Three reasons to change industries

Today I had a long conversation with a friend about why I keep "taking on new challenges." This was the polite way for an old friend, with a long career in economics, to ask why the hell it is that I keep jumping from one industry to the next. Just when I seemed to have garnered amazing contacts in the consumer electronics industry (for one instance), THERE I GO AGAIN jumping into wireless, or gaming.

After some long banter about the difference between water and bullets, I boiled it down to three reasons why I think serial entrepreneurs do this:

1. Learning. Entrepreneurs, and I hope most people, love to learn. It seems ridiculous to limit yourself to what you know, since you then are pretty much confining yourself to not learning.

2. Outsider perspective. The benefit of knowing an industry is you know all the warts and potholes. The huge detriment is that you know already know all the warts and potholes. More on this is in a sec.

3. Market timing. An idea is always a mixture of, "why" and "why now."  If you just spent five years building and selling a company, chances are that market is not ready for another disruptive innovation just yet.

In the end these usually outweigh the negatives of lacking deep market knowledge and high level connections for me. It also helps that virtually every one of my startups have been consumer facing and involved in the weird art/science of original content & product creation. I have found that discipline to be highly transferable.

For the attributes unique to a market, you get to be a quick learner. If you are starting a company in a market that is new to you, a good tactic is to focus your learning on the areas of the industry that you want to innovate in, and hire key employees in the areas where you are not innovating. And you are innovating in all directions, stop.

At Ambient Devices we hired a rockstar head of sales, Bonnie Hamje, with 25 years experience in selling consumer electronics to the same retailers we had targeted. She took our innovations in product design and our proprietary wireless technology, and spoke in Radioshack language like a native. I have tremendous respect for those who have honed their craft, and you could never build a successful startup without rockstars like them.

In the end, for every disruptive innovation that has happened by leaders "in the industry" I can point to 10 that happened by mavericks who just entered the business. Let me just offer a couple off the top of my head:

- Burton Snowboards - Burton was an economics major with no sports equipment experience and founded Burton Snowboards, the "Nike of snowboarding."

- Amazon.com - what did Jeff Bezos know about books, their margins, how to negotiate with publishers, etc?  What did it matter?

- Netflix - not some VP of Marketing out of Blockbuster

- Flickr - not some VP of Product out of Shutterfly.... I could keep going but I realized that you could read this book or this book.

There are certainly big businesses that are built out of incremental innovation, where deep native knowledge from the entire team is incredibly key. But everywhere I look (and I look a lot, and make spreadsheets) - the disruptive innovations that I tend to be drawn to are from outsiders. In these cases an outsider perspective serves a very valuable purpose when teamed with industry veterans.

Although it is worth analyzing what I believe to be the great benefits of "jumping industries" it has never been my hard and fast plan. In fact, gaming is a bit of a return for me since my first and only "job" was for a gaming company as a developer.

In the end it isn't about some hard rule of needing to skip to a new industry. It is typically that I get so passionate about a situation that I desperately want to change, to hell with what market it is in.

Comments

[Hiroshi Anno]

I feel the same way. But I see many VCs looking for someone who has "done it before" versus someone who "can do it." This seems at odds with their desire to have big 10x returns versus some incremental innovative product.

[ventureblogalist]

great point.

It is often the outsider who can not be intimidated because they haven't been in the trenches and think they can usurp industry barriers.

I am going to a toy fair because my firm invests in educational software. Making toy contacts is relevant because both of these groups market to the same end customer (albeit some difference in channel strategies).