Industry experience is easy to spot on a resume, but often overrated. Better hiring means weighing long-term ability more heavily than day-one familiarity.
Time and again I see companies overemphasize industry knowledge when hiring for a role. Industry experience is helpful, but for many roles it has far less impact on long-term success than employers assume. When employers cannot easily evaluate capability, they substitute easy-to-measure proxies, and industry experience is one of the easiest to apply. As with similar streetlamp effects, it often sacrifices optimal choices for the illusion of control.
In “The Streetlamp Effect in Hiring” I cover in detail how many companies look for the wrong capabilities. This is a specialized case, and I emphasize this because many people don’t realize that the streetlamp effect applies here, too. As a quick reminder, the streetlamp effect occurs because some things are easier to evaluate than others and so people tend to focus where it’s easy to look. It’s easier to evaluate, “Do you have at least ten years of marketing experience?” than it is to ask, “Are you a good marketer?” or, “Are you the best marketer for this role?”
In this article we’ll focus on why industry knowledge and experience fall into this trap. Evaluating it is easy; you can typically read it right off a resume in a matter of seconds. Its relevance, or rather, lack thereof, is not as clear.
First, let’s recognize that subspecialization within an industry does matter, but that it is different from industry experience. If you experience blurry vision in one eye, you need a doctor; specifically, you’d visit an ophthalmologist, not an obstetrician. In software, the developers who create responsive, complex mobile UIs are different from developers who can write low-latency code for high-frequency trading. These and other subspecialties do take time to develop and that does matter. Medical specializations can take years of training; other fields, much less so.
Other types of specific functional experience also matter. This article is focusing on the same role, even the same specialty, but different industries. For example, within accounting, there’s taxation, auditing, and forensic investigation, to name a few. In marketing, there’s online marketing, events marketing, market research, brand positioning, lead generation, etc.
I often see roles that emphasize industry experience over functional experience, or sometimes on par with functional experience. This is often a mistake. The question is not whether specialized experience matters; it is whether that specialization is tied to the function or specifically to the industry in which the function was performed.
Take finance, where job descriptions might ask for experience in manufacturing or SaaS. The reality is, much of the work isn’t that different between them. Generally speaking, manufacturing has hard assets you can borrow against and less steady revenue, while SaaS has more stable revenue but no hard assets. Both have OpEx and CapEx, some of the latter of which can be amortized. Someone with no experience in that industry might initially have to ask how to classify a certain expense or revenue item. But assuming there’s no one else on the team who knows, she can reach out to someone in her network or look it up online.
Most of the time, a director of finance isn’t doing something industry-specific. She’s working on budgeting or cash flow issues, preparing reports, working on reducing DSO, creating internal processes, managing her team, working with other department heads on financial issues, etc.
Learning how to classify a certain charge is knowledge any halfway decent accountant can pick up quickly. Knowing how to work effectively with clients to get paid faster is a skill that takes much longer to develop. And this is to say nothing of the importance of skills like leadership, teamwork, communication, the ability to hire, etc. Day in and day out, those usually have a bigger impact on role success than someone’s initial knowledge of an industry.
I see the same thing in software. Recently, I was speaking to someone about her project. I strongly advised her not to sign with an offshore firm until she had a fractional CTO in place who could evaluate them. She said she felt comfortable with the firm because it had previously built another product in her industry. What she couldn’t tell me was whether it was well built, whether it could scale, whether the code was clean, or whether they tested and documented it well. Those are the things that create much of the long-term cost and risk in software development. Her industry isn’t one where deep industry knowledge changes the workflow. If they missed an industry-specific edge case, it could usually be identified and added later. She didn’t know that; she did know her industry. As a result, prior industry experience became an easy proxy for technical quality. In my experience (which includes specialized industries like cybersecurity, healthcare, and media), deep industry-specific knowledge is required surprisingly rarely. Most of the time, the general skills of a software developer are what matter: sound design and long-term thinking, disciplined coding, strong communication and collaboration, rigorous testing, keeping documentation current, etc.
In her case, she couldn't evaluate their technical abilities or the quality of the code they produced. She could evaluate two things: cost and whether they had worked in the industry before. Both were easy to see under the streetlamp. I’ve seen lots of companies like hers. They feel safer evaluating what’s visible under the streetlamp, even though what lies outside its light often matters more and ultimately costs them more when they get it wrong.
