master)thesis...
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Copenhagen Business School
Master thesis: The Lean Startup Approach – and its applicability outside Silicon Valley Conducted by Aleksander Blomberg Cand.Soc. Organisational Innovation and Entrepreneurship Copenhagen Business School Supervisor: Dr.Patricia Plackett -‐ Department of Operations Management Total character count: 134.481 Total page count: 74/98
Spring 12
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Acknowledgements
The process of writing a master thesis has undoubtedly been the most challenging piece
of work I have ