The digital ecosystem assessment: How investors, corporates and entrepreneurs need to change their view on existing frameworks

March 2018, by Simon Fischer

It is common belief that the right timing is of the essence when bringing an idea to market and that it is one of the most crucial factors for a start-up’s success. Well-known entrepreneurs and investors, such as Bill Gross in his famous TEDTalk provide the evidence that timing contributes to success even more than funding, the business model or the right team to execute the start-up’s idea. According to Gross, the “timing” accounts in his analysis for 42% of the difference between success and failure of a start-up and hence is the main differentiating factor.

In today’s digital era where we are witnessing a highly increased speed of technological adoption and development, this analysis and conclusion appears even more accurate and overwhelmingly clear.

Since corporates have also entered the innovation race to combat up-and-coming digital players, the challenge to truly understand the market and its readiness for a new product/technology is omnipresent.

Yet the majority of analysts in organizations have failed to create better forecast models to accurately time their moment of market entry. Even those who work tirelessly on testing their ideas and products with potential customers and “early adopters” often fail to find the right moment. Prominent examples in recent months were Quixey (133m$ funding; too early in the market for digital assistants), Pearl (too late, even though their product was superior) or German fintech Fintura (too early, customer acceptance still too low).

So why is this happening? One thing that most companies commonly fail in at is adjusting their frameworks for adoption of technology to the digital environment. While the majority still thinks in technology adoption models hailing from the late 50s and 60s, these diffusion theories and adoption lifecycle frameworks fail to reflect the impact of today’s digitization.

So, market analysts urgently need to rethink their strategies and frameworks, in particular with regard to two major shortcomings:

1) The speed of technology adoption has increased significantly.

While the common models use adoption curves that develop gradually over time, digitization and globalization created a technology adoption in a mercurial shape depicting skyrocketing adoption rates. If a technology or business model really breaks through, this success also is no longer limited to its regional environment but literally creates adoption across the developed markets around the globe. This new reality is reflected in many unsuccessful business cases from incubator and accelerator programs that merely tried to replicate early stage ideas from other parts of globe and ran out of time in the execution once they saw it succeeding in the home markets.

2) Not just the customer’s acceptance of a technology, but also the market readiness of the technology itself matters.

Investors in particular face the difficulty of thoroughly understanding and forecasting the applicability of technology in certain industry sectors. For example, just because blockchain applications could work effectively in the banking industry, this doesn’t mean it will show the same levels of growth and success in the insurance market. Simply because the environmental factors, the structure of the industry’s value chain or the IT-backbone of leading players aren’t ready to adapt.

This is why a two-dimensional analysis of both customer acceptance (adoption readiness and hence true growth opportunity) on the one hand and market readiness on the other is becoming a new standard for assessing the right timing of an innovation and its market entry.

Such frameworks, or comprehensively described as “digital ecosystem market readiness assessments” can resolve some pain-points in the market entry timing and help corporate innovators to better understand the maturity of the innovations segments they currently investigate. Is this still a wild card or our last chance to get into this innovation segment?

But is there a good proxy for the market readiness of a technology in the digital era? How can this be assessed properly? What kind of data is needed for this analysis?

While measuring customers’ acceptance of a new technology can be easily done using product demos and interviewing programs, understanding the market readiness of the technology is a true challenge. Multiple factors need to be taken into account here: e.g. the volume of venture capital funding flowing into this technology, the IP/patent filing activity, the speed of new start-up formations across the market and the amount of open job postings related to the technology. An analysis of these factors flanked by an understanding of the existing tech-stack in the market could help to determine the market readiness of a new technology.

For investors, corporate innovation managers and entrepreneurs, this new reality will make it even more difficult to assess the right market timing and will require constant monitoring of the digital ecosystems they are working in today.

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