Luck or Strategy? Some Insights Into Successful New Ventures

Abstract

Utilizing Nobel Laureate, Daniel Kahneman's views on decision-making psychology and the general practice experience of Amazon's founder, Jeff Bezos, the authors formulate an approach to understand strategy and entrepreneurship. A hypothetical a priori probability model of a successful entrepreneurial venture is introduced in this paper. The model clarifies why the “prior to launch” probability of success is normally exceptionally low. But, low probability does not imply insignificance as free-market-driven new ventures with low probabilities of success can have a substantial impact on strategic planning within competitive firms. As a venture progresses through start-up phases and the probabilities of achieving individual critical single-events rise, the probability of venture success also increases as a function resembling the shape of a “hockey stick.” Entrepreneurially, the results show how a new venture's start-up can be quantitatively managed and analyzed with improved outcomes. The results provide some strategic insights on the difficulty of assessing competition as markets evolve.