6 Differences Between Technology Push and Demand Pull Startups
And why companies should know which paradigm applies to them
It has been well-studied in the economics of technological change literature that two fundamentally different paradigms drive innovation: (1) technology push and (2) demand pull. Technology push meaning that advances in science and/or technology are driving the innovation. Demand pull meaning that market needs are driving the innovation. They are equally valid approaches, but each involves a different set of challenges. Thus, companies should be aware of which paradigm applies to them, so they can develop their business strategy accordingly.
Here are 6 differences between the two paradigms to help companies identify, understand, and adapt to the one in which they find themselves:
1. Demand pull means customers already know they have a problem
As defined above, demand pull is driven by market needs. In this case, a company identified a problem, need, or desire among a population in the market, and is developing a product to address it. This means the potential customers and future end users of the product already know they want it (or something like it). This is a huge advantage of demand pull companies compared to technology push companies, because they do not need to convince potential customers that they need the product.
This is the reason that nearly all guidance on developing investor pitch decks involves defining the customer problem upfront and then presenting the company’s solution to the problem. However, just because a pitch deck is structured as “problem -> solution,” does not mean the company is a demand pull company. Since this pitch deck guidance is so common, technology push companies also tend to adopt it. The difference is that the customers of demand pull companies already know they have a problem. The customers of technology push do not.
2. Technology push means a new technology is looking for a problem
Compared to demand pull, technology push companies are in the reverse situation. They have developed a solution, but need to figure out what problem it solves. In this case, their potential customers are not already looking for a solution. Therefore, technology push companies need to figure out, which population in the market will benefit from their product and then convince them that the product is better than the status quo. This can be incredibly challenging, because not every new product improves the situation of its target customers.
The technology push paradigm tends to be very common among technical founders for reasons outlined in my previous post The Science-Engineering Interface. Engineers will often build things because it is interesting or cool, not necessarily because there is a market need. While this can be a more challenging paradigm from a market perspective, it is still a major driver of innovation, and founders, companies, and investors should not shy away from the market challenge it presents, but they should be prepared to address it.
3. Demand pull has lower market risk
Companies operating in the demand pull paradigm inherently have lower market risk than companies in the technology push paradigm, because, by definition, demand pull means there is already a market signal that a new product is wanted. It is much easier to assess the total addressable market (TAM) in this case, because a market already exists. In contrast, it can be much more difficult to assess a TAM for technology push companies, because the market may not exist yet. However, technology push companies should not assume the market does not exist; in many cases, it’s a matter of finding the right market, not creating a new one.
While demand pull typically means lower market risk, it may also mean higher technology risk. Often technology push companies are supported by years of research and development, proving that a new technology works. Whereas demand pull companies often are developing a new product without knowledge that it will work as intended. Just because there is a market need, does not mean the technology exists to address it. However, qualifiers such as “may” and “often” are used in this description of risk, because in many cases demand pull companies may actually be lower risk in terms of both market and technology, because demand pull companies often leverage existing, proven technologies to develop their products.
4. Technology push often has a higher transformative potential
While technology push companies can be higher risk than demand pull companies, they can also be higher reward, because technology push companies typically have a higher transformative potential. When a completely new technology emerges, its usefulness may not be immediately obvious to potential customers, because it is drastically different than the status quo and some potential customers may not have the appropriate context to evaluate it. Think about it, if you asked someone in the early 1900s, how they would use an airplane, or someone in the 1980s, how they would use the internet, most people would not have sufficient context to answer the question. Yet both technologies were transformative and achieved wide market adoption.
Not all technology push companies will be transformative, in fact more often than not, they will fail to gain the market traction needed to succeed. And some demand pull companies have transformative potential, because sometimes using existing technology in a new way can be transformative. (For more on transformative potential, check out a previous article on What is Frontier Technology?).
5. Demand pull has fewer adoption hurdles
Due to the attributes of demand pull companies already discussed, they typically have fewer adoption hurdles than technology push companies. When customers already have an understanding of a product’s value, there are fewer steps to achieving product adoption, because the company does not need to demonstrate the value of the product to customers. Instead the company can focus on getting the product in front of customers, ensuring the customers know how to use it, and being responsive to customer feedback on how to make it better.
In contrast, technology push companies have a more difficult path to adoption, because their potential customers typically do not understand the value of their product and they may not even be engaging with the right potential customers in the first place. Thus, the path to product-market fit is much longer for technology push companies. It requires companies to learn about potential customers’ needs, challenges, and pain points, adapt their products to address them, and then educate those potential customers on how the technology works and why it is better than the status quo. In that process, companies will discover that many potential customers are not actually customers, because their product does not provide sufficient value. Plus, they still have the same adoption hurdles as a demand pull company too.
6. Marketing matters for both, but with different initial goals
Product marketing is incredibly important to both technology push and demand pull companies, however due to the different challenges faced by each, the initial product marketing goals are going to be different. For demand pull companies, brand awareness is often the major goal to ensure potential customers know you exist and can solve their existing problem. For technology push companies, the initial product marketing goal is learning the market, learning about potential customers, and eventually educating potential customers on the product value.
Recognizing which paradigm a company exists within is incredibly important to developing the right strategy. Founders who started their company because of a technology are likely in the technology push category. Whereas founders who started their company because of a known customer need are likely in the demand pull category (assuming that customer need is wide-spread and not unique to one customer). And some companies may involve a bit of both.
Too often I have seen technology push companies adopt an “if we built it, they will come” strategy, when they are operating within a paradigm where their potential customers have no idea they exist, the value they might bring, or how to leverage the company’s product. Just because something is new does not mean it’s better than what already exists, so companies have to do the work to prove that it is better. And know when to accept that it’s not!