The adoption of new technology follows an S-shaped path over time. Innovators, early adopters, early majority, late majority, and laggards. New technology almost always triggers new business formation. For entrepreneurs and builders, it's critically important to understand how your business fits into this larger adoption curve because different stages strongly favor different business models.

Technology Adoption 101

It's a well-documented fact that new technology tends to be adopted in a predictable pattern. First, innovators find and begin to use the new technology. These folks are almost always technical and deeply understand the underlying tech. The early adopters come next, followed by early and late majority, and finally, the laggards begrudgingly capitulate.

We are incredibly early. If you're reading this, you are undoubly an innovator. It's still hard to use the product (hence the need for sites like nostr.how) and hard to see what it's going to become in the future.

We've seen this play out with many different technologies over the last 200 years. As you can see, the adoption cycle is speeding up over time because of our increasingly faster and broader communication networks.

Another thing we've seen play out in each new technology adoption is the creation of hundreds or thousands of new businesses to serve various parts of the market around the new technology. Most of these businesses fail over time, but some succeed and become long-term institutions.

The adoption curve and business models are reflexive

Imagine the birth of a new technology. It's been created by a handful of people who are truly cutting-edge in how they think and how they apply that thinking (GM @fiatjaf 🤙). As they share what they've created, others will glimpse the future and adopt this new technology too. Before too long, someone will start a business based on the technology.

The idea that new technology drives business formation is easy to grasp. It's also easy to see that this relationship is reflexive in nature. As businesses create products & services and chase customers, they are inherently driving new awareness and adoption.

As adoption progresses, the nature of the technology itself and the market tend to change in very predictable ways. The types of products & services that are valued and the types of customers that value those products & services are therefore a function of the adoption cycle.

Ultimately, businesses exist to provide value to their customers. The challenge for entrepreneurs is create a product or service that delivers value to enough customers such that the business can become profitable and self-sustaining. However, finding that product-market fit is easier said than done.

Understanding the reflexive nature of technology adoption and business formation, I believe it's possible to stack the odds in your favor as an entrepreneur. Let's explore each stage.

Innovators & Early Adopters

In the earliest days of a new technology, the innovators and early adopters are building for folks like themselves. Building, in and of itself, it's very difficult and requires a deep knowledge of the underlying tech to even make progress.

In this stage, it's common to see founders and businesses making quick early progress. However, it's rare that these extremely early companies go on to build lasting businesses and capture large shares of the market.

Don't believe me? Here's a simple one. The IRC protocol led to creation of Hipchat, Hipchat was eventually bought by Slack. All these services are basically the same, built using almost identical technology, but the adoption of messaging tools allowed for very different business models and different levels of success. By the time Slack came along, the market was thousands of times larger.

Sidebar: If you build it, they will come...and other bullshit.

An all too common error that founders make, especially in the VC-funded tech world, is to build as if they are further along in the adoption cycle than they really are. The thinking is that if you build something innovative, useful, and truly novel; people will find it and engage with it. This is, at best, wishful thinking. When a technology is brand new, it's extremely difficult to describe what it is and even harder to articulate why it matters. Often, even the earliest users can't agree on what it's for.

I believe this is actually a feature, not a bug, as it gives a nacsent technology to find its feet and become resilient enough for larger-scale adoption. But it is a source of consternation for many early founders looking for product-market fit with customers who aren't ready for what they're selling.

Phase 1: Developer tools

In the earliest days of a nascent technology, the only people using it are the creators & builders who can see and understand its long-term potential. The tech is often very hard to use and confusing. No one has figured out how to properly explain it to anyone who doesn't already deeply understand the technology at a foundational level.

During this phase (which pre-dates even the concept of "early adopters"), the most important things being built are developer tools that enable more (and more interesting) use cases to be built in less time. When I say developer tools, I mean that in the broad sense. This can be software development kits, but it can also be infrastructure or physical tools that must be built to more easily utilize physical technology as well.

Who are the customers of these tools? And will they pay? This is the most common pushback people building in the picks and shovels spaces get, and they are good questions.

When your customers are the early developers and entrepreneurs you have to have low time preference and play the long game. In the early days, your customers are groups of developers and tiny newly formed businesses. These groups are notoriously hard to market to and hard to monetize. But as adoption marches forward, these developers and businesses will be seen as visionary, and many will go on to succeed. This gives the makers of early developer tools a front-row seat to better understand what's working and what is needed to push adoption and usage to the next level.

Phase 2: Early adopter consumers

As development begins to flourish on a new technology platform so too will the earliest of the early adopters arrive. Within the cambrian explosion of new products that come with all this development activity, there will be a handful that are truly novel and exciting. These products will capture the zeitgeist of the time and propel the technology further to the forefront of our collective social consciousness. In other words, consumers will start talking about it, and many more users will show up and begin using the technology. These are the true early adopters of the technology. They don't need to know anything about the underlying tech to understand what value they get from using these new products.

However, even for the businesses that have built one of these exciting early products, the path forward is not preordained. While they have an early head start and exciting traction, history is full of first movers who never properly capitalized on what they'd created. (e.g. MySpace, Friendster, Yahoo, etc.)

Late adopters and businesses

Phase 3: Late adopter consumers

As more of the market adopts the new technology, the slower-to-adopt consumers will start to arrive. These consumers are less technologically savvy and often are introduced to the technology by someone they know who was part of an earlier wave rather than finding and adopting it themselves.

At this point, the market sizes start to become absolutely enormous, and, often, whichever businesses come out ahead at this stage, whether because of network effects, brand reputation, or otherwise, will take a dominant share of the market – at least for a while.

Phase 4: Businesses

In almost all technological advances, the first to understand and use the advance are the innovators (the actual builders of the technology); next come consumer adopters who are running towards novel new uses of technology that solve real problems for them. The last users of a new technology will be businesses. They are almost always last for a few reasons:

1. They are slow. Consumers can make a decision (rational or not) and act on that decision in the same second. Businesses are groups of individuals and take longer to come to consensus, make decisions, and then take action.
2. They are more conservative. Businesses must be more conservative in adopting new technology because they have more to lose in revenue, brand reputation, etc. This naturally makes them more adverse to change, even if that change promises improvements. This, in a nutshell, is the concept of the innovators dilemma.

This is obviously a continuum. Solo-preneurs and SMBs will be quicker to adopt, Enterprises will be slower moving, and large governments will be comically slow, often adopting technology only once it's nearly obsolete.

Because of this relationship between size and speed of adoption, it makes sense then that any new venture focused on bringing a new technological advancement to businesses needs to be very careful about who they're targetting and when.

Think of it this way. The more complexity inherent in the organization you're trying to sell to, the further along in the adoption cycle you need to be to be successful.

How does this relate to Nostr

We're still insanely early in developing the Nostr protocol and network. Getting started with Nostr is still somewhat technical. So many of the products we're all using day to day barely work. And yet, here we all are. We can see how this new technology can bring value to our lives while also (hopefully) making the world a better place. We are the definition of innovators.

Many new projects have been started, and several businesses are already growing out of those projects. Venture funding is starting to arrive, which will only accelerate business creation.

Hopefully, at this point, you've got more clarity on how technology adoption drives business creation and how that business creation drives further technology adoption. Ideally, if you're an entrepreneur or thinking of becoming one, this post has also helped you better understand where we are in the cycle, where we're going, and what's likely to work.

In any case, I'd love to hear your feedback, questions, thoughts, and rebuttals.

• Primal (Web): @JeffG
• Nostr link:
• npub: