examine lean startup methodology

Upload: zenonnowak

Post on 17-Oct-2015

84 views

Category:

Documents


0 download

DESCRIPTION

Thesis - Zenon Nowak

TRANSCRIPT

  • Examining the Lean Startup

    Methodology

    Zenon Nowak

    Submitted in partial fulfilment of requirements for the

    Bachelor of Business (Honours)

    Wexford Campus

    Institute of Technology, Carlow

  • 1 | P a g e

    DECLARATION

    *I declare that all material in this submission e.g.

    thesis/essay/project/assignment is entirely my/our own work except where duly

    acknowledged.

    *I have cited the sources of all quotations, paraphrases, summaries of information,

    tables, diagrams or other material; including software and other electronic media in

    which intellectual property rights may reside.

    *I have provided a complete bibliography of all works and sources used in the

    preparation of this submission.

    *I understand that failure to comply with the Institutes regulations governing plagiarism constitutes a serious offence.

    Student Name: (Printed) __________________________________

    Student Number(s): __________________________________

    Signature(s): __________________________________

    Date: __________________________________

  • 2 | P a g e

    Acknowledgments

    I would like to dedicate this thesis to my

    mother Bronislawa Krafczyk who has

    inspired and encourage me through my

    life long education process.

    A sincere thank you, I love you

    I would also like to acknowledge my supervisor and

    lecturer Tomas Dwayer for his endless and invaluable

    encouragement and support while completing my

    dissertation.

  • 3 | P a g e

    Abstract

    Title of the Thesis

    Examining the Lean Startup Methodology.

    The Main Objectives

    1) How efficient is the Business Model Canvas for planning and developing a Business Model and how does it compare with the traditional Business Plan?

    2) How efficient is the lean startup methodology of conducting small experiments to validate the business assumptions of the new start-ups?

    3) How effective is the lean startup methodology of conducting experiments to validate the business assumptions of new start-ups?

    Literature

    The Lean Start is new methodology introduced by Silicon Valley entrepreneurs.

    Today, Lean Startup have many followers and multiple of research was conducted by

    many researchers as Steve Blank, Eric Ries or Ash Maurya.

    Methodology

    In order to answer the research objectives, personal semi-structured interviews were

    conducted with; Darren Heaphy, the product manager from Scurri Web Service,

    Claudio Perrone a lean-agile management consultant and Tom Banville, the CEO of

    Wexford County Enterprise Board. The use of qualitative data to explore research

    topic has support (Tull & Hawkins, 1993)

    . Conclusions

    The conclusion highlight there are many common patterns between the respondents

    regarding Business Model Canvas efficiency. It is a great tool for planning the

    business but there are some limitations that need to be considered such as influence of

    the environment which in business exists or details of company financial data etc. The

    involvement of customers in new business development is a fundamental principle of

    Lean Startup Methodology and there is as much risk in development in "stealth mode"

    as in the more open Lean approach. Interviewees argue that, the collection of valid

    data may be an issue but well-designed experiments are key to reduce bias. Finally, the

    Lean Startup methodology increases the odds for business success by the elimination

    of risk through validation of hypothesis and assumptions and assist business to not

    focus on development of products that nobody wants. However, the Minimum Vitae

    Product (MVP) and all experiments need to well-designed in order to collect true

    feedback from customers.

    Recommendations

    The author would recommend to use of the Lean Canvas as the replacement of

    Business Model Canvas in early days of startup. Also, the experiments, assumptions

    and MVP needs to be well designed to show true and fair view of researched issue.

    The author is recommend to use Lean Startup methodology to reduce risk in new

    business ventures.

  • 4 | P a g e

    Table of Contents

    DECLARATION ......................................................................................... 1

    Acknowledgments ..................................................................................... 2

    Abstract ..................................................................................................... 3

    Table of Figures ..................................................................................... 7

    List of Tables ......................................................................................... 7

    Chapter 1 Introduction ............................................................................ 9

    1.1 Problem Statement ..................................................................... 9

    1.2 Rationale for research ................................................................. 9

    1.3 The Structure of the Thesis ....................................................... 11

    Chapter 2 - The Research Context .......................................................... 14

    2.1 Introduction ............................................................................... 14

    2.2 Scurri ........................................................................................ 14

    2.2.1 Early days of Scurri................................................................ 14

    2.2.2 Scurri Technology and Global Competition ........................... 16

    2.2.3 Scurri team ............................................................................ 17

    2.2.4 Scurri - go to market strategy. ............................................... 18

    2.3 Entrepreneurship in Ireland ....................................................... 19

    2.4 Conclusion ................................................................................ 22

    Chapter 3 - Literature Review .................................................................. 24

    3.1 Lean Manufacturing The Origin of Lean Startup .................... 24

    3.2 What Is Lean Startup ................................................................ 26

    3.3 Business Model Canvas ........................................................... 29

    3.4 Customer Development ............................................................ 33

    3.5 Minimum Vitae Product ............................................................. 35

    3.6 Criticism of Lean Startup ........................................................... 37

    3.7 Conclusion ................................................................................ 38

    Chapter 4 Methodology ........................................................................ 40

    4.1 Aim of Research ....................................................................... 40

    4.2 Research methods .................................................................... 41

    4.3 Data Analysis ............................................................................ 44

  • 5 | P a g e

    4.4 Details of interviewees .............................................................. 45

    4.5 Limitations ................................................................................. 46

    4.6 Conclusion ................................................................................ 47

    Chapter 5 - Findings ................................................................................ 49

    5.1 Introduction to findings .............................................................. 49

    5.2 Profile of respondents ............................................................... 49

    5.3 Research question 1 ................................................................. 51

    5.4 Research question 2 ................................................................. 54

    5.5 Research question 3 ................................................................. 57

    5.6 Conclusion ................................................................................ 58

    Chapter 6 - Analysis ................................................................................ 61

    6.1 Introduction to Analysis ............................................................. 61

    6.2 Research Question 1 ................................................................ 61

    6.3 Research Question 2 ................................................................ 64

    6.4 Research Question 3 ................................................................ 67

    6.5 Conclusion ................................................................................ 69

    Chapter 7- Conclusions and Recommendations ..................................... 71

    7.1 Introduction ............................................................................... 71

    7.2 Research Question 1 ................................................................ 71

    7.3 Research Question 2 ................................................................ 73

    7.4 Research Question 3 ................................................................ 74

    References .............................................................................................. 76

    Appendices ............................................................................................. 81

    Appendix 1 ........................................................................................... 82

    List of interviews questions ................................................................. 82

    Appendix 2 ........................................................................................... 85

    In-Depth Interview with Claudio Perrone .............................................. 85

    Research Question 1 ........................................................................... 86

    Research Question 2 ........................................................................... 92

    Research Question 3 ........................................................................... 97

    Appendix 2 ......................................................................................... 100

    In-Depth Interview with Darren Heaphy ............................................. 100

  • 6 | P a g e

    Research Question 1 ......................................................................... 101

    Research Question 2 ......................................................................... 105

    Research Question 3 ......................................................................... 108

    Appendix 3 ......................................................................................... 111

    Interview with Tom Banville ............................................................... 111

    Appendix 4 ......................................................................................... 118

    Interview with Darren Heaphy - Data Reduction ................................ 118

    Appendix 5 ......................................................................................... 123

    Interview with Claudio Perrone - Data Reduction .............................. 123

    Appendix 6 ......................................................................................... 128

    Interviews Context Data Display ........................................................ 128

  • 7 | P a g e

    Table of Figures

    Figure 1 Lit Motors ................................................................................. 10

    Figure 2- The Lean Startup Loop ........................................................... 27

    Figure 3 - The Business Model Canvas .................................................. 30

    Figure 4 Customer Development Process .............................................. 33

    Figure 5 - Scurri Business Model Canvas .............................................. 51

    List of Tables

    Table 1 Interview with Darren Heaphy Data Reduction .............................. 119

    Table 2 Interview with Claudio Perrone Data Reduction ............................. 124

    Table 3 Data Display........................................................................................ 129

  • 8 | P a g e

    Chapter 1

  • 9 | P a g e

    Chapter 1 Introduction

    1.1 Problem Statement

    The Lean Startup approach proposes early interaction with customers, collecting

    feedback in the early stage of development and allowing customers to be more

    involved in the development process. Sometime businesses already know that a plan is

    not right and there is a need to change the business strategy but this can be very time

    consuming process. To implement the new concepts into a business model, often a

    plan needs to be re-written. The author believes traditional business planning methods

    limit the flexibility of the companies for dynamic change.

