Quoting an example; suppose a renowned chef well versed in culinary arts working with a new ingredient. Before start cooking with it, he needs to know what kind of flavor it contains, whether it is favorable for dessert or not, whether it will match the cuisine or not.
The same way domain knowledge adds an advantage in the most predictable way as per the business or end-user perspective.
A domain is nothing but core knowledge of any particular sector, specific industry or nature of business. In simple words, we can say a particular area of work or a specific area to be worked upon.
It is specialized discipline or field, in contrast to general knowledge, or domain-independent knowledge. The term is often used in reference to more general discipline, as, for example, in describing a software engineer who has general knowledge of programming, as well as domain knowledge about the pharmaceutical industry. People who have domain knowledge, are often considered specialists or experts in the field.
Knowing the Domain thoroughly helps with the requirements accurately along with exploring new areas for the customers.
Domain knowledge for entrepreneurs: It accelerates finding product/market fit for your innovation in a given domain.
According to David S. Rose, Entrepreneur, Angel Investor, Founding Finance Chair at Singularity University:
Domain Knowledge is extremely important because of something called the Dunning–Kruger effect. Without domain expertise, you might think that you see an obvious solution to a problem in someone else’s domain to which they are oblivious. But in 99% of the cases of which I’m aware, the “solution” turns out to be a dead-end for reasons that would have been obvious to someone with domain expertise.
Entrepreneurs with prior knowledge of a given domain are alert to opportunities in that business environment. VC, when asked about the reasons for the rash of dot com failures, stated that most of the new internet-based businesses had been founded by entrepreneurs with a high degree of technical skills but insufficient domain knowledge. They were not prepared to run the businesses they had started because they did not know the industry or its intricacy.
Two implications that are especially salient can be drawn from the facts:
First, Entrepreneurial ventures, no matter how exciting or fast-growing they may seem, must acknowledge the rules of enterprise and business "wisdom" that apply to the industry and competitive environment in which the ventures are launched. Knowledge in a specific domain is required. Second, in opportunity recognition, as with all fields of business, there is no substitute for experience. Entrepreneurs who know a business domain will have a better chance of correctly recognizing opportunities than those who have no experience or knowledge in the domain.
Domain Knowledge Is The Blocker Now, Not Tech Skills.
You can’t fix what you can’t see. There is a common theory that entrepreneurs should pursue problems they experience themselves. Back when the app store was exclusive, engineering talent was scarce, development tools were blunt, and ideas were commodities.
You didn’t have to look very far to find a business opportunity waiting for web disruption. The strategy was to work on the problem you knew best and for most tech nerds in their 20s (including Kyle and me) that meant photo-sharing, drink ordering, on-demand food, transportation, and laundry apps.
However, the low hanging fruit has now been picked, and the next generation of successful entrepreneurs must find and conquer opportunities outside their world of familiarity. Engineering skills are still valuable, but they just are not the bottleneck to getting off the ground like they once were. The web development tools and resources available now can carry the basic code monkey to a product with real live users.
The bottleneck now isn’t your ability to build a minimal viable product, it is having the business intelligence to know what to build and how to sell it.
https://books.google.co.in/books?id=Npss0ddjjZcC&pg=PA85&lpg=PA85&dq=why+domain+knowledge+is+important+for+entrepreneur&source=bl&ots=03YuDwPriR&sig=ACfU3U0-DDeSPfXNpMOVyvSX0fiCuZhoXA&hl=en&sa=X&ved=2ahUKEwiMiIfG2svoAhX_7XMBHVY2BWY4ChDoATAGegQICxAv#v=onepage&q=why domain knowledge is important for entrepreneur&f=false
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