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Tech Startups and Railroad Tracks



Whenever you talk to a person who works or found a startup they are talking about innovation. Having spent the last 15 years in Enterprise SaaS I started wondering how innovative are we in technology today? When I think about monumental technological breakthroughs, I think about the invention of the web browser and the mobile phone. Most of the current enterprise SaaS startups do not do anything monumentally different, can we even call it innovation?

Can we map this situation to historical technological breakthroughs like railroads, telephones, and airplanes? For instance, the railroad evolution is a good proxy for the current situation: the big breakthroughs were the Bessemer steel process and the steam engine by Richard Trevithick. There are other huge steps in the railroad technology but for the most part the work after that was laying out the railroad tracks. Was laying out railroad tracks innovative? Not in comparison to a breakthrough like the steam engine. Did it require some good engineering – absolutely. Enterprises like Delaware and Hudson Canal had to survey the land, figure out the right places to put down the tracks, build bridges, stations and figure out the logistics of running the line. The product market fit for the railroads was about figuring out if there are enough customers on both ends of the line to make the venture profitable.

Most of the modern-day tech ventures seem to be engineering problems, rarely do I come across a startup that is trying to reinvent the engine and rarely do they spend the money on years of R&D without any customer traction. That investment in R&D is what is needed to create something breakthrough and then connect the dots to customer use cases. Most of the VC backed startups are akin to laying the existing railroad tracks in a new terrain.

Technology today has presented some methods for information sharing and processing that are clearly better than what we had before. The railroad has presented a better way to haul people and cargo. Most of the people are now looking for places where there are inefficiencies in information sharing and processing and seeing if by laying the virtual railroad tracks, they can provide some value. Is it innovation? I guess it depends on one’s definition.

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