Entrepreneurship – When Novices Can Beat Experts

Why does entrepreneurship work? Why can novice entrants to an industry sometimes beat the experts who have been around for so long? A new research paper out of Europe offers one good reason.

Furthermore we use information theory to show that when environment changes suddenly, novice entrants as the entrepreneurs are, actually perform better than experts whose prior knowledge often cause severe biases in prediction, in terms of recognizing and acting upon opportunities.

In other words, expertise is important, unless your environment is changing so rapidly that it makes your expertise irrelevant. This is one of the reasons entrepreneurial strategies like disintermediation are successful.

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  • What competitive environment isn’t changing “rapidly”? Yet even Google considers “prior knowledge” to be the ultimate attribute in candidates.

  • I know what you mean Mike. I downloaded the paper and my hair hurts already. But seriously the conclusion is not new. Other studies show that expertise slows adaptability in business. I wrote about one great bit of research in my first book. And my inspiration was from an astute observer who lived 2,500 years ago.

  • A very successful startup CEO (who also had considerable experience in large companies) remarked that “the reason startups work is that they let very smart people focus on small things.” By “small” he didn’t mean unimportant, rather small in terms of current revenue. A currently-small but high-potential innovation in a large company might be product-managed by someone several levels down in the marketing organization, whereas in a startup the same innovation would be receiving the full attention of the CEO, several VPs, etc.

    The work of Michael Raynor and Clayton Christensen is very relevant to this topic:

  • Thanks for providing a link directly to the research paper in your post.

    This article was really interesting and gets you thinking… What exactly determines an expert when it comes to business, entrepreneurs, and entrepreneurship? And, is there any advantage to being an expert? The paper would almost seem to move towards indicating that perhaps it is some sort of classical conditioning process that creates experts (in that they’ve been trained to become an expert), and that very training makes it harder for them to adapt to new business opportunities, changes in the marketplace, etc.

    Really interesting stuff.

  • Hiya, Great blog. I found this article in particular to be very interesting. As a marketing consultant I find keeping up with the play through blogs and articles helps me moreso than books and courses, as the rate of technology makes such things obselete in a very short period of time.

    I’ve found in my experience that while traditional styles of thinking about business do in fact work, they’re ussually most effective when the business in question has a lot of money to throw around on things like marketing and physical resources. The second wave of Ecommerce brings to the forefront a different style of entrepeneur, marketer and business person, it brings about the social aspect of marketing, where word of mouth can spread a hundred times over, which, I personally think, that personality and ‘who you know’ far outstrips ‘what you know’.

    On the basis of success through many of these ‘new age’ business people, we have to wonder if the old school definition of ‘expert’ really applies.