For innovative entrepreneurs, the cannabis industry looks like a massive opportunity, and it can be if you’re willing to go on a bumpy ride. The industry is growing rapidly, and the variety of businesses entering the cannabis market is expanding even faster. From marijuana foods to marijuana tech, cannabis market innovations have become a strategic imperative.
While there are many opportunities for creative thinkers and visionaries in the cannabis industry, there are challenges waiting that entrepreneurs must plan to navigate. The truth is innovation can only get you so far in the cannabis industry. Between regulations and constant change, agility is key not only to survival but also to turn innovation into sustainable business revenue.
Opportunities for Cannabis Market Innovations
Innovation provides an opportunity for differentiation in the cannabis market, particularly among cultivators who are developing unique marijuana strains in an effort to build their brands and compete against the proliferation of less expensive, mass-market marijuana products.
Among infused product manufacturers, innovation is critical to seizing market share. As a result, we’re seeing a growing number of “craft cannabis” companies, similar to craft breweries. These companies develop innovative infused products and edibles with distinct flavors and aromas, and they leverage these innovations to increase sales and revenue in an industry where big companies are getting closer and closer to stepping in and taking over.
Cannabis product delivery is another area seeing new innovations. California-based startup Eaze promotes itself as the Uber for weed. In 2017, the company raised $27 million in Series B funding and reported having 300,000 customers in California as well as 300% year-over-year growth.
Beyond companies that actually touch the cannabis plant or product at some point in the supply chain are businesses offering ancillary products and services to the marijuana industry. Innovation is rampant among these companies, too. For example, Baker claims to be the Salesforce of the marijuana industry providing dispensaries with a full-featured customer relationship management (CRM) tool. Potbotics offers a mobile app, Potbot, that provides personalized recommendations for cannabis strains based on medical conditions. There is no shortage of innovation in this growing industry.
Obstacles for Cannabis Market Innovations
Despite all of the positive stories about cannabis market innovations, it’s not always an easy road to launch and sell new cannabis and cannabis-related products. First, the marijuana industry still has a perception problem that can make it difficult for companies to secure financing. Second, regulation often drives innovation in this industry.
Innovative entrepreneurs might have big dreams for marijuana products, but current and evolving laws might squash those dreams. In other words, innovation is often limited due to state and local regulations. This happens all the time in the cannabis edibles market. A business might develop an innovative new edible product idea or infusion technique, but if that product or technique doesn’t meet regulatory requirements or the end product doesn’t adhere to strict guidelines, the product won’t go to market.
For example, let’s say an edibles manufacturer has an innovative idea for a new candy, but the texture of the candy is such that a warning symbol cannot be imprinted directly onto the candy, itself. In many states where the symbol must be printed directly onto foods, the innovative candy would not be allowed.
Here’s another example. Imagine that an edibles manufacturer develops a new infusion technique, but when this technique is used, precise dosing and uniform potency cannot be guaranteed. Since states typically require both precise dosing and uniform potency in edibles products, this technique would not be allowed.
Bottom-line, a business can only be so innovative in a highly regulated industry. That’s certainly the case in the cannabis industry where new innovations have to be developed not because they’re the best but because they’re what the law will allow.
The Future of Cannabis Market Innovations
In the cannabis industry, as in all industries, innovations can deliver an incremental improvement to the current market, provide a new offering with a new value proposition, or completely redefine an aspect of the category by launching something no one has seen before. There are opportunities for all three types of innovations in the cannabis industry for entrepreneurs who can navigate through the regulatory obstacles they’ll undoubtedly face.
Regardless of the obstacles, innovation is essential to moving the industry forward. Considering that 87% of the value of companies in the S&P 500 is intangible assets, there can be no arguing that innovation is critical to differentiation, business success, and longevity. In that respect, the cannabis industry is no different from any other industry. That means protecting cannabis innovations as valuable intellectual property through trade secret protection programs, patents, and trademarks (to the extent possible), is essential. Bottom-line, innovation provides companies with a significant advantage in this industry.