    When starting a business, everyone wants to reduce the initial costs and reduce the

    risks related with the startup. The central question of this thesis asks is the Lean

    startup a solution to reduce uncertainty and improve success odds?

    1.2 Rationale for research

    The Lean Startup approach proposes early interaction with customers, collecting

    feedback in the early stage of development and allowing customers to be more

    involved in the development process. Sometime businesses already know that a plan is

    not right and there is a need to change the strategy but this is a very time consuming

    process. To implement the new concepts into a business model, often a plan needs to

    be re-written. I personal believe traditional business planning methods limit the

    flexibility of the companies for dynamic change.

  • 10 | P a g e

    When starting a business, everyone want to reduce the initial costs and reduce

    the risks related with startup. Is the Lean startup a solution to reduce uncertainty and

    improve success odds?

    Lean startup, while still in its infancy as an entrepreneurial approach, has been

    proven successful for companies including Dropbox and Lit Motors. Dropbox CEO

    Drew Houston stated that, the lean startup approach helped in in the process of the

    development of Dropbox in the early days. After implementing the lean startup

    principles, the company started iterating their product much faster in order to test the

    business assumptions and discover the need of Dropbox customers. Dropbox went

    from 100,000 registered users to over 4 million, just in 15 months of time (Ries,

    2013). Lit Motors is an example of successful implementation of the Lean Startup

    methodology in the automotive industry. Danny Kim, the founder of Lit Motors, used

    the lean startup principles to prototype the Model-T of the 21st century, the concept

    of a merger between the motorcycle and car. Danny Kim argues that the Lean Startup

    concept of the

    Figure 1 Lit Motors (Motal, 2011)

  • 11 | P a g e

    Minimum Vitae Product helped in a big way with de-risking the concept and

    supported the quick development of a product that satisfied the customers (Ries,

    2013).

    Today The Lean Startup methodology have many followers across the globe. There

    are multiple startups that are successfully implement the new entrepreneurial

    methodology practices into their business models.

    1.3 The Structure of the Thesis

    Chapter 2 - The Research Context

    The purpose of this chapter is to present the entrepreneurship climate in Ireland and to

    present one of successful Irish startup that practically use the Lean Startup

    methodology in business development Scurri Web Service.

    Chapter 3 - Literature Review

    The purpose of this chapter is to present literature related to Lean Startup.

    Chapter 4 - Methodology

    The purpose of this chapter is to outline the research methodology. The author will

    present the aims of the research, the research method and the limitations.

    Chapter 5 - Findings

    This chapter will present and discuss the research findings from the interviews

    conducted.

  • 12 | P a g e

    Chapter 6 - Analysis

    This chapter will provide analyse of the research questions findings. The structure of

    that chapter will discuss each of the research objectives findings and how it links into

    existing literature.

    Chapter 7 - Conclusions/recommendations

    The main purpose of this chapter is to provide the conclusions and recommendations on

    the findings and analysis of the research objectives presented in chapters five and six.

  • 13 | P a g e

    Chapter 2

  • 14 | P a g e

    Chapter 2 - The Research Context

    2.1 Introduction

    The purpose of this chapter is to present the context of the research project by

    providing an outline of Scurri.com and to present the entrepreneurship climate in

    Ireland.

    2.2 Scurri

    Scurri is an Irish technological startup, with headquarters in Duncannon. Scurri

    technology optimises the customer delivery experience, allowing merchants to

    effectively deliver on brand promises and drive customer loyalty.

    2.2.1 Early days of Scurri

    You really need to find a problem that is worth solving

    Rory OConnor, CEO of Scurri

    (yhponline.com, 2013)

    Scurri Web Service was founded in 2010 by Rory OConnor. The initial idea

    of the business came when Rory was trying to order online a new set of alloys for his

    car. Second hand alloys are relatively cheap in comparison to brand new ones but after

    searching for a delivery supplier the total cost grew above the cost of the new wheels.

  • 15 | P a g e

    That was the beginning of a new startup vision, the online company that connects

    delivery companies, e-commerce and their customers (yhponline.com, 2013).

    The initial Idea was based on creating a website that would allow customers to

    pick from multiple choice of transport companies, an option that is best suited to the

    customer. Connecting through the Scurri software, the transport service companies

    will quote the price for each order based on their own pricing policy. In the first year

    of business the company focused on searching for the correct business model to

    deliver a new product. Scurri conducted multiple of experiments to test the business

    model hypothesis but most of them failed. It was a very difficult period for the startup

    because of limited amount of resources available. (yhponline.com, 2013).

    The initial concept of Scurri business model was rapidly changing. The website

    traffic metrics indicated a big interest in the product however the Scurri team noticed

    that the time needed for the customer service was not acceptable and it would be a

    huge problem after scaling the product. Scurri needed to pivot the business model and

    look for an alternative solution (yhponline.com, 2013).

    Scurri is given great support from Enterprise Ireland by participating in iGAP

    accelerator programme. The Scurri team was trained on how to use the Lean Startup

    methodology to increase the odds for success in a difficult software development

    market. The training was provided by the author of Lean Startup movement, Eric Ries,

    and also Sean Ellis the founder of Dropbox and Eventbrite (Fitzpatrick, 2012).

  • 16 | P a g e

    Finally, Scurri spot an opportunity to provide a service for e-commerce

    merchants offering a platform that effectively manages high volumes of online orders

    by choosing the best delivery service, according to business-customers requirements.

    The Scurri team discovered that the improved performance in the area of

    delivery had an effect on reducing the amount of the online cart abandonment

    (yhponline.com, 2013) and significantly increased customer satisfaction in their online

    shopping experience. The concept of Scurri software was to match the best suitable

    delivery service for each order by using business rules set by online retailers and allow

    to manage the delivery process in the most cost-efficient way. After validation of the

    new business model Scurri was ready to raise more funds. They used multiple of

    government grants and raised additional funds from private investors (Kennedy,

    2014).

    2.2.2 Scurri Technology and Global Competition

    In the delivery management software market we can distinguish few

    companies that are in direct competition to Scurri with similar offer and already a

    well-established brand name. In the United States, the market leader position has

    ShipStation and the United Kingdom market is dominated by Metapack that is focused

    on large and medium size businesses. Scurris market strategy is to focus on delivering

    a maximum quality service and a careful analysis of competitive products with a aim

    to find aspects where Scurri could add extra value and differentiate from competition.

    As a result, Scurri found the first early adopters of new the software from dissatisfied

    customers of competition that were able to risk the transfer of part of the orders to the

  • 17 | P a g e

    new platform. After analysing the feedback from these customers, Scurri quickly

    found the value proposition that would be a good alternative for competition products.

    From technological perspective, using the cloud computing and python

    development language in the Scurri platform greatly increased the speed of software

    performance in comparison to already existing products.

    2.2.3 Scurri team

    One of the most important company assets is a great management team.

    Chief Executive Officer Rory OConnor - Prior to founding Scurri he performed

    various roles in Waterford Wedgwood, spending time in various sales, marketing and

    strategic project roles. Rory subsequently worked as a change management consultant

    with clients such as Heineken, Intel, Ogilvy and Siemens and as a project manager

    with AOL broadband. Rory has a number of business qualification including holding

    an MBA from Henley Management College.

    The Product Manager - Darren Heaphy, was previously working in AOL Broadband

    and TalkTalk where he held the role of head of consumer operational communications.

    Darren graduated from WIT where he holds a BA in IT and a higher Diploma in

    Business Management.

  • 18 | P a g e

    Chief Technological Officer Sonya Hogan. She previously worked with Baush and

    Lomb, TSSG in WIT and with another successful start-up Muzu.tv. Sonya graduated

    from WIT where she earned her BA and Masters in Software Development.

    Customer Support Manager Pamela Keane. Pamela worked within the hospitality

    industry where she set up and managed a hotel and gained much of her customer

    service experience. Pamela maintains most of office duties such as customer service,

    preparing legal and revising agreements and managing the company cash. Pamela

    graduated from Law School.

    Development team - The initial development of the product was outsourced to the

    external development company. By using the agile development and Lean Startup

    practices there was ongoing communication on daily basis with outsourced developers

    and every week Scurri was able to deploy next parts of the product features.

    Today, Scurri employees few software developers that coding in-house in

    Duncannon headquarter.

    2.2.4 Scurri - go to market strategy.

    Today, Scurri has few customers on board and by adding additional functionality

    to the platform they constantly introduce new customers together with quickly

    growing volume of process orders. The management strategy is to focus now mostly

    on implementing new curriers service to the platform and scaling of the product

  • 19 | P a g e

    worldwide with the main focus on the UK market. Scurri opened an office in Google

    campus in London. Rory OConnor cited in siliconrepublic.com said:

    Delivery remains a huge priority for both customers and merchants,

    ecommerce is accelerating and customers now expect Amazon-level service

    as standard Our technology gives growing online merchants the power to fulfil this need quickly and affordably. As one of the first purpose built

    cloud-based solutions in Europe Scurri has found a better way to serve the

    market, reducing the cost and resource draining complexity of current

    shipping solutions (Kennedy, 2014).

    Because of the aspiration to become global player on the delivery management

    software and willing to entry in 2014 to the United States market, Scurri wants to

    establish a representative office in Silicon Valley, California.

    2.3 Entrepreneurship in Ireland

    In the recent years Ireland entrepreneurs needed to challenge the effects of the last

    recession that enforce many entrepreneurs to finish business operations due to

    negative changes in the global business environment. Recession is a difficult time for

    many businesses that need to challenge verification of their business models in very

    difficult macro environment.

    The last CPA Entrepreneurship Report (McCall, 2013) indicate that the climate for

    entrepreneurship in Ireland starts to improve due to reduced cost of doing the business,

    lower prices of labours and materials that lowered barriers to entry or opportunities in

    new technologies such as cloud computing. Tom Banville from Wexford County

    Enterprise Board, who conducted an interview with the author (transcript from

    interview could be found in appendix 3), noted that the recession forces many people

  • 20 | P a g e

    to start thinking about developing their own business because of the consequences of

    losing their jobs and the difficult employment market. Tom stated that:

    the majority of people who are attending the start to run business programme at the moment are unemployed people who are looking for other

    options, you know, rather than looking to get a job they are looking to start

    their own business so I think the recessions has created necessity

    entrepreneurs, new people who have lost their jobs or been made redundant

    and who feel there are not opportunitys for them in terms of employment so they are looking at self-employment as an option

    Enterprise Ireland offers lots of support and assistance for Irish entrepreneurs,

    they offer multiple of workshops, trainings, grants and giving advice to people that

    want to start their business. Unfortunately, there is a small percentage of start-ups that

    survive the first three years of business operations. Tom also explain:

    there will be people that would want to start the business or just about to start the business or thinking about starting the business in the future once

    they will find out the information. So, out of that 300, my guess would be

    that, maybe 30% would go on to actually start the business. And then if you

    will look out of that 30%, year later maybe half are still in business and

    maybe two, three years later it would be half of that again would be still in

    business. It is risky, starting the business is: I always say it is easy to start

    the business but it is hard to keep it going.

    Despite of the unfavourable environment some entrepreneurs recognise that this

    is the best moment to enter the market because of low barriers to entry and lower

    competition. Start-ups which are able to survive challenges in difficult time of

    economic downturn may become very successful after global economy will recover

    because of the business models that was created in that difficult time for some

    entrepreneurs. In opinion of Laura Erskine from MumterprenurClub.ie cited in CPA

    Entrepreneurship Report (McCall, 2013), the difficult environment is the best moment

    to establish a new business. Laura stating that:

  • 21 | P a g e

    Recessionary or difficult economic times are the ideal time to establish a

    new business. In the last year alone, I have seen more small businesses than ever

    set up and even more importantly, they are all helping in supporting one another

    to succeed

    (McCall, 2013)

    Comparing to data from time before recession, in year 2007 almost half Irish

    population 46% saw business opportunities in their local area. In recent years these

    numbers fell down to 26%. In terms of early-stage entrepreneurs Ireland achieved 14

    position in Europe with 6% of population that was involved in starting new business

    ventures (McCabe, 2013).

    In global entrepreneurship the researcher found the two common trends:

    increasing number of female entrepreneurs and increasing influence of globalisation.

    In Ireland entrepreneurship is still mostly dominated by men starting up business. Irish

    female entrepreneurs represent just third part of all self-employed or new start-ups.

    This is a common pattern in other European countries. In sense of globalisation,

    Ireland noted an increase in new business customers base outside the country and

    almost a quarter of new ventures possess quarter of customers based internationally.

    Specific Ireland characteristic of small population and peripheral location contribute to

    the increase of that trend (McCabe, 2013).

    Ireland offers great support for entrepreneurship. The Forbes magazine ranked

    Ireland as The best place for business stating that Ireland has a very high level of

    direct foreign investment, very attractive tax system, a good investors protection and

    also personal freedom (Badenhausen, 2013).

  • 22 | P a g e

    2.4 Conclusion

    Irish entrepreneurs need to challenge increasing global competition and

    sometimes operate in a very difficult economic environment. The use of Lean Start-up

    methodology may help to increase the chances of start-ups to survive on the market.

    The next chapter will outline the available literature that was previously published

    about The Lean Start-up methodology.

  • 23 | P a g e

    Chapter 3

  • 24 | P a g e

    Chapter 3 - Literature Review

    The purpose of this chapter is to present information which has previously been

    presented by a mixture of authors and researchers. All of the material used was

    collected from journals, online resources and various publications. The information is

    specifically relevant to core elements of the Lean Startup methodology.

    3.1 Lean Manufacturing The Origin of Lean Startup

    The origins of Lean, which is one of the core elements of the Lean Startup, comes

    the from Japanese manufacturing industry, introduced by Toyota known as Toyota

    Production System & Just-In-Time (JIT) (Slack, et al., 2010).

    The term Lean was introduced for the first time by John Kafcik (1988) in an

    article, Triumph of the Lean Production System published in Sloan Management

    Review. The lean approach quickly gained many followers who continued their

    research on the Japanese production system. James Womack et al., (1990) published a

    bestseller about the lean production system called The machine that changed the

    world. The authors describe one of the characteristics of lean as a process of waste

    elimination by operation management; focusing on product quality, supply chain

    efficiency and the continuous improvement of processes in manufacturing and

    engineering, known as Kaizen.

    Masaaki Imai cited in Slack et al. (2010) notes that Kaizen is not only the

    improvement of the work environment but it is also the improvement in our personal

  • 25 | P a g e

    lives, both the home and social life. Kaizen includes the involvement of everyone in

    the process, managers and workers alike.

    Masaaki Imai also points out the importance of commitment and self-discipline

    order to maintain everyday improvement. Masaaki suggests that the implementation of

    Kaizen should begin at the top level of management, who show the employee

    guidance, commitment and determination, passing the values of Kaizen to the lower

    level management and finally to the line staff employees. Kaizen means

    improvement, both in everyone and everywhere (KAIZEN963, 2013).

    Philip Atkinson (2010) suggests that the implementation of Lean cannot be

    successful in an organisation where the culture opposes it. Lean requires such a high

    degree of cross functional working that any culture which counter acts this will fail.

    He argues that the organisational culture can evolve and could become the driver of

    organisational change.

