Industry Expertise: Advantage or Hurdle

In evaluating a business opportunity for investment of time, energy, and/or money, there is one metric that is often held up as the gold standard, the holy grail of entrepreneurship. Years of industry experience. If you’ve got 10, 20, 30 years of experience in an industry, you should be able to succeed in a venture that targets that industry, right? Maybe, maybe not.

Doesn’t every entrepreneur target the industry he/she knows best? Aren’t most products developed by people who discovered an unfulfilled need, or way to improve something in the industry where they have many years of experience? We have all heard an entrepreneur say, “I’ve been in this industry my entire career. I know what the customers want and need.” Since that is in fact the case, why is it that 90% - 95% of entrepreneurial ventures still fail? Even those that have been fully vetted by professional investors have a failure rate worse than 65%. 

Maybe all industry experience is not equal.

A friend of mine, I’ll call him Jim, was just such an entrepreneur. He had worked for the Military for about 25 years providing a valuable operational service, and was one of their most productive people. In the process, he developed an idea that would dramatically improve both the speed and accuracy of the function he provided. Since his product had even more application in the business world than in the military, he left the military to develop his product and take it to market. 

Once developed, his application was in fact excellent, and the results were even better than predicted, producing output at better than four times the rate of the standard industry tools, with improved accuracy. So why did his company fail to achieve even a noticeable blip of market-share when his product offered the newest technology, the highest productivity, and the lowest price?

Haven’t we all heard this story? What are the major difference between the military and the business world? They have no customers, and efficiency is a minor factor at best. That means:

• They do not have to acquire customers. They don’t sell. Jim had no idea how to market and sell his product and believed that it’s superiority alone would sell it.
• They don’t have to provide customer service and keep customers happy, 24/7. Though this was a constant complaint from most of his customers, he refused to offer it.
• They don’t lose money if their staff takes a few days off for training. Businesses need their staff to get up to speed on new applications quickly and lose money when they don’t. Despite complaints from customers, Jim thought the product was intuitive enough, and didn’t want to create training materials, or a more beginner friendly interface.

Jim’s solution was not only highly applicable to his target market, it was brilliant in its conception and development. But his experience was like that of most entrepreneurs, it was in product and product development. While the product is extremely important, it is not what defines success for an entrepreneur.

So what is the most valuable industry experience? Customer acquisition and retention. Without that, even the best products can fail and often do. With it, even mediocre products can create a significant market presence. The key to entrepreneurial success, the most valuable industry experience is Marketing, Sales, and Customer Service. 

So the next time you hear “I’ve been in this industry for 30 years”, ask “Doing what?” If it’s not acquiring and retaining customers, someone needs to be added to the team who has that most valuable experience.