Many high-profile business leaders claim to rely on their gut feelings, also referred to as intuition. Intuition has three qualities; it is quick, emotionally charged (e.g., we have a good or bad feeling about someone or something) and it is non-conscious (i.e., it’s hard to explain why we think and feel the way we do when we rely on our intuition). Partly because of these qualities, some scholars have argued that intuition may lead to pitfalls as an inferior alternative to being more analytical when forming judgments and making decisions. We sought to make sense of these conflicting views in our article, published in the Journal of Management Studies where we report findings from our study of how entrepreneurs generated ideas for new ventures.

Why New Venture Ideation?

New venture ideation involves the generation of ideas for new products, services or business models, and is considered to be the lifeblood of entrepreneurship. In rapidly changing business environments where competitive advantage is often short-lived, new venture ideation enables start-up founders as well as managers of existing organizations to stay ahead of the curve by driving innovation.

Please Think Aloud

For our study, we recruited 74 entrepreneurs from the ICT industry in Malta. We asked them to imagine they were at an ICT fair searching for new business opportunities, presented them with descriptions of various innovative technologies, and instructed them to think aloud as they generated new venture ideas. This enabled us to capture these entrepreneurs’ actual use of intuition and analysis during new venture ideation, rather than relying on retrospective self-report measures or solely on their natural preference for intuition or analysis (something we controlled for in our analysis).

Intuition with a Twist

We find that the actual use of intuition (as opposed to a natural self-reported preference for intuition) helps new venture ideation, but there is a twist. We find it is even better to be cognitively versatile – the ability to use both intuition and analysis in abundance, and to switch between them as needed. Greater use of intuition enabled our entrepreneurs to generate more new venture ideas and ideas that were of moderate innovativeness (as rated by experts), but it was those who were cognitive versatile that generated highly innovative venture ideas.

Where Do Intuition and Cognitive Versatility Come From?

While many scholars consider domain-specific experience to be a prerequisite for intuition, which suggests that only experienced individuals would be capable of using intuition effectively, others argue that novices could employ other forms of intuition that rely on creative capacity rather than experience. Our analysis revealed that entrepreneurs who had started up multiple businesses in their current industry were able to be both more intuitive and more cognitively versatile, and this in turn enabled them to generate more and better quality (i.e., innovative) new venture ideas than novices.

So What?

When it comes to identifying novel entrepreneurial opportunities, entrepreneurs should not be afraid to rely on their intuition. To identify the most innovative opportunities though, it pays to combine intuition with analysis by being cognitively versatile. The ability to effectively draw on intuition and cognitive versatility to generate new venture ideas, however, is based on domain-specific experience; in our case, having created multiple businesses in the industry in which the ideas were generated. This suggested that if novice entrepreneurs want to have the benefit of intuition and cognitive versatility in the future, they should look to gain experience by creating multiple businesses in the same industry. Having many years of experience as an entrepreneur, or indeed having experience of created businesses in other industries, did not have the same positive effect on new venture ideation. Therefore, entrepreneurs require in-depth knowledge of the industry to understand unmet needs, but experience of having been through the entrepreneurial process more than once (i.e., the process of generating new venture ideas and seeing them through to fruition multiple times) is also necessary to develop the capacity to rely on intuition and cognitive versatility.

For experienced entrepreneurs wishing to establish new businesses, it is best to generate new venture ideas within the industry they already operate in. Due to the fact that entrepreneurs commonly work in teams or are held accountable to stakeholders, it is important for entrepreneurs to learn how to communicate the value of their reliance on intuition to others. The fact that intuitive decisions are often emotion-laden might put some stakeholders off, but entrepreneurs might usefully reassure them that their intuition is based on their extensive experience in the domain. Finally, while intuition can aid new venture creation, entrepreneurs should still engage in the deliberate assessment of an idea to determine its viability, therefore, decisions for new ventures should be based on a careful balance and application of both intuition and analysis. 

In short, if you are hunting for new business ideas, use your head as well as your gut!

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