    Taiichi Ohno (1988) formally known as father of lean due to his commitment in

    development from early years, wrote in his book, Toyota Production System: Beyond

    Large-Scale Production, and described all of his personal life experiences in relation

    to the Toyota Production System and supply chain management (JIT) Just-In-Time,

    which is also a very important part of Lean Manufacturing.

    Womack et al. (2006) published an important book about Lean Manufacturing

    Lean Thinking, where we can read about the importance of the Lean Culture and

    implications of the main concepts of lean with specific manufacturing examples of the

    concepts in action in a variety of industries. The authors also explain in that

  • 26 | P a g e

    publication the importance of producing small batches in the Lean Manufacturing

    production process, arguing that, this will have an effect on the identification and

    resolution of problems in relation to quality if they arise as with small batches it is

    much quicker to reconfigure the small machines to the production demand.

    3.2 What Is Lean Startup

    The term Lean Startup was first introduced by Eric Ries (2008) on his personal

    entrepreneurial blog - Startup Lesson Learned. Ries explained that term Lean Startup

    derives from a connotation of Lean, in the sense of low-burn by using available open

    source software and iterative development, the minimising of waste in startup

    operations. Ries also argues that Lean startup is an application of Lean Thinking,

    defined by Womack et al. (2006) in their book Lean Thinking

    Ries created five principles that are characteristic to the Lean Startup:

    1. Entrepreneurs are everywhere Eric Ries (2011, p. 8) suggests that you

    dont need to work in a garage to be a startup. A Startup has nothing to do with

    the size of the company, sector of the economy, or industry but is the specific

    stage and place that a company has whilst in their early business development

    searching for product-market fit. Ries describes startup as ...a human

    institution designed to deliver a new product or service under conditions of

    extreme uncertainty (Ries, 2010) .

  • 27 | P a g e

    2. Entrepreneurship is management - A startup is an institution, not just a product,

    so it requires management, a new kind of management specifically geared to its

    context (Ries, 2011, p. 8).

    3. Validate Learning - Startups exist not to make money or to serve customers. They

    exist in order to learn how to build a sustainable business. This learning can be

    validated scientifically, by running experiments that allow us to test each element

    of our vision (Ries, 2009), (Ries, 2008) (Ries, 2011, p. 8).

    Build Measure Learn (known as Lean Startup Cycle/Loop) - The fundamental

    activity of a startup is to turn ideas into products, measure how customers respond,

    learn about your customers behaviour and needs. After analysing the metrics,

    entrepreneurs need to make decisions on whether to pivot (change direction) or

    persevere. All successful startup processes should be geared to accelerate this

    feedback loop (Ries, 2012), (Ries, 2008), (Croll & Yoskovitz, 2013) (Ries, 2011,

    p. 9)

    Figure 2- The Lean Startup Loop (Ries, 2011)

  • 28 | P a g e

    4. Innovation Accounting - To improve entrepreneurial outcomes, and to hold

    entrepreneurs accountable, we need to focus on the boring stuff: how to measure

    progress, how to setup milestones, how to prioritize work. This requires a new kind

    of accounting, specific to the startups (Ries, 2011, p. 9).

    Womack et al. (2006), notes that, in Lean Manufacturing the indicator of

    efficiency is the improvement of value-creating activities such as waste elimination

    and focusing on building the highest quality of products. Eric Ries (2013) stated that,

    the Lean startup adapted this idea into the context of entrepreneurship and this is why

    efficiency and progress are measured, not on the quality of products, but by validated

    learning. Ries argues that if 9 out of 10 startups fail the only one outcome from these

    business startup failures is the lesson to be learned from failure. For this reason the

    focus of lean startup is on the reduction of time needed in order to learn more about

    our assumptions using a scientific method of testing Lean Startup Loop. The author

    also points out, the life time of a startup is related with access to funding and cash

    burning. If startups reduce time needed to pivot, the odds for success will immediately

    increase.

    Because the startup often builds products which nobody wants, the purpose of

    Lean Startup is to figure out what is the right product to build. This is carried out by

    engaging customers whilst in the development process and including their feedback

    into the product development process from the early stage of the startup (Blank, 2013)

    (Ries, 2008).

  • 29 | P a g e

    Lean Startup leading researchers argue that the startup is not about the

    successful execution of the Business Plan, that leads no nowhere, but the startup is

    about searching for a problem worth solving and product market fit through validate

    learning (Ries, 2008) (Blank, 2013) (Maurya, 2012).

    Eric Ries (2008) defined three drivers in Lean Startup with the following

    characteristics:

    Use of Cloud computing and Open Source software to minimise operation costs.

    Application of the practice of agile software development.

    Application of customer-development process.

    In an article Why the Lean Start-up Changes Everything, published in Harvard

    Business Review, Steve Blank (2013) stated that the time startups spend operating in

    stealth mode is not efficient. The dot.com bubble gives the evidence showing how

    important it is have involvement with customers whilst in the development process to

    avoid building products that no one wants.

    3.3 Business Model Canvas

    As stated previously, a very important factor for startups is searching for problems

    that are worth solving, searching for product-market fit and the creation of new

    business models which could make the enterprise successful on the market.

  • 30 | P a g e

    Alexander Osterwalder (2004) found a new way of approaching the business

    model planning process which would eliminate the necessity of writing time

    consuming business plans and is much more flexible regarding change, innovation and

    also to test business assumptions. Osterwalder wrote The Business Model Ontology -

    A Proposition in a Design Science Approach, where he introduced for the first time

    the concept of Business Model Canvas, a tool used as a replacement for the traditional

    business plan which very quickly gained many followers. Business Model Canvas

    offers powerful, simple tested tools for understanding, designing, reworking, and

    implementing business models. Osterwalder distinguished nine blocks on the Canvas

    that contain a series of hypothesis which need to be tested and by analysing the

    outcomes of these tests will help in business model prototyping.

    Figure 3 - The Business Model Canvas (Kromer, 2013)

    Many entrepreneurs and business researchers quickly adapted the new idea into

    new business development processes. Steve Blank, author of Customer Development

    concept, stated at Stanford University Entrepreneurship Corner, the Business Model

    Canvas is an excellent tool in the Customer Development process due to its

  • 31 | P a g e

    transparency, flexibility and ease of use when entrepreneurs need to test their business

    hypothesis (econer, 2012).

    Steve Blank (2012) also noted that the Business Model Canvas could be used to

    test business assumptions before their implementation and in the book The Startup

    Owner's Manual Blanks explains how we can use the scientific approach while

    testing our business model assumptions.

    Alexander Osterwalder (2010) also published an article on his personal blog that

    summarising the fit of Business Model prototyping, customer development process

    and social entrepreneurship. Osterwalder believes that a business model should consist

    of three phases:

    Designing a starting model

    Iteratively adapting your starting model in response to market feedback (Customer

    Development process)

    Scaling it when you nailed it

    Osterwalder suggests that all three phases can be supported by the use of the

    Customer Development process and Business Model Canvas in order to map and

    discuss the business model, suggesting using Canvas as a tool in the testing process

    then, scaling the Business Model once business assumptions have been scientifically

    proved.

  • 32 | P a g e

    Eric Ries (2011) found the Business Model Canvas to be a very valuable tool for

    every startup and included the concept as a core element of the Lean Startup

    methodology. Ries found that the Business Model tool fit very well with the Lean-

    Startup-Cycle (build-measure-learn) and it is very well designed for use as a tool with

    the purpose of measuring metrics from our business experiments.

    Ash Maurya (2012) noted that the use of the Business Model Canvas is better in

    comparison to the traditional Business Plan in three important ways:

    Speed Business Plans are a very time consuming process which usually take a few

    months and it is difficult to adjust when changes have a significant impact on business

    models. In compression, writing multiple Business Model Canvas, will take no more

    than one afternoon.

    Concise The Business Model Canvas is very concise as the words used need to be

    very specific and entrepreneurs have 30 seconds to grab the attention of potential

    investors and just 8 seconds to grab the attention of customers which visit your

    website.

