What Is and Is Not A Technology Company
When I was a kid, I had a morning routine with my family. Over breakfast, we’d divvy up the newspaper. I’d go straight for the Business section, and from there to the back pages with yesterday’s stock prices. Scanning down the lines of tiny text, I’d look for SUN, ORCL, MSFT, AAPL, SGI. Then back to the front of the Business section, reading whatever I possibly could about the silicon giants of the day. Then, finally, the funny pages. I was a weird kid.
Today, like many, I no longer get a physical newspaper. Most mornings I sit down with my iPad and pull up Techmeme, which more often than not leads me to several different “tech blogs” that deliver a mix of rumor, opinion, gossip, rehashed press releases, and, very occasionally, actual news.
There’s a striking difference between the technology news I grew up with and a lot of what I end up reading these days. The difference is something I only recently cemented for myself: most so-called tech news isn’t about technology at all anymore.
Confusing Startups for Technology
There was always something that bothered me about TechCrunch, and it bothered me more and more over the years that the blog rose to be the sort of force that could wipe a site out with a tsunami of traffic just by linking to it. For a publication with “tech” in the name, technology only ever seemed ambiently present in TechCrunch’s reporting. Software and hardware are background music for the site’s real interests: money and power, success and failure, who’s up and who’s down. TechCrunch often read to me like the parts of the Business section I used to skip as a kid, the boring ones with “merger” or “acquisition” in the headline and a picture of two suits shaking hands.
TechCrunch’s popularity urged on a slew of imitators, and now the majority of “technology journalism” consists of blogs that operate in the same general mold. Even newspapers have adopted TechCrunch’s overall format and pace of publication for much of their writing on technology. This has shifted not just the tone and the depth of technology reporting, but the subject matter as well. Where newspapers tended to focus on established technology companies, TechCrunch has always primarily been about startups. With everyone following in their footsteps, startups have become synonymous with technology journalism.
And why not? Startups are exciting. They’re often headed up by interesting people who want to take on big problems. Startups seem somehow rebellious and alternative, but in a way that’s safe and accessible enough to read about at the breakfast table. Startups have drama. Will they survive? Get bought for a billion dollars? Fail spectacularly? What’s more, startups love to talk about themselves, which makes life easier for reporters. What founder, save one who’s already well-established and cagey, is going to turn down free publicity?
Startups, however, are not inherently technology companies.
It’s now accepted-going-on-cliché to say things like “software is eating the world”, which is an aggressive way of assuming that every company now has to be at least a bit of a technology company, and those that want to grow rapidly even more so. Many new companies targeting industries as diverse as eyeglasses and baby food are, at the outset, leveraging technology for everything they do: supply chain management, marketing, recruiting, internal communication, product development, and so on. This makes these businesses look like technology companies, if you squint. But, of course, they aren’t. They’re eyeglasses and baby food companies.
Somewhere along the way, we confused “startup” for “tech startup” and “company” for “technology company”. Now that every growing business requires significant competence in technology to succeed, the distinction is even blurrier. Is a company that has staff members with “programmer” or “engineer” in their titles a technology company? Are they a technology company if they were funded by venture capitalists who have previously funded businesses that we think of as technology companies? Are they a technology company if their founder was using a laptop when she came up with the idea for the business?
A Definition, But Not a Value Judgment
These questions are pretty easily resolved. You are a technology company if you are in the business of selling technology. That is to say, if your product – the thing you make money by selling – consists of applied scientific knowledge that solves concrete problems and enables other endeavors, you are a technology company.
By this definition, most of the companies that dominate the “tech blogs” are not technology companies. They’re just, well, companies. These businesses might use technology, or develop technology, or even be run by people who used to work at technology companies, but they don’t exist to create and sell technology.
IBM is a technology company. Basho is a technology company. Boundary is a technology company. Apple is a technology company thanks to some of its lines of business (hardware, software), but is not a technology company in all of its lines of business (music, movies, books). Ditto Google and Amazon, which make money both from selling technology and from leveraging technology to sell things like advertisements and socks.
Simple is not a technology company. We use and develop technology, but we are a banking service, and we make money through banking. Zappos, likewise, is not a technology company. They use and develop technology, but they make money when people buy shoes from them. Technology might make our respective businesses run more effectively, or give us a competitive advantage, but it is not our product. An interest in technology might shape our corporate cultures, but technology is not what we sell.
Put more crudely: sticking feathers up your butt does not make you a chicken, and having an engineer or a data scientist on staff does not make you a technology company. Having people in these kinds of roles just makes you a company that has to do business in a world that requires code to be written in order to operate efficiently.
This definition also doesn’t suggest that only “enterprise” technology companies are “real” technology companies. There are plenty of companies that make money by selling technology to consumers. But there are also a lot of businesses selling actual things to consumers who get lumped in with technology businesses simply because they sell products via the web. That might have been an important distinction in 1995, but no longer.
What I’ve spelled out is a definition, but not a value judgment. I’m not saying that technology companies are good and other types of companies are bad, or vice versa. What I’m saying is that they are different, and that they require different approaches for investors, executives, and particularly for the press. Because technology companies are trafficking in applied science, an understanding of that science is required in order to reason about and report on their operation with any kind of cogency.
New Terminology Needed
“Tech company” and “tech startup” are over-applied labels that have outlived their usefulness. Calling practically all growing contemporary businesses “technology companies” is about as useful as calling the enterprises of the industrial era “factory companies”; it accurately describes an aspect of what they are (or were), but it doesn’t really capture the totality of their operation. It certainly doesn’t tell you anything substantive about how they’ll behave in the market over the long term, which is probably the most useful reason to label a business at all.
What’s more, this mis-labeling results in the conflation of companies in totally different industries applying totally different business models, all being funded and staffed and reported on by the same pool of people. If we remove the label of “tech startup” – and with it the hypothetically stellar trajectory we like to imagine such businesses are on – we’re forced to confront the reality of a business’s model, independent of the reverberations of the echo chamber.
That said, what TechCrunch and other sites often cover is clearly something distinct: companies that have information technology so close to their core (“in their DNA”, if you can still stomach that phrase) that they seem to have acquired the essence of this thing that they use to get ahead. But in confusing how these businesses make their product and what their product is, we introduce a whole set of assumptions and biases and information gaps that, by the looks of it, have resulted in a distorted market for companies and their equity, salaries, publicity, office space, and so forth.
I’m not sure what the ideal terminology is for today’s burgeoning companies. At startup showcases, terms like “disruptive businesses” are thrown around, but they presume too much to be useful. The word “startup” itself presumes too little, and has become overloaded. In time, a new word will present itself. Or maybe we’ll have to learn to be satisfied by talking about businesses that leverage information technology in creative ways as, simply, “businesses”. But clarifying our language is only the outward expression of clarifying our thinking.
Really, nobody but sociologists and historians should be running around talking about “technology” in the large. It’s a vague word for an even vaguer set of ideas about how humans operate in the world. Our current culture sprinkles this word around like faerie dust, blinding us to the truth of what things are, how they work, and who’s responsible for them. Broad cultural change takes time. As a starting point, the business world seems as good a place as any to wipe away the magic dust and start seeing clearly.