Business Models for Technology Entrepreneurs

by · February 5, 2013

role-of-entrepreneur-290x290About a year ago, ictQATAR conducted some internal research on the goals and aspirations of young Qataris. The number one “profession” Qataris aspired to be was not an engineer, a doctor, or even a lawyer. No, the top profession – and by a lot – was to be an entrepreneur. What exactly does that even mean? Last time I checked, entrepreneur wasn’t really a profession in and of itself. If young Qataris have their way, they all will be creating new businesses. Perhaps, but what I also noticed was that far too often people thought that all it took to be an entrepreneur was a good idea and some money. As Grumpy Cat would say: No.

Over the next few weeks I’m going to share a series of considerations for aspiring entrepreneurs as they consider what next great business they plan to lead. Today I am going to explore considerations for choosing a business model for entrepreneurs, particularly in the technology realm.

A great book on new business models is Henry William Chesbrough’s “Open Innovation: The New Imperative for Creating And Profiting from Technology.” In it he shares a detailed case study of the development of Xerox as a company, and how its strict adherence to one business model led to its decline and helped spur the creation of new businesses including Adobe and 3Com. Xerox became highly successful on a business model that focused on delivering the entire system and service from start to finish. Adobe and 3Com flourished on different models that weren’t even considered by Xerox. They adopted more open business models that focused on distribution methods, networks and shared standards. The takeaway – just because you have one business model in mind, it doesn’t mean that’s the only way, and often your first concept is not the best.

As an aspiring entrepreneur in technology, it’s highly possible you have a great new product that meets a specific need, but how the business is shaped to realize the potential of that product is essential. A great product with the wrong business model is likely to languish. So what should you consider when deciding on a business model? Chesbrough has thoughtful recommendations for this:

  1. Clearly identify your value proposition – what is the value your new technology creates for people?
  2. Identify a market segment – what particular part of the market will you target your technology to? It’s unrealistic to think the entire market will jump at your new offering.
  3. Define your value chain – what is required to produce and distribute your technology? Where do your technology and services fit into that supply chain? What outside assets could be leveraged to maximize value?
  4. Identify the revenue generation mechanisms in your technology – what should your cost structure be and what are realistic target margins?
  5. Clarify your place in the value network – what are possible complimentary firms and competitors? How will customers be linked to suppliers?
  6. Finally, formulate a competitive strategy – based on all the other factors, what will allow your technology or firm to triumph over others?

In today’s connected world, it’s highly unlikely you will develop a business model where you control every factor of business from development to delivery. Critically examining your offering on the above factors will help you choose the right model for your budding business. Certainly read all of Open Innovation for more ideas on possible business models, especially open ones, as well as greater clarity on the factors you should consider as you work to launch your own business.

Post By Brian Wesolowski (137 Posts)


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