    Portable Single page Business Model Canvas is much easier to share with

    everybody and, in effect more people have a chance to read all of it. Also, as

    mentioned before, it is much quicker to update and introduce changes.

  • 33 | P a g e

    3.4 Customer Development

    Customer Development methodology was described for the first time by Steve

    Blank (2013) in his publication The Four Steps to the Epiphany in 2005. Blanks

    outlined his views regarding entrepreneurship practices and the process of searching

    for market fit between products and market argues that no business plan survives the

    first contact with customers. The author describes startups as temporary organisations

    with the purpose of searching for repeatable and scalable business models and also

    points out that startups are not a smaller version of companies as the size of the

    business is irrelevant.

    Steve Blank (2013) explain that the startups are not about execution of the plan but

    searching for scalable business model. The founders should go outside the buildings

    and talk to their customers to test their business hypothesis and start search for the

    facts behind their guesses.

    Figure 4 Customer Development Process (Blank, 2013)

  • 34 | P a g e

    Steve Blanks (2013) puts the startup life-time in four phases; discovery,

    validation, creation and finally the creation of the company. If our business hypothesis

    is not validated, it is time for pivot and Blanks suggests using the Alexander

    Osterwalder Business Model Canvas tool to play around with business models until

    the desired product-market fit is archived. After customer validation is achieved, the

    next step customer creation, is the time when we finally heavily invest in marketing

    the product. The Last stage of the Customer Development process is Company

    Creation, the time when the Startup becomes a company which knows their customers.

    Pivot in Lean Startup was introduced by Eric Ries (2010) in the book Startup

    Lesson Learned. Ries explain Pivot as the moment when the startup needs to change

    direction after previous validation of hypothesis that proved untrue. For the startup,

    Pivot means that we are learn something about our customers and Ries argues that

    startups should pivot in the shortest possible time in order to reduce costs related with

    the learning process and speed up learning regarding the customers. If a company

    pivots too late this will have a significant effect on capital resources that are usually

    very limited at this stage of the startup.

    Steve Blanks explain Pivot as a change of one or more Business Model Canvas

    components and also argue that the pivot cycle time matter, because startup is mostly

    go from failure to failure and by reducing time between them we increasing our odds

    for the success (LeanStartupCircleLA, 2012).

    A decade on from his first publication, Steve Blanks on speech at UCLA Anderson

    School of Management, updated his Customer Development concept with new

  • 35 | P a g e

    aspects. Blanks explained how over the last decade todays market has changed;

    products can now be divided into products we can touch and virtual products. He also

    distinguished six different types of startups and suggests they all should be treated in a

    different manner and each type of startup will require different entrepreneurship skills.

    Blanks suggests that startups which are owned by big corporations that know the

    customers of their existing markets, will differ much in comparison to small

    enterprises that need to discover their customers first. In big corporations, managers

    know the changes and their actions will be more about the execution of the plan. In

    the small startups, everything is unknown and you need to search for the business

    model first (LeanStartupCircleLA, 2012).

    3.5 Minimum Vitae Product

    To avoid building products that nobody wants, Eric Ries (2009) suggests the use of

    the Minimum Vitae Product (MVP) minimum version of a new product which

    allows a team to collect the maximum amount of validated learning about customers

    with the least effort. Through involving the customers in the early process of

    development, entrepreneurs reduce the risks and speed up the learning process. The

    main purpose of MVP is to collect the metrics from our early adopters.

    Ash Maurya (2012) points out the importance of baseline metrics which are used

    in our experiments and points out they need to be chosen and measured carefully.

    Metrics will help us to identify the problems around the product, where things go

    wrong, but they will not tell you why it is going wrong. To get an answer to the

  • 36 | P a g e

    reasons for failure we need to talk with the customers again. Maurya distinguish three

    stages in startup:

    Problem/Solution fit first stage of the startup when entrepreneurs search for

    problems that are worth solving by talking with the customers and using observation

    techniques. At that stage the identification of product features which are most

    important to customers can be ascertained which gives the knowledge regarding

    features of Minimum Vitae Product that will be used in the next stage of the

    development process.

    Product/Market fit The stage of testing the product and analysing the metrics.

    Product/Market fit is a process of optimisation of the product to best market

    performance. In internet space the metrics used could be: sing up rate, activation rate

    or rate of getting paid.

    Scale of the product Last stage of product development where, based on the

    outcome of MVP experiments, we know how to build the product which satisfies the

    needs of customers with a small risk of failure.

    Lean Analytics publication focuses on how to analyse the metrics which are used

    in experiments. The authors argue that not all the metrics are relevant and suggest, in

    each case the importance of metrics are different and entrepreneurs should focus only

    on the most important, defining them as One Metrics That Matter (Croll & Yoskovitz,

    2013).

  • 37 | P a g e

    Eric Ries (2011) suggests, the collected metrics are the base for the engine of

    growth. The use of the Minimum Vitae Product and by analysing of our experimental

    outcome, we can decide when the product is ready to proceed to the next stage of

    development and how quickly the product will evolve in the market.

    3.6 Criticism of Lean Startup

    There is some criticisms regarding the Lean Startup. Sasmito Adibowo (2013)

    suggests that entrepreneurs should not have blind trust on it. Adibowo argues that the

    use of the MVP in online space (landing page) could not guarantee that you are talking

    to your target customers caused by the fact they cannot locate the website, you want

    them to reach. Also, collecting customer feedback based on e-mails, could be

    misleading as people sometimes have no trust in providing their email addresses in

    fear of the spam that is often the result of giving e-mail addresses to untrusted sources.

    John Finneran (2013) argues that the Minimum Vitae Product has some

    limitations, he note that customers are not interested in the companys learning process

    but only want reliable software which consistently delivers value. Finneran also critics

    the concept of testing the product with early adopters, arguing that the customers are

    not interested in the Lean Startup adventure, they just want reasonably priced software

    that does to the job.

    Jared White (2013) critics the Lean Startup methodology based on the experience

    of Steve Jobs and the history of Apple. The author suggests that the failures of Steve

    Jobs never made him drop the ideas but always pushed him to try harder until he

  • 38 | P a g e

    reached the desired target. White suggested that the metrics from MVP do not always

    give the true view of the situation and could be misleading and as a result this could

    cause you to pivot your good ideas in other directions which you should not follow.

    3.7 Conclusion

    Lean Startup methodology changes a hundred years of research in

    entrepreneurship into science, based on validated learning in startup management. The

    importance of the Lean Startup movement is growing every day.

    Tom Eisenman, a professor in the Entrepreneurial Management Unit in Harvard

    Business School introduced new MBA courses called Launching Technology

    Ventures which focus on the Lean Startup Methodology. Eisenman argues that the

    Lean Startup is easier to apply in the field of web-based startups than that of clean tech

    or biotech fields (Nobel, 2011).

    Eric Ries (2013) argue that the Lean startup is not only about technological

    startups but it can be applied into various industries. Many researchers and

    entrepreneurs commit to the development of the new entrepreneurship methodology

    and we can read different Lean Startup stories on Eric Ries entrepreneurial blog

    Startup Lesson Learned.

  • 39 | P a g e

    Chapter 4

  • 40 | P a g e

    Chapter 4 Methodology

    The purpose of this chapter is to outline the research methodology. The author

    will present the aims of the research, the research method and the limitations.

    4.1 Aim of Research

    The aim of this research is to investigate how efficient is Lean Startup principles

    of using Business Model Canvas as a tool for developing the business model and how

    is that compare with traditional approach of business planning. Also the examination

    of efficiency and effectiveness of the Lean Startup principle of use of the experiments

    as a tool for validation of a business hypothesis/assumptions.

    The research objectives which the author is seeking answers for are as follows:

    4) How efficient is the Business Model Canvas for planning and developing a

    Business Model and how does it compare with the traditional Business Plan?

    5) How efficient is the lean startup methodology of conducting small experiments

    to validate the business assumptions of the new start-ups?

    6) How effective is the lean startup methodology of conducting experiments to

    validate the business assumptions of new start-ups?

