Why You Should Follow Your Instincts to Do Something Different
Even in a hot market, people still have herd mentality. Here's research on why you should block that impulse.
Tinder, Bumble, Hinge, The League -- the list goes on for mobile dating apps. And their formats are similar: swipe right to like, swipe left to reject.
Uber, Lyft, Gett -- each of these ride-sharing apps have similar set-ups as well. Put in your location and destination and hit submit, and five minutes later you’ve got a car waiting outside the door.
So why do startups and entrepreneurs tend to follow the crowd and copy an app or company that’s “hot” on the market? Because these ideas seem likely to guarantee success -- but that’s obviously not always the case. A new study reveals that changing things up and resisting temptations to follow trends is likely a more successful strategy.
Besides, entrepreneurs are supposed to take risks.
Research from the University of Chicago Booth School of Business reveals that business owners who go against the norm are more likely to stay in a market, receive funding and take their companies public. In the study, The Non-consensus Entrepreneur: Organizational Responses to Vital Events, researchers looked at 4,566 startups in 456 different market categories in the software industry between 1990 to 2002.
Based off data from the software companies, their market categories, when they received venture capital funding, when they had an initial public offering and various interviews from industry investors, board members and executives, the study revealed major herding behaviors.
By playing it safe and entering “hot” markets that garner easy support and typically receive venture capital funding, many entrepreneurs and startups overlook the feasibility of their products. Those were the people who suffered in the long term.
“Entrepreneurs who entered into ‘untouchable’ markets -- those tainted by bankruptcies -- applied more scrutiny to product-market fit and, in turn, fared better,” researchers said.
So how can entrepreneurs resist the temptation to follow the crowd? Even though going against trends may feel foolish, “it turns out to be a wise alternative.” Researchers suggest companies install formal processes that force executives and decision-makers to closely examine their products before jumping into a market.