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.
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.