The Blindfolded Entrepreneur: Should You Start a Company Without Functional Industry Knowledge?


I'm not sure of the statistics, but based on the people I know, it seems that most businesses are started by people with previous experience in that industry. You work for a law firm, then start your own. You sell cars for someone else, then take out a loan and open your own dealership. You write code for Google, then leave to build a new web application. That's the way it usually seems to happen. But is that the way it has to be?

An article asking How Relevant is Drucker, made an interesting observation about Indian business culture that highlights a major difference with the West.

At a recent SME (small and medium entrepreneurs) conference, three leading Indian businessmen echoed a similar thought. Their choice of industry was not something that they knew anything about, but consciously one that they knew nothing about. They reflected that this was because it ensured they worked hard to learn and listen to others and perhaps their "naiveté" ensured that there was enough innocence left to provide for innovation. This goes against classic western business management theory of driving business by core competence.

What does that say about core competence? Should a new startup be based around some sort of competitive advantage that stems from previous experience? I think most investors would expect that. To trumpet inexperience as your advantage is one way to make sure you get turned down for funding.

Yet, at the same time, there is something to it. Existing companies are often in such a routine and do so many things out of habit, that they miss opportunities that should seem obvious.

Back in college, one of my professors had worked at Bell Labs, and had received a patent on a circuit he designed his first year on the job. He said that he did it because he "hadn't been around long enough to know that it was impossible." His co-workers had let design assumptions slide by without questions, even as tools, industries, and business models had changed.

So where does that leave the entrepreneur?

Statistics usually trump anecdotes, so I think in most cases, it is best to stick with industries you know. It's easier to see opportunities, you have a stronger network of contacts, and you have a knowledge base to build on that gives you an advantage over competitors. But there are exceptions. There seems to be a rare type of entrepreneur whose skill set is nothing but pure entrepreneurship. Such people possess functional knowledge about evaluating markets, pulling together resources, making the most of limited capital, and managing the process of new company creation. They probably have functional knowledge related to certain industries too, from time spent in a more "regular job," but the key difference is in the industry and business meta-knowledge they acquired that most people never pay the slightest attention.

As with most things entrepreneurial, the best advice is to know yourself well and understand your skills and competencies. Some industries are easy to learn. Some business models leave lots of room for a learning curve. Some industries will kill you for the slightest mistake. Being blindfolded isn't a bad thing if you're listening to music, but if you are driving a car, it's deadly. Startups are the same way.

  • asg

    I think the network of contacts is key — it may be that in India, networking and family connections are a far larger part of what senior businesspeople do, and as a result they always have a friend or a cousin they can contact in almost any industry. (Certainly my father, who is Indian and a businessman here in the U.S., would agree.) Networking and contacts are so critical to entrepreneurship that this kind of “built-in” networking ethic may mean entrepreneurs can start businesses in industries with which they’re unfamiliar much more easily.

  • I usually feel a bit guilty when I don’t know everything about what I’m doing. One of the main services my company provides is web development. I do keep up with the industry and keep a keen lookout for trends but I am human and learned I can’t know it all. In the beginning I was doing a lot myself for a very small number of people on a part-time basis. later I discovered my wife who is very detailed oriented was better at coding than I was and she has taken up the majority of the coding work. My passion is on the design end. Later the both of us reached a saturation point of working and marketing and decided to bring in others to help us. It’s very important to know your industry but not nearly as important as it is to know how to “get the job done.”

    They are a few projects we are all working on in our company that we are having to learn as we go but these are ideas were are working on to compete with our customers and stay ahead of them and also to look a bit ahead of where are clients are and where they will be in the months and years ahead.

  • This author “leaps” to conclusions that aren’t supported by facts.
    For example he writes that “it [not knowing the industry] ensured they worked hard to learn and listen to others.” Both are good qualities that lead to success. But who did they listen to? Nowhere does he say that these “others” were also completely naive to the competencies and complexities of the business. (Can you imagine the result of listening to people who know nothing?) How does it follow that “This goes against classic western business management theory of driving business by core competence.”

    There’s more of the same in the link. Yuck.

  • I think that a certain amount of experience is necessary to start up a business. It may be possible to succeed in the business world without experience, but it’s a bit risky to pursue.

  • Lord

    The greatest opportunities are never in what you know or in what others know but in what is unknown. To be able to take advantage of that, you need to know some things, and need to find out what others know, but it is recognition of what is not known and seeing how to use that that produces success.

  • Some may have survived business at the first step, but without any knowledge or experience they will not hold up for long. The world of business is like a sea full of sharks. Going empty handed is like swimming in open sea. But if we get knowledge and experience first, it will be like in a huge boat.

  • oldguy

    I started a business in a field I knew nothing about. It worked out, but I’ll never do it again. I made mistakes that should have put me out of business. While I did have insights into what could be done that escaped the regulars in the field, I couldn’t really even begin to implement them until after I had made the long, hard slog up the learning curve.