When the economy looks down, entrepreneurs look up. Check out our series on innovating during a crisis.

Not Too Flexible

Luke Sykora, Stanford University June 17, 2020

Welcome to Stanford eCorner Research Briefs. Here, we explore new research from the Stanford Technology Ventures Program and offer actionable insights relevant to today’s innovators, entrepreneurs and policy-makers.

 The paper

For Startups, Adaptability and Mentor Network Diversity can be Pivotal: Evidence from a Randomized Experiment on a MOOC Platform” by Chuck Eesley and Lynn Wu (MIS Quarterly, Volume 44, Issue 2).

 Key quote

“This is in stark contrast to recent work which has (almost) universally advocated for the benefits of adaptive strategies for digital ventures.”

The research

Adaptability is often portrayed as a prerequisite for successful digital startups. That’s because, with digital products, data can be collected relatively cheaply, and that information can be used to rapidly build new products and adopt new business strategies. There are numerous stories of digital startups that found success by pivoting in new directions in the face of market challenges.

Another predictor of success, supported by prior academic research, is mentor networks. The companies with the most diverse and comprehensive networks of mentors and advisors tend to flourish, and make more impactful strategic decisions.

But which factor is really more important, and how do they interact?

To study the question, co-authors Chuck Eesley of Stanford’s Department of Management Science and Engineering and Lynn Wu of the Wharton School turned to a MOOC, a massive open online course on entrepreneurship offered through NovoEd. By tweaking the assignments they gave to several randomly generated groups of online students, they were able to observe how students responded to prompts that emphasized different mentor relationships and degrees of adaptability.

Contrary to popular wisdom, they found that when the MOOC ended, the class startup projects that emphasized set plans rather than adaptation generated the most promising ideas. Later, though, adaptability did have a positive impact. When they checked in again two years after the class ended, the startups that adopted highly adaptable strategies had outpaced the startups that followed less adaptable strategies.

The study’s most stark finding was this: The standout projects were those that paired adaptability with strong mentor network diversity. Without a strong and well-informed network, this study suggests, adaptability alone provides no short-term advantage and only a modest long-term advantage.

Boost your skills

  1. Build a wide and diverse network.
  2. Recognize situations where waiting is better than pivoting.
  3. Distinguish careless risks from intelligent risks.
  4. Learn how to develop and nurture mentors.
  5. Engage allies by simply being helpful.