Are Entrepreneurs with Industry Experience Sometimes a Danger to Themselves?

Yesterday, I wrote a post about the concept of founder-market fit. The whole idea is that someone who has great experience in their industry or discipline will have an easier time being successful with their start-up.

A friend of mine, John Peltier brought up a good counter-point in the comments section. He mentioned the challenge that entrepreneurs with experience in their industry may take short-cuts with their product because they assume that they know the space. It makes sense to see where John is coming from with this. In order to be innovative, you have to look for inspiration outside of what you know. This reminds me of the famous Henry Ford saying: “If I’d asked customers what they wanted, they would have said ‘a faster horse’.”

In my response, I said that an entrepreneur creating a short-cut because they believe that they know an industry could also be a good thing. The best way to improve a product is to make an assumption or hypothesis, and then prove it right or wrong. So as long as the entrepreneur can see the writing on the wall (whether the idea is gaining traction), I believe that quick assumptions could be a quality trait.

So this brings up the question: is it better to understand the space of which you are an entrepreneur, or is it better to be an outsider bringing new solutions to old problems? What are your thoughts?

  1. Kyle, the point you make about testing whichever hypotheses the entrepreneur formulates is a good one.  However, keep in mind that testing hypotheses is a small part of the process of settling on startup strategy.  Customer discovery and ideation processes are also very important, as I’m sure you would readily agree.

    Which brings me to my next point.  It’s not fair to characterize the choice as between:

    1.  Understand the space you are in.
    2.  Bring in an outsider to devise new solutions to old problems.

    Often, the most successful approach is to bring in someone who is an expert at learning markets.  They may not have experience in the industry, and they may not have prior in-depth knowledge of it.  However, there are certain exceptional individuals (such as the most talented product managers) who can quickly and thoroughly master a market without prior experience in it.

    So it’s not just a matter of devising new solutions to old problems.  It’s a matter of identifying and synthesizing market problems that industry professionals have neglected or failed to put in perspective due to blind spots or being “too close” to it.  And “understanding the space” can be a result of fast-paced, methodical learning (leveraging hypothesis testing) rather than years of experience.

    Consequently, Business Week’s  G. Michael Maddock and Raphael Louis Vitón have recommended that businesses stop hiring leaders from their instrustry.

    My first blog entry, back in 2005, covered this issue.  The title of the entry was, “Domain Experience“.  A couple of years later, I followed up with another one discussing the importance –  or lack thereof – of industry experience.

    1. Great feedback Roger. When I was an executive recruiter, I would often coach my customers that finding great candidates is not about what a person has done, but what they can do with the talents they have. I think that this matches up well with your comment.

      I also believe that all else being equal, an entrepreneur with domain expertise and relationships, can come up to speed faster than someone without it. I like your characterization of someone being an expert at learning markets (which would have to be equal for the comparison). The non-industry experience part of founder-market fit is the skills expertise (ie. you are most likely a good product manager in any industry, just as I have B2B sales & marketing skills cross-vertical). You would have great “founder-market fit” if you started a Product Management software business no matter which industry you sold it to.

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