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Unfair Advantage: Is Domain Knowledge Essential?

Posted on Monday, Nov 21st 2011

In startups, often, some of the most compelling businesses are created by people who have deep domain knowledge of complex, esoteric areas, from Email Marketing (Example: Act-On) to Environmental Compliance (Example: Enviance) to Online Payments (Example: Plimus).

The notion of unfair advantage helps in competing and creating defensible barriers in crowded markets.

I have personally worked in areas where I did not have as much domain knowledge (Example: Fashion e-commerce), but the amount of insight I have in building 1M/1M because of my 16 years of swimming in the world of entrepreneurship certainly helps tremendously.

There is, however, one point in favor of people coming into a sector without prior experience in it: they can think fresh, ask the stupid questions. My stupid questions in the online fashion industry in 1999-2000 led me, eventually, to publish the Web 3.0 frameworkin 2007. And the deep domain knowledge rich fashion industry still hasn’t achieved anything remotely close to the vision of personalized store that I presented over a decade back.

What do you think? Is domain knowledge essential or a detriment? I haven’t quite made up my mind, to be honest!

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I think domain knowledge is must as it will lead us to know its ability and restrictions which will help us to take better decisions.

barcode labels Monday, November 21, 2011 at 11:42 PM PT

I am currently in a domain (neuroscience) within which I don't have deep knowledge, but enough to comprehend the field and its directionality. I think this has actually helped our start up find an arena of value added because 1) we do ask the stupid questions and find that few can understand the very complex answers provided by 'experts', so we use this as an opportunity to translate into products that provide 'common man' answers, and 2) possibly more importantly we are building products that provide the 'weft' – the cross weave of the matrix which in our field is extremely thin. We gather complex data being developed in the vertical pathways, and create horizontal pathways that integrate in a simple fashion that which has been created. Some would argue that integrating is another form of creation.

J Parsons Tuesday, November 22, 2011 at 5:11 PM PT

Yes, and often the people who integrate are not the ones with the deep domain knowledge, but rather how the directionality flows.

Sramana Mitra Tuesday, November 22, 2011 at 6:24 PM PT

Agree that domain handling knowledge is a must for the reasons mentioned "defensible barriers" and also for effective communicating with all potential clients, partners, commentators…
Good initiative, shapeau!

Edith Monday, November 28, 2011 at 5:40 AM PT

"Is domain knowledge essential or a detriment?"

Could we instead ask and explore….
how do we build deep domain knowledge without losing that creative skill of asking stupid questions:

Now wouldn't that make a potent entrepreneurial mix?

Sanaa Monday, November 28, 2011 at 7:53 AM PT

It's not or the other. To be successful, you need "T" shaped expertise.

Deep in one area, but then broad across a wide range of topics. The depth allows you to create differentiation and avoids the stupid mistakes. The broad knowledge creates the ability to learn from other disciplines / approaches and to integrate (as you put it, Sramana).

Nimish Mehta Monday, November 28, 2011 at 9:27 AM PT

I agree with Nimish.

You need a general broad knowledge from across several sectors (Biz 101) because general principles of business are similar in all sectors.

But at the same time., you need sufficient knowledge of the specific sector, not to understand how existing models work, but to understand what the clients need – or more importantly what they are demanding but not getting from the existing suppliers..

DennisKL Monday, November 28, 2011 at 11:52 AM PT

Domain knowledge essential or detrimental? Answer. Neither and both. Depends on how you use what you have. A domain expert with fixed opinions not open to new ways, who thinks they have all the answers is detrimental, and a domain novice not open to the wisdom that can come from experience also detrimental.

Lisa Monday, November 28, 2011 at 1:05 PM PT

Yes, I like Nimish's analogy of the 'T' shaped expertise as well. Very aptly put.

Sramana Mitra Monday, November 28, 2011 at 1:51 PM PT

Too much domain knowledge puts too many barriers in the mind(this or that won't work). Sometimes it may give the impression that we know more than we actually know. Going a bit further, thinking oneself as an expert might also set up psychological barriers(I can't afford to fail in this cuz I am the domain expert).

Domain knowledge by itself is a very good thing if we can somehow sidestep the psychological issues mentioned above. Also, IMO, innovation comes from having deep domain knowledge and applying that knowledge in new ways(for example applying domain knowledge of one industry into another).

Talat Thursday, December 22, 2011 at 5:07 AM PT