May 25, 2010
Push versus Pull: A Tug-of-War.
“Is an entrepreneur with a market need in mind and a product to fit that need better positioned for success than an entrepreneur who starts with a technology but “needs” a need?” Dr. Erika Wagner asks me as we sit in the MIT Entrepreneurship Center. She quickly answers her own question. “I’d argue yes.” Dr. Wagner is the Executive Director of the X PRIZE Lab@MIT that challenges students to identify a grand challenge to be solved through breakthrough innovation … and a prize of $10,000,000 no less. Students need not predict who would win the prize. Rather, they focus on the impact of having that problem solved and the feasibility of doing that in reasonable time. In the context of entrepreneurship, the X Prize Lab@MIT takes a very “market-pull”-oriented approach. Students think first about a market need and worry about how to solve it later.
Contrast that with A123 Systems, a battery maker made famous by its IPO in the midst of the historic economic recession. When A123 began with a high power density, low-cost battery developed in the lab of MIT Professor Yet-Ming Chiang, its founders knew that they had a promising technology but didn’t know what the right application for it could be. Fiona Murray, MIT Professor of Innovation Management who teaches the Innovation Teams, a course where students develop commercialization strategies for MIT technologies, explains the challenge faced by companies like A123, “People can’t always imagine the problems they have. Part of what entrepreneurs do is articulate problems in new ways that help consumers think about what might be valuable to them.” When a technology is developed without thought to what problem it solves or how, a team of savvy entrepreneurs must “push” the technology to market and create a need that consumers may not have even thought about before.
Both the X Prize Lab and Innovation Teams, and their underlying philosophies, have interesting implications for the entrepreneurial process. Dr. Wagner believes that focusing on the problem first forces entrepreneurs to deeply understand their customers. And this “empathy” serves as a guide to whatever solution is pursued. But there is always the risk that the entrepreneur misidentifies or misarticulates the need and winds up with a non-existent market and the wrong product.
Professor Murray points out that our notion of government funding for basic research relies on some form of technology push also taking place. Governments fund research in part because the private sector is not designed to take big risks and absorb long-term uncertainty. Companies are more adept at developing products that are incremental improvements over their existing offerings based on customer feedback. But truly breakthrough innovations come from development of basic science. So while tech-push entrepreneurs face challenges, they are critical if we want to really leverage our investments in basic research. But to do their job well, tech-push entrepreneurs must be highly adaptable and realize that their first assumptions about the market for their technology may be wrong.
Ultimately, tech-push and market-pull are two sides of the same coin for entrepreneurs. A successful company requires both a well-defined problem to solve and a well-formed solution that addresses the problem. Additionally, both types of ventures begin crystallizing their strategy as soon as they make their first hires. When a tech-push founder hires sales and marketing staff the market approach begins to be defined by the experiences and culture of these new hires. Likewise, when a market-pull founder hires the first engineer, the solution starts to go down a path defined by that engineer’s expertise. In both cases these first hires must be made with great care.
Finally, it is important for aspiring entrepreneurs to be aware of the approach that they are coming from. This is the strength of courses like Innovation Teams and X-PRIZE Lab. They help students understand the challenges that exist at the earliest stages of entrepreneurship based on the starting point of the business. So although Dr. Wagner’s and Professor Murray’s starting points differ, in the end all roads (hopefully) lead to commercialization.