Consider a mining camp that needs a doctor on site and has two options. Doctor A has consistently demonstrated exceptional diagnostic ability, but hasn't worked in a mining camp before. Doctor B is known to be a solid but unremarkable physician who has spent two years at a mining camp. Who would you rather take? You might be tempted to think that the first doctor might not recognize mining camp ailments day one. Realistically, there are probably a few dozen common afflictions (from black lung to back injuries) that any competent person could learn within hours or days. A quick web search could bring up a list. AI could be used to note how those might be mistaken for different diseases the doctor is more familiar with so he’s prepared. But let’s even assume that on day one, or even during the first month, the first doctor is not as familiar with the conditions as the second doctor. How about month two? How about year two? Wouldn’t you rather have the better doctor in the long run? We hire people not for their knowledge on day one, but their ability to do work over the years we expect them to be employed. However, because “ability” is much harder to judge than “knowledge,” many people focus on the latter and not the former, to their long-term detriment.
When I need a specific type of doctor, I go to my doctor friends (typically in other specialties) and ask for recommendations. I can’t evaluate medical professionals but they can. The same is true when hiring auto mechanics and other professionals; we often lack the ability to evaluate them. If you don’t have the ability to evaluate some functional area, then it’s important that you find someone who does to help you out. Otherwise, you’ll continue to look under the streetlamp only and will miss the truly valuable signals.
The famous “Why do New Hires Fail?” study by Leadership IQ found that technical competence was the reason for failure only 11% of the time. That’s for all technical competence about their roles, of which industry-specific knowledge would be just a small part. But again, the other failure reasons in the report (coachability, emotional intelligence, motivation, and temperament) take much more effort to assess during a candidacy.
This is not to say industry experience never matters; consider sales. Sales, like other functional areas, has specialties. Selling planes, enterprise SaaS, and energy drinks do differ. Aviation is a small world with a limited number of buyers and sellers. The buyers are very deliberate as to when to make purchases; there’s no cold prospecting for a $100M airplane rolling off the line. SaaS has a buyer’s journey of identifying in-market prospects, qualifying them, mapping their needs, and selling against competitors and alternatives. It’s a journey lasting weeks or months with defined milestones. Finally, selling an indie energy drink to local stores is mostly about convincing them to try it so they can see if it works in their market. It’s not a long sales cycle.
Someone selling energy drinks to bodegas may also be able to sell airplanes, but it’s not exactly the same sales style or skill set, so it is a risk. On the other hand, someone selling energy drinks is using skills similar to those of the old door-to-door (or office-to-office) photocopier salespeople. Cold prospecting, short decision cycle. Different industries, but the same “subspecialty” type of sales.
The exception is the Rolodex. Salespeople bring their contacts with them, and while you can buy a list of contact info from a third party vendor, you can’t buy the relationships. When you hire a salesperson, you’re getting their relationships, and they may or may not transfer across industries.
Sales is just one example. Jobs involving regulators (not just following regulations, but roles where the job involves working with regulators), relationships in foreign countries or with key partners, community engagement, and other jobs that are relationship-heavy are similar. I understand that in law, sometimes the relationship between opposing counsel can help the process and the outcome because they have a degree of trust even if their clients don’t. Industry knowledge can often be acquired quickly; industry-specific relationships, trust, and institutional capital often cannot.
When hiring, there are two things you can do to avoid this pitfall. First, for the functional area in which you’re hiring, determine how much industry knowledge actually matters. Ask people in that or similar roles how often industry knowledge or experience actually matters in the course of the job. If someone lacks that knowledge, would they recognize the gap and be able to get an answer quickly from colleagues or other sources? How long would it take a strong hire to close the gap entirely? Together, those answers tell you the real cost of hiring someone without that industry experience: how much extra work and risk it creates, and for how long. What’s five or ten hours, or even a few days’ worth of training, when amortized over the roughly four years of the average job in the US?
If you don’t have anyone in that functional area who can provide an answer, reach out to your network (by “you,” I mean yourself and anyone else at the company who can help) to find someone who can guide you. The benefit of getting it right and the cost of getting it wrong are massive compared to the small effort of getting help.
Second, make sure you can effectively evaluate the skills not immediately visible under the streetlamp. Again, if that expertise doesn’t exist in-house, you should tap your network. This is harder than it sounds, though. As I often note, most individuals and organizations don’t do this well. (Many of my articles on interviewing and Chapter 3, Interviewing, of The Career Toolkit: Essential Skills for Success That No One Taught You provide actionable guidelines and frameworks to help.)
Are you hiring for their knowledge today, more and more of which can be sourced from AI (see “Where to Put the X in the Age of Generative AI”), or for their abilities over the next few years? Those abilities range from technical and functional expertise to communication, teamwork, leadership, and other skills that take years to develop.
Unfortunately, none of those are easy to evaluate in a candidate. Don’t mistake speed or ease of evaluation for importance. The right question isn't whether industry experience has value. It is whether the cost of acquiring the missing industry knowledge outweighs the long-term value of hiring the stronger candidate.
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