When I launched Standout Jobs I didn’t know much about the HR / recruitment industry. I could clearly identify problems in the space, and I was passionate about fixing some of those problems, but I lacked a real appreciation for the industry itself. This led to numerous challenges, and without a doubt had a negative impact on the company.
I was able to overcome some of those challenges, but my lack of domain knowledge, experience and expertise gnawed at my ankles like a crazed ferret. And in some cases I over compensated as a result.
Mark Suster points out that domain experience brings relationships. I recognized early on just how important it was to establish myself in the HR / recruitment space. I began blogging, networking, connecting with people on Twitter, attending conferences. With my experience in brand building and positioning, I was able to fairly quickly and successfully get some level of recognition in the space. But in hindsight, I probably spent too much time doing that, and overvalued those efforts. Without question there was value in establishing myself and Standout Jobs as leaders and innovators in the HR / recruitment space, but if I had gone in with domain knowledge and experience already, I would have started in a much better position.
One way to compensate for a lack of domain knowledge is to hire someone from the field in question. Logically makes sense. But there are risks as well. One of those risks is losing objective control and decision-making abilities to the “hired expert”. If that person is executing, so be it, but if not (and in some cases it’s hard to judge because there’s a lack of information), there can be serious difficulties within the startup.
Another tempting approach may be to outsource sales responsibility through channel partners. Be very careful about doing that. Channel partners may have a ton more domain knowledge and existing customers to up-sell to, but they require tons of effort and pose plenty of challenges on their own. Plus, without your own domain expertise it becomes difficult to judge partners, figure out how to motivate them, and drive success through them.
Mark MacLeod suggests that domain knowledge and aggression are the two startup founder traits that stand out. Is domain knowledge really one of the top two traits that define successul founders and startups? I’m cautious about over-estimating its importance, even in light of my own experience, but I do think domain knowledge provides a clear advantage.
The Lean Startup Methodology and Customer Development can most likely counter (somewhat) a lack of domain expertise because these strategies are driven by engaging customers, discovering key problems and then implementing solutions. Their systematic approach to building startups, finding product/market fit and scaling through information gathering & assessment help remove errors that might be caused by not knowing an industry. So you can “learn the market”. But even here, without true domain knowledge, you may not be asking the right questions when speaking to prospects, and you may be approaching things incorrectly (but simply be unaware).
In the world of startups there’s no such thing as perfect information. CEOs have to make decisions all the time with imperfect data. You can’t know everything. But those founders that have domain knowledge (versus those that don’t) have a clear advantage in terms of the amount and quality of data they possess. That makes it easier for them to make better decisions on a consistent basis. And generally that leads to winning.