  • 41 | P a g e

    The result of the research may be of some benefit in the future where entrepreneurs

    consider using the Lean Startup approach when creating new business ventures.

    4.2 Research methods

    This section will outline the advantage and limitations of primary and secondary

    methods of data collection.

    Secondary research

    Secondary data are data that were developed for some purpose other than

    helping to solve the problem in hand.

    (Tull & Hawkins, 1993)

    Before conducting primary research, the secondary research should be conducted

    in order to gain a deeper insight into the research topic. Secondary data are data

    collected by another person for reasons other than our research objectives and could be

    used to support our primary data collected.

    There are a number of advantages of secondary data. They are relatively

    inexpensive and much less time consuming in comparison to primary data collection.

    Secondary data may be gathered from multiple sources such as; Central Statistics

    Office, online journals articles or college databases.

  • 42 | P a g e

    The limitations of secondary data research are that it is not always sufficient to

    answer the research objectives that the research is seeking to answer and therefore

    primary research is required in order to pursue specific research objectives.

    The revision of the secondary data regarding the Lean Startup Methodology

    which was conducted by other researchers can be found in the Literature review

    section.

    Primary research

    Primary data are originated by the researcher for the specific purpose of

    addressing the problem at hand.

    (Shukla, 2007)

    Primary research is research that is conducted by the author to answer research

    objectives. Primary research is conducted after researching secondary sources of data

    and having recognition in the chosen topic. There are two types of data that could be

    collected by the researcher to answer specific research objectives.

    Qualitative or Quantitative

    The type of data that is collected by the researcher depends on the nature of the

    topic being researched. Descriptive and Casual research focuses on quantitative type

    of data that is used to examine areas of study that is already well known and is based

    on mathematics, statistics and probability theory. (Domegan & Fleming, 2007)

  • 43 | P a g e

    Exploratory research is the only way to generate the Qualitative data. Qualitative data

    could be defined as a data open for interpretation; it includes gaining an insight into

    peoples opinions and attitudes or to research their expectations or impressions.

    Qualitative data is often called soft data and does not provide statistical answers

    (Domegan & Fleming, 2007).

    Qualitative research is predominantly a diagnostic tool to find out what the

    issues are and what respondents feel about them.

    (Domegan & Fleming, 2007)

    For the purpose of the dissertation and to answer the research objectives, the

    author chose qualitative data type as the objectives are to research the opinions and

    attitudes relating with the practical use of Lean Startup Methodology.

    Interviews

    In-Depth interviews are a very good method to collect Qualitative type of data.

    They typically take around 40 minutes. The Interviewer does not have a prepared pre-

    specified set of questions but has the freedom to create the questions whilst conducting

    the interview. This type of Interview gives the researcher a chance to get a greater

    insight into the answers and allows for the development of best answers for purpose of

    the study. There is a risk that the interviewer will affect the answers during the

    interviews and there is a need to carefully conduct the interview in such a way that

    the interviewee will feel free to reply without giving directions (Tull & Hawkins,

    1993).

  • 44 | P a g e

    The Interview could also be conducted in a semi-structured way. The researcher

    will have prepared a set of questions but, if there is a need to expand on the answers

    the interviewer will create another question that will support the answer that he is

    looking for.

    4.3 Data Analysis

    To analyse the qualitative data, the author applied three step framework approach

    of Miles and Huberman (1984). The three step are:

    Interim Data reduction post data collection reduction method - Data collected from

    interviews was analysed and the answers context reduced as per table 1 & 2 in the

    appendix 4 & 5.

    Data Display Descriptive Matrices After reduction of interview data, the summary

    of the answers context will be displayed in the table 3 in the appendix 6 section. This

    method will help the researcher with future analysis and conclusion of findings.

    Conclusion-Drawing and Verification. After the stage of analysing existing patterns

    in the researched topic, the researcher will draft the conclusion by analysing the

    difference in data sets.

    See appendix section for evidence of data analysis. The next section will provide

    detailed description of interviews conducted for purpose of that dissertation.

  • 45 | P a g e

    4.4 Details of interviewees

    In order to answer the research objectives, the author choose the personal semi-

    structured interview method due to the exploratory and qualitative type of research

    questions. Semi-structures interviews will give the author a good insight into practical

    use of the Lean Startup Methodology and it will also assure researcher to feel free of

    creating new questions if the answer dont meet the objectives.

    Personal interviews are used to gather from responded informations about them

    motivations, beliefs, attitudes and feeling in the researched areas. The main advantage

    of interviews is the ability to uncover more complete answers to the research questions

    during the survey research. (Domegan & Fleming, 2007)

    Three personal interviews will be conducted to answer the research questions

    objectives. To obtain a high quality of answers from the different perspectives, the

    interviews will include an interview with the Lean Startup business coach, product

    manager of Irish Lean startup practitioners Scurri and entrepreneurship expert from

    Wexford county Enterprise Board. All interviews will be scheduled by appointment.

    Claudio Perrone - The interview with Claudio Perrone, lean-agile management

    consultant will be conducted through Skype video call. The interview will take place

    on 12th April 2014 which has been prearranged with the interviewee. A set of twelve

    structured questions will provide answers to all three research objectives.

  • 46 | P a g e

    Darren Heaphy- The interview will be conducted with Scurris product manager

    Darren Heaphy. The interview will be conducted face to face at Scurri Headquarters

    on 17th April 2014 in Duncannon. A set of twelve structured questions will provide

    answers to all three research objectives.

    Tom Banville The interview will be conducted with the Chief Executive Officer of

    Wexford County Enterprise Board, Tom Banville. The interview will be conducted

    face to face at Enterprise Ireland Wexford Office after a previous appointment. A set

    of twelve structured questions will provide answers to all three research objectives.

    All interviews where recorded and the transcripts of the interviews are included in the

    appendixes section.

    4.5 Limitations

    There are certain limitations regarding this research and interview methods.

    Time and cost to conduct Personal interviews, we need to take into consideration

    the costs in relation to travel and appointment time with interviewee. There is a risk of

    running into difficulties regarding the time availability of the interviewee and

    additional costs related with travel if we fail to meet the appointed person (Domegan

    & Fleming, 2007).

    Interview Bias When conducting personal interviews, it is important to take into

    consideration the interview bias. The context of the questions could be wrongly

  • 47 | P a g e

    understand by the interviewee or the answers could be influenced by certain factors

    such as lack of interviewee time, personal influence of interviewer or insufficient

    knowledge in order to be adequate to research objectives. Lack of Anonymity in

    personal interviews could also be a cause of interview bias. The interviewer may not

    be willing to answer the questions due to confidentiality or the sensitive nature of the

    questions (Tull & Hawkins, 1993).

    4.6 Conclusion

    This chapter outlines the type of research undertaken for purpose of this thesis. It

    explains the reasons for conducting the research and examines the primary methods

    which could be used to obtain answers for the research objectives. The limitations of

    the chosen Research Methodology are also examined. The next chapter will outline the

    findings of the research conducted.

  • 48 | P a g e

    Chapter 5

  • 49 | P a g e

    Chapter 5 - Findings

    5.1 Introduction to findings

    This chapter will present and discuss the research findings from the interviews

    conducted.

    The structure of that chapter is as follows:

    Profile of respondents: In this section, the researcher will outline the

    professional profiles of the interviewees.

    Research questions findings In this section, the findings of the research

    objectives will be provided.

    Conclusion of findings A conclusion of the research objective findings.

    5.2 Profile of respondents

    The following section will provide a profile of the interview respondents.

    Claudio Perrone is a well-known lean-agile management

    consultant. Claudio advises and coaches companies which use the Lean

    Startup Methodology practically both in Ireland and globally. He helps

    teams and managers rapidly improve their performance. Lean, Agile consultant,

    startup strategist, award-winning speaker and entrepreneur, Claudio has played key

    roles in Lean & Agile transformations for global organisations as well as for some of

    the fastest-growing technology startups in the world. Claudio released a suite of

  • 50 | P a g e

    innovative solutions around A3 Thinking, a Lean management approach to

    systematically solve problems, improve and mentor. Hundreds of companies

    worldwide use his Lean thinking tools including Toyota, Spotify, Honeywell, Carl

    Zeiss Microscopes, Nissan North America, McKinsey, Skype, BearingPoint, J.P.

