Changes in technology: new products, new services and new ways of selling
Definition
Technological change: the arrival of new products, materials, processes and ways of trading that were not available before.
E-commerce: buying and selling goods and services online instead of in a physical shop.
- Technological change creates business ideas because it changes what can be made, what can be sold and how cheaply it can be delivered.
- It opens three routes to a new idea.
- New products: technology makes something exist that could not exist before, such as electric cars, smart watches and home 3D printers.
- New services: technology makes a service possible to run at scale, such as video streaming, mobile banking and live delivery tracking.
- New ways of trading: e-commerce lets a business sell across the country from a spare room instead of renting a unit on the high street.
- Technology also gets cheaper as it spreads, so the cost of starting up falls and an entrepreneur needs less money to test an idea.
- A website and a social media page can reach thousands of customers for under £100 a month, where a high-street unit would cost several thousand pounds in rent.
Example
- Deliveroo launched in London in 2013, once smartphones with GPS had become normal.
- Restaurants and hungry customers both existed long before that.
- The new technology was what made an app that matches the two, tracks the rider and takes the payment workable.
- Will Shu did not create the need, he used new technology to meet an old need in a new way.
Changes in what consumers want: when lifestyles move, demand moves with them
Definition
Consumer wants: the goods and services people would like to buy, which shift as their incomes, tastes, priorities and way of life change.
- When people change how they live, work and spend, demand drains away from old products, and four shifts in what UK consumers want have produced most of the business ideas you would recognise.
- Health and fitness: rising interest in wellbeing built demand for budget 24-hour gyms such as PureGym and for low-sugar drinks.
- Environmental concern: shoppers wanting less plastic and less meat opened the way for refill shops, reusable bottles and the Greggs vegan sausage roll.
- Time pressure and expectations of speed: households with less time to cook created demand for meal-kit boxes such as HelloFresh, for click and collect at Tesco and for rapid grocery delivery.
- Home working: spending moved towards desk chairs, video-call software and coffee shops in market towns rather than city centres.
- An entrepreneur who reads a shift early sells into a market with few rivals, so can charge a higher price and build a customer base before larger firms copy the idea.
Common Mistake
- Do not stop at describing the change, because the mark is for linking it to the business idea it creates.
- "More people care about fitness" on its own earns nothing.
- Carry it through: more people care about fitness, so demand for cheap gym access rises, so an entrepreneur opens a 24-hour gym with no staffed reception and low monthly fees.
- Keep the change as the driver and the idea as the result, not the other way round.
The two drivers usually push in the same direction
- The drivers rarely act alone, because a change in what people want only becomes a business once technology exists to serve it cheaply enough.
- Both are external drivers, meaning they happen outside the business and no entrepreneur can control them.
- Because both keep moving, the supply of new ideas does not dry up, and a business that stands still is overtaken by one that reads the change.
Note
- The same two drivers also work in reverse, by making existing products unwanted.
- That process is obsolescence, and the next guide covers it.
Judging a change: whether it is worth acting on depends on the business
- Not every change is worth chasing. A lasting shift such as online shopping is more attractive than a short-lived craze, especially if rivals cannot copy the opportunity immediately.
- The business must also be able to afford the response. New technology or stock may require spending before extra revenue arrives, which can rule out an otherwise attractive idea for a cash-limited start-up.
- Overall, a technology or consumer change is worth acting on when demand is likely to last, the business can afford the response and the expected advantage is not likely to disappear immediately.
Exam technique
- Build the chain in three links: name the change, state the idea it makes possible, then say why customers will now pay for it.
- The link most often dropped is the last one, because the answer names the change and the idea but never says why anyone buys.
- Use the business in the source booklet rather than a memorised favourite, since application marks are gated on that context.
- On a justify or evaluate question, finish by weighing whether the change looks permanent enough to justify the spending, because that is where the judgement is credited.
Self review
- What three routes to a new business idea does technological change open?
- Define e-commerce.
- Give one change in consumer wants and name a business idea it created.
- Why are technology and consumer wants called external drivers?
- Name two things that decide whether a change is worth acting on.
