering-driven company, it failed to gain traction on its computer cameras despite being the best from a technology perspective. Consumers were not convinced by technology arguments, but instead by look-and-feel, brand, pricing and positioning. Logitech ended up buying the leader in the category to get the business model it needed to succeed.

Engineers with little appreciation for the business side see a successful technology-based startup and quickly point out how the technology is widely available and how they would be able to replicate it with enough money. They fail to see that the magic is not only in the product, but more so in the business model around it .

Another reason that makes engineers disenchanted with business in some countries is the bad rap that business gets. Making money is seen as an unworthy purpose and the knowledge associated with it as unworthy. This perception biases engineers against giving the business model the attention it deserves. Regardless of whether the idea has an economic or social purpose, its success depends on applying business knowledge. This means answering questions like:

  • Who are my customers?
  • How do I reach them?
  • How do I convince them?
  • How do I deliver my product?
  • Is the business economically sustainable?
  • How do I get other people and companies on board to enhance the customer experience?
  • What will competitors do?

Building the business around the prototype is as important and challenging as the technology itself. Much like technology, the business model requires prototyping to understand what works and what does not. Failing to understand that both technology and the business model are equal partners is a recipe for failure.

Entrepreneurial engineers would should get a business cofounder of the same stature . Alternatively, they can get a business education themselves. Relying on their own business intuition has failed all too often.

About Tony Davila

Antonio Dávila is professor of entrepreneurship and accounting and control. Furthermore, he is the head of IESE's Department of Entrepreneurship and holder of the Alcatel-Lucent Chair of Management of Technology. From 1999 to 2006, he was part of the faculty at Stanford University's Graduate School of Business, where he still teaches periodically. Prof. Dávila earned his Ph.D. from Harvard Business School and his MBA from IESE. His teaching and research interests focus on management systems in entrepreneurial firms, new product development and innovation management, and performance measurement.

10 thoughts on “A Mistake Engineers Make When They Innovate: The Prototype

  1. I would love to hear Toni debate this topic with Guy Kawasaki, who was a visitor to IESE last year. He came with a clear message: forget the business plan, it’s the prototype that counts. That would make for a interesting debate!

  2. Thanks for the comment and for your suggestion. It is always interesting to debate. Also it suggests that I failed to do a good job in writing the blog. Did I mention business plan anywhere in the blog? I don’t think I did. Still it sounds like I am advocating for it, when the entire blog is neutral on this topic (the blog is not about business plans!) . When I mention prototypes I mean engineering prototypes of products and services; often engineers think that an engineering prototype is all you need. The point that I am making is that you also need business knowledge and, if you choose so, you can deploy your business knowledge through prototypes of the business model (lean startup approach, which I think is what you refer to when mentioning Guy Kawasaki)

    Thanks!

  3. A couple years ago I advised a biotech firm seeking PE financing. They had an incredible product and the founders were world renowned experts in their field. However, their business strategy was poorly thought out and the business plan read like a scientific research paper. I tried to help them but they simply did not have the ingredients, beyond product, to create and sustain a viable business. I suggested they bring on professional management but they refused to provide meaningful equity incentives. These scientists still dream that they will launch a successful business but I highly doubt it will ever happen.

  4. I really enjoyed reading your blog, you have lots of great content. I look forward to reading more posts from you.

  5. Being trained as an engineer myself, I too fell to this trap, believing that any good product will sell for itself. Nevertheless, looking at some successful companies, it isn’t always about the product but how the product is positioned/portrayed at the market is what matters in determining success

  6. This article gives a new way of business thinking to engineers. It is good to get all the good thoughts here and how come a startup can get boost. It is good post and looking for something new in this.

  7. This post best describes the business criteria like the tips for building business. This will definetely boost the entrepreneur looking to build business as this focuses on many good points important for business like knowing customers, reaching them etc. Keep posting such informative post which is fruitful for many.

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