    Morgan, and many others. In June 2013, Claudio was selected to become a Fellow of

    the Lean Systems Society, mainly with thanks to his contribution to revitalize and

    clarify the role of A3 Thinking as one of the most powerful points of contact

    between Lean, Systems Thinking, and the Scientific Method. The LSS further added

    that Claudio made A3 Thinking accessible to the point that it is a major force again

    for systems work. (Perrone, 2014)

    Darren Heaphy is the product manager of Scurri. Scurri has the largest

    practical experience in Ireland regarding implementation of this new

    Entrepreneurship approach. Darren hast vast experience as a product

    manager and is responsible for new product development process in Scurri and

    graduated from WIT where he holds a BA in IT and a higher Diploma in Business

    Management. Prior to this position Darren worked for AOL and TalkTalk as head of

    consumer operational communications for both companies, managing a team of project

    managers delivering customer service solutions. (LinkedIn, 2014)

    Tom Banville is Chief Executive Officer of Wexford County Enterprise

    Board. Tom has great experience regarding advising startups, new

    product development and creating new ventures. The author chose to

  • 51 | P a g e

    interview Tom as he is an entrepreneurship expert of a government body which assists

    entrepreneurs with expanding their business locally and globally. (Wexford County

    Enterprise Board, 2014)

    5.3 Research question 1

    How efficient is the Business Model Canvas for planning and developing a

    Business Model and how does it compare with the traditional Business Plan?

    In this section, five findings to the research question will be provided.

    Figure 5 - Scurri Business Model Canvas (2013)

  • 52 | P a g e

    The first finding to the research question was outlined by both Darren and Claudio

    state that, the Business model Canvas is a great tool to quickly draw the business

    model. It is both quick to draw the Business Model Canvas and it is also possible to

    draw a few versions in the one afternoon. Use of the BMC is very efficient which

    could save valuable time normally spent during the planning process.

    The second finding to the research question was explained by Claudio and Darren,

    both recommend that the BMC should be updated and revised often so as not to

    become a dead paper which is no longer used. Scurri revises the Canvas on a weekly

    basis to ensure that the model is still valid as startups changes very quickly. The

    complete process involved in the update and revision of BMC take on average, around

    an hour. See figure 5 for Scurri Business Model Canvas.

    With regard to the research question, the third finding shows that, should a situation

    arise where a business makes significant changes to the business model such as,

    adding new customer segments or new products, both respondents indicate that the

    original canvas could be used. Claudio states that the new components could be coded

    with colours or numbers. There could be a limitation in the transparency and

    convenience of use of BMC if there are too many different layers. Claudio and Darren

    recommend using the original canvas for planning but should you want to expand the

    business model with new customer target, it is recommended to draw a separate

    canvas. Due to the different needs of different customers, the value proposition could

    vary and sometimes that is the best way to do it.

  • 53 | P a g e

    The fourth finding with respect to the research question, according to Claudio the

    Business Model Canvas is great tool to talk with the Investors. There is a common

    pattern indicating that there is some groups of investors that prefer/require more

    detailed information about the business, then, you will need to prepare a classical 30-

    50 pages business plan. Darren states that, the Scurri investors were delighted with the

    use of the business model canvas and therefore do not require a detailed business plan.

    They were delighted but, there is a need for some financial calculations or information

    about our customer life time value and that is why Scurri used the Investor

    Memorandum, a short-light version of the business plan. Darren Heaphy explains this:

    business model lends itself well to that kind of conversation. You can sit and if you are the investor, and said: Well, I show you my core components

    of my business model and here is what I done to validate that those

    components are correct. And the investors that you find, who brought into

    that process, they really like it. Because is systematic de-risking from the

    perspective.

    In Claudios opinion, the BMC is a great tool to begin talks with investors in order to

    show what the business is about and to get their attention but, at some stage the full

    version of the business plan will most probably be demanded although it is not the

    most important thing that entrepreneurs need to focus on.

    The last finding to first research question indicate, there are some limitations of BMC

    in comparison with the full version of the traditional Business Plan. Both Darren and

    Claudio indicate that, there are some limitations in describing some business aspects

    on the BMC. There is a common pattern regarding recommended replacement of the

    BMC at the early stages when starting the business and both of the respondents

    recommended use of the Lean Canvas as a replacement, (more information about lean

  • 54 | P a g e

    canvas could be found in literature review chapter) as the company needs to focus on

    problem/solution fit before they are able to draw Business Model Canvas Components.

    Darren Heaphy from Scurri, also mentions the limitations of scope in describing the

    business environment. Darren argues that the business is shown in isolation on the

    canvas and does not involve environmental factors.

    To summarise the findings of this research question, the author found that,

    there are many common patterns between the respondents regarding Business Model

    Canvas efficiency. It is a great tool for planning the business but there are some

    limitations that need to be considered carefully.

    5.4 Research question 2

    In this section, six findings to the research question will be provided.

    How efficient is the lean startup methodology of conducting small experiments to

    validate the business assumptions of the new start-ups?

    The first finding for second research question, the author found that, in Lean Startup

    methodology customers play a very important role. Both of the respondents, Darren

    and Claudio, indicate that involvement of the customers is fundamental. As the Lean

    Startup focuses on improvement during the learning process stage of business startup,

    customers insight will give necessary information in order to validate our assumption

    as soon as possible.

  • 55 | P a g e

    With regards to the research question, the second finding shows that, in order to gain

    insight from customers regarding our product or service, Lean Startup uses the concept

    of Minimum Vitae Product. Claudio states that, customers could lie to you because of

    interview bias. He gives as the example asking your mom:

    If you went to you mam and you ask her, I have idea for a business, what you think? And your mom of course will say: its great idea! And that what

    is very often had whit customers, they will tell you, ohh its great idea. But

    they dont do it because... They want you to succeed in many ways.

    Claudio also points out; there are some limitations which often arise during the

    interview process. The customers may be led by the interviewer and it is sometimes

    very difficult to understand the customer right. Claudio summarised MVP usability as

    a great tool to gain insight into customer behaviour and to know about their opinions

    more. Claudio gives as an example of his own experience with A3 Thinker Action

    Deck, a product which he himself created using Lean Startup principles. Claudios

    MVP that he used before the actual product was good enough to collect all relevant,

    important information and validate the product assumptions. All was done in a very

    short time, using a printer, paper and some glue. The purpose of MVP is to validate

    and learn as quickly as possible and he was able to get the required information

    successfully.

    The third finding to that research question, Darren points out that the core purpose of

    the MVP is to achieve a solution for the problem that we are looking to solve. If MVP

    will not deliver a solution to the core problem it will cause dissatisfaction of our

    customers. Everything which makes your product beautiful but, does not necessary

    solve the problem, should not be part of the focus at the product assumption validation

    stage.

  • 56 | P a g e

    The forth finding with respect to the research question, there is a common pattern

    between Claudio and Darren in the scope of lean startup experiment timing and

    collection of feedback. Darren and Claudio both state that it could be difficult at times

    to collect feedback in a specific period of time and it is sometimes difficult to

    recognise when we have sufficient data to validate the experiment assumption

    correctly.

    The fifth finding to the research question indicates that, the duration of the experiment

    could vary from minutes to days or weeks. Both of the respondents indicate that

    timing of the experiment will depend on the assumption you would like to validate.

    Claudio recommends conducting smaller experiments, as they are easier to comply.

    He states that:

    experiment may last from few minutes to weeks but the problem sometimes is to collect feedback that they are actually depends from the others So the goal is always to shrink. If you can shrink it is better

    Darren also states that it is not important how many experiments fail but, the lesson

    that is learned from the experiments.

    In the last sixth finding to that research question, the author found that, the

    development of the business in stealth mode is not an issue from the perspective of

    competition. In Darrens opinion competition is inevitable and is a good indicator that

    the market is there and that the problem we are trying to solve is big enough. Claudio

    also argues that, the stealth mode is not applicable with Lean startup principles and

    it is not a risk for company, because data which is available to the public gives only a

  • 57 | P a g e

    snapshot of company business progress and not the learning process which was

    conducted in order to get to that point.

    To summarise the findings of this research question; the respondents indicate that the

    involvement of customers in new business development is as fundamental principle of

    Lean Startup Methodology and there is very much risk in development in "stealth

    mode". Both of the respondents also argue that, the collection of data may be an issue

    and, well designed experiments are key to reduce bias.

    5.5 Research question 3

    In this section, two findings to the research question will be provided.

    How effective is the lean startup methodology of conducting experiments to

    validate the business assumptions of new start-ups?

    The first finding to the research question was outlined by Darren and Claudio, in both

    opinions the Lean Startup reduces waste in the company. Darren points out that the

    Lean methodology itself focuses on just in time, waste reduction etc. Both of the

    respondents indicated the same pattern, stating that, The Lean Startup definitely

    reduces the risk in business due to the process of validation business assumption and

    in that way saves on time and resources.

    In second finding to that research question, Claudio and Darren also have the same

    opinion regarding misleading data from the MVP. They both argue that the reason of

  • 58 | P a g e

    misleading data could be in wrong structure of experiment. Claudio also mentions

    there is a risk in MVP if its wrong constructed.

    To summarise the findings of this research question; both of the respondents state that

    the Lean Startup increases the odds for business success by elimination of risk through

    validation of our hypothesis and not doing the wrong things. The Minimum Vitae

    Product and all experiments need to well-designed in order to collect true feedback

    from customers.

    5.6 Conclusion

    In summary, all of the objectives were achieved with support of the findings from the

    conducted interviews.

    The findings from the first research objective indicate that, the Business Model

    Canvas is well applicable in the new business development planning process. It is

    great tool to get investors attention but there are some limitations that need to be

    taken into consideration.

    The findings from second research objective indicate that, the involvement of

    customers in the new business development is essential to validate the business

    assumptions and it is not good practice to develop products in stealth mode. Also,

    the Lean Startup experiment could sometimes become a challenge to collect valid

    feedback.

  • 59 | P a g e

    The findings from third research objectives indicate that, the Lean Startup practices

    reduce the risk and uncertainty in the business startup stage, but, it is important that

    Minimum Vitae Product and business experiments are well designed to collect valid

    data from customers.

    The next chapter will provide the analysis of the above findings.

  • 60 | P a g e

    Chapter 6

  • 61 | P a g e

    Chapter 6 - Analysis

    6.1 Introduction to Analysis

    This chapter will provide an analysis of the findings to research questions. The

    chapter will discuss the findings to the questions in relation to the existing literature.

    6.2 Research Question 1

    The author found that, there are many common patterns in findings between

    respondents related with efficiency of the business model canvas and analysis of five

    findings to that research question will be provided.

    Using the business model canvas as a tool for planning our business activities

    saves a lot of time in comparison to the traditional business planning approach.

    Claudio and Darren both state that, it is quick to draw multiple versions of the business

    model and it could be completed in one afternoon. Claudio argues that the business

    plan is not the first thing that entrepreneurs should focus on in the early stage of

    startups. Claudio and Daren also state that, the Business Model Canvas should be

    regularly revised to ensure that the Business Model is still valid. Steve Blank (2012)

    argues that, the business model should be validated first, before we move to writing a

    full business plan and until the business assumptions are validated, the business plan is

    just creative writing. Thus in the summary, the focus of the entrepreneurs in the early

    days of the startup, should be on searching for the product-market fit and the customer

    development, before entrepreneurs start writing a business plan. The right time for

  • 62 | P a g e

    writing the full business plan, should take place after the validation of the business

    assumptions or when required by the investors or financial institutions.

    Claudio and Darren both state that, the Business Model Canvas needs to be

    regularly revised as the business environment is changing quickly and revision of the

    components is necessary to assure they are still valid. Osterwalder (ecorner, 2012)

    recommends mapping and revising the business canvas components and also how the

    components influence and impact each other. Therefore, to assure that the business

    model canvas is updated and the components are still valid, it is recommended that the

    BMC needs to be revised systematically.

    Darren and Claudio both state that, the introducing of a new target market or

    any additional product into the business model canvas, could sometimes require use of

    a separate board, as the needs of the new target market could be different and will

    require different canvas components. The separate canvas will help with clarity and

    keep transparency on the board. Claudio also states that, the same canvas can be used,

    but coded with numbers or different colours with the new components. Osterwalder

    (2010, p. 223) states that, the use of separate canvas is recommended if there are

    significant differences between new business model components. Sometimes changes

    in the business model will create conflict with other components and in this situation,

    the use of a separate independent canvas is necessary. Therefore, if the business model

    is not complicated and introducing new components will not be in conflict with other

    canvas sections, entrepreneurs could use one canvas and if required, code the new

    components to keep transparency on board. Otherwise, separate canvases should be

    created.

  • 63 | P a g e

    Darren and Claudio note that, its very quick to adjust the changes on the

    business model canvas and does not require much work to apply changes in

    comparison to the business plan. Claudio argues that, at some stage of the startup, after

    entrepreneurs validate their business model, the investors could require more detailed

    information about business. Osterwalder (2010) recommends using the Business

    Model Canvas, as its a great tool to grab the attention of the investors before we move

    on to the full business planning. It can be argued, the Business Model Canvas, could

    save a lot of time in situations when entrepreneurs change their business model. The

    Business Model Canvas is more efficient for planning the business in comparison to

    the traditional business plan approach and its great as a tool to quickly explain to the

    investors how the business operates. Quite often, entrepreneurs have a limited time

    frame to capture the investors attention and the business model canvas is a perfect

    tool for doing so.

    Claudio and Darren also recommend using the Lean Canvas in the very early

    stage of the startup. Ash Maurya (2012) suggests that, the Lean Canvas should be used

    when startups are in the stage of searching for problem-solution fit, arguing that, the

    problem that the company is focused on, needs to be worth solving. After

    entrepreneurs find the right problem, Maurya recommends replacement of lean canvas

    with the Business Model Canvas that focuses on product-market fit. It appears that the

    use of the Lean Canvas is recommended in the process of the Customer Discovery.

    The Lean Canvas focuses on searching for the right problem to solve and the solution

    to that problem before moving to the business model canvas which focuses on the

    product and market fit.

  • 64 | P a g e

    Darren and Claudio both point out that there are some limitations that need to be

    taken into consideration such as details of the financial operations or the environment

    in which business exist. Alexander Osterwalder (2010) included environmental forces

    outside the business model canvas and recommends continuous mapping of the

    business model environment, arguing that a good understanding of the environment

    will help with evolution of the business model in correct directions. It is recommended

    that the business model canvas needs to included links to the environment because that

    is an essential aspect of the business to be able quickly react to environmental changes

    or spot the new opportunities and threats in business environment.

    In the summary, the author found that, the use of the business model canvas could

    be very supportive for the purpose of planning and development of startup business

    model but there are some limitations that need to be taken in consideration such as the

    environment or financial details.

    6.3 Research Question 2

    In the summary, the author found four findings to the second research question.

    Claudio and Darren both indicate the same opinion about importance of the

    involvement of the customers in business development and careful design of the Lean

    Startup experiments. There are four findings to the research question that the author

    analysis in following section.

    Perrone and Heaphy, both state that, the involvement of the customers in new

    product development as essential and it is not recommended to develop the product in

  • 65 | P a g e

    the stealth mode. Eric Ries (2013) argue that, many startups fail because startups

    dont know their customer. Ries also argues, is doesnt matter if the plan was done in

    time and on budget, if we build something that nobody wants. The goal of the startup

    is to figure out, what is the right thing to build, a product that a customer wants and is