To invest in generalists or specialist entrepreneurs?

Generalists tend to perform better when the pace of change in a knowledge domain is slow. PHOTO | SHUTTERSTOCK

In Kisumu, Kenya, Sarah Omondi runs a tech startup that specialises in providing localised agricultural solutions. She holds a prestigious background in computer science, agronomy, and a bit of marketing. Her diverse skill set made her new venture a talking point in local tech circles, but she since discovered that the pace of change within agri-tech proves slow like a glacier.

Thus, she can utilise her generalist expertise to solve a broad range of problems, making her startup attractive to various stakeholders, including farmers, suppliers, and even local government agencies interested in food security.

Contrast Sarah with Peter Ochieng, another Kisumu entrepreneur. Peter solely focuses on the fish farming industry, leveraging his specialised knowledge in aquaculture. The rapid technological advancements in his niche have positioned him as a key respected figure.

His specialised skills make it easier for him to quickly adapt to new methodologies and equipment, thus staying ahead of competitors who may not hold as deep an understanding of the field.

Research by Florenta Teodoridis, Michaël Bikard, and Keyvan Vakili offers valuable insights into the roles that generalists and specialists play in dynamic environments.

The study argues that generalists, like Sarah, tend to perform better when the pace of change in a knowledge domain is slow.

This allows them to utilise and incorporate their wide range of skills effectively. On the other hand, specialists, such as Peter, gain the upper hand when rapid changes occur in a specific field.

Their deep-rooted expertise enables them to swiftly understand and implement new knowledge, thus gaining a competitive edge.

The study used a surprising sample through the collapse of the Soviet Union as a natural experiment to analyse the performance of theoretical mathematicians. The historical event led to a sharp acceleration in the pace of change in the field of mathematics.

Inasmuch, it compared the performances of generalist and specialist mathematicians before and after this period, allowing them to tease out how changes in the pace of a knowledge domain could influence the relative success of specialists versus generalists.

They further delved into the roles of cognitive mechanisms and competition for scarce resources, using data to assess how desirable these mathematicians were as collaborators.

Investors looking to support entrepreneurial ventures should pay heed to these findings. The pace of change within the industry of interest becomes a critical factor in deciding where to allocate funds.

In sectors experiencing slow transformations, backing a generalist entrepreneur may yield the most rewards, as their diverse skill set allows them to navigate complex issues with a multi-disciplinary approach.

On the flip side, in fast-paced industries where innovation cycles prove shorter, investing in specialists could become more profitable.

Their deep understanding of the subject matter can be crucial for keeping the venture at the forefront of the industry.

Such knowledge could redefine investment strategies, urging stakeholders to consider not only the skill set of the entrepreneurs but also the rate of change in the relevant industry.

Therefore, understanding whether the pace of change demands a generalist’s broad view or a specialist’s depth of knowledge could become the decisive factor in making a wise investment and warrant special due diligence.

In additional new interesting research by Florenta Teodoridis, along with Frank Nagle, the focus shifts to the role of individual-level diversification in research. They employed a matching procedure and exploited the unexpected adoption of Microsoft Kinect as a motion-sensing technology in research.

The study found that diversified researchers were more successful in exploring new areas than their more specialised peers.

The study also holds practical implications for entrepreneurship and investment strategies. Diversified researchers, analogous to entrepreneurs with a broad skill set, were more adept at integrating new, unfamiliar technology into their repertoire.

In the context of startup environments, which thrive as inherently explorative, having a diversified team may enhance adaptability and innovation. Investors might benefit from funding teams that have diverse backgrounds, especially in industries where technological disruptions occur frequently.

Both studies highlight the intricate balance between specialisation and generalisation in the realms of entrepreneurship and business.

While the first research suggests that the industry’s pace of change should guide whether specialists or generalists are more valuable, the second research extends our understanding by showing that diversification within a team or individual can result in better adaptability and successful exploration of new opportunities.

Businesses and investors can capitalise on the above insights and utilise a nuanced approach in selecting leaders, collaborators, or projects to invest in incorporating the current and projected pace of industry change, as well as the benefits of a diversified skill set for innovative performance.

Have a management or leadership issue, question, or challenge? Reach out to Dr Scott through @ScottProfessor on Twitter or on email at [email protected].