When should entrepreneurs trust their gut instinct?

When is it safe for entrepreneurs to trust their hunches? We’re used to business experts talking about their ‘gut feel’ for a new venture, but is this better than cold headed analysis? 

Isn’t intuition a little unscientific and risky for the entrepreneurial world where the stakes are high?  

We wanted to know more. What is the relationship between intuition and rational analysis when entrepreneurs must make snap judgements about new ventures? And can the two sit comfortably together?  

Intuition, as psychologists understand it, is rapid, almost instantaneous; it’s emotionally charged – it’s about how we feel about a situation or person; and it occurs at a non-conscious level – it’s automatic, we don’t decide to have a hunch, we just have it.

High profile entrepreneurs are often heard to boast about their gut instincts – but we still don’t know enough about what causes them. 

This makes intuition a tricky quality to investigate. Previously researchers have relied upon individuals declaring themselves to be intuitive or analytical thinkers.

How well does 'gut instinct' serve entrepreneurs?

Instead, our research led us to track tech entrepreneurs as they toured a hypothetical technology fair. We asked 74 business owners recruited in Malta to think aloud as they assessed the opportunities that arose, and generated ideas for new ventures.

This helped get around their own beliefs of whether they were rational or intuitive business people - we simply analysed their reactions. We tried to recreate the speed at which these events operate, and the swift reactions required to seize opportunities.  

What my colleagues Leonie Baldacchino, Laure Cabantous, and I found was revealing. When it comes to thinking up ideas for new ventures – the lifeblood of entrepreneurship – intuition serves entrepreneurs well.

They’re operating amid uncertainty and a wealth of disparate information, so mechanisms that can help make sense at speed are vital. But for best results, intuition works best alongside analysis.

And the most innovative ideas came from a particular group - experienced entrepreneurs who were able to combine intuition and analysis – the sweet spot that yields the strongest ideas.  

These entrepreneurs were able to make a rapid analytical assessment of a highly innovative ideas for new ventures.

There is debate about where intuition comes from, and what helps develop it.

We focused on intuition that arises from experience. Even if an individual can’t explain why they feel something, it’s a result of patterns in their area of expertise that they’ve learned over time.

Knowledge of these contribute to the immediate gut feel that is intuition. We found the most experienced entrepreneurs in terms of new start-ups came up with more innovative new ideas and that this can be attributed to their use of intuition.

We are among the first to shed light on the link between experience and entrepreneur’s use of intuition; but it’s not just any kind of experience, it’s domain specific experience. In our case, intuition is enabled by experience of creating new ventures in the same industry rather than for example, years of entrepreneurial experience.

How to train your intuition

What does this mean in practice? What we’ve discovered will help entrepreneurs develop their sixth sense or gut feel and have confidence to trust it and follow up with analysis to generate truly innovative ideas. 

It’s also possible to train your intuition. By grabbing opportunities to get involved in as many new start-ups as possible within a certain sector, entrepreneurs can accumulate this vital domain-specific experience.

Traditional thinking has it that an individual must be immersed in a field for more than ten years in order to become an expert. But as our research shows, time alone is not enough – the number of new ventures matters too.

Experienced entrepreneurs must resist the temptation to sink into their comfort zone and instead continue to generate new projects. And it’s also important that entrepreneurs see their ideas through the cycle of ideation through to realisation – it’s not enough simply to have the idea.   

But what does this mean for those just starting out? How can they compensate for lack of experience?  

Newcomers should aim to build the breadth and depth of their experience in a particular niche or area, by taking advantage of any courses, incubator and accelerator programmes. This is a conscious effort to create an unconscious process until knowledge and experience gradually become internalised.

New entrepreneurs would also do well to team up with more experienced colleagues who can share their insights and intuitions. 

We must add a health warning here that these findings resulted from a hypothetical exercise and we can’t be sure that our entrepreneurs would behave in exactly the same way in real life.

But we made every effort to ensure the setting and the exercises were as realistic as possible, and controlled for variables such as a natural, dispositional preference for intuition and analysis.  

Our research also begs further questions, such as how intuition and analysis are linked – does one trigger the other? We’d like to look too at whether intuition actually plays a part in the start-up world beyond helping an entrepreneur come up with ideas. 

Intuition is often dismissed as whimsical and insignificant, and we hope we’re resetting the balance. We’ve also revealed that whether entrepreneurs consider themselves intuitive or not doesn’t relate to how they operate.

What matters is the ability to switch rapidly between intuition and analysis – and this combination is the best of both worlds.

Further reading:

Baldacchino, L., Ucbasaran, D. and Cabantous, L. (2022) "Linking experience to intuition and cognitive versaility in new venture ideation: a dual-process perspective", Journal of Management Studies

O'Neil, I., Ucbasaran, D. and York, J. G. (2022) "The evolution of founder identity as an authenticity work process", Journal of Business Venturing, 37, 1, 106031

Ahmed, A. E., Ucbasaran, D., Cacciotti, G. and Williams, T. A. (2022) "Integrating psychological resilience, stress, and coping in entrepreneurship: a critical review and research agenda", Entrepreneurship Theory and Practice, 46, 3, 497-538
 

Deniz Ucbasaran is Professor of Entrepreneurship at Warwick Business School. She teaches Entrepreneurship and NVC on the Full Time MBA, Executive MBA, and Distance Learning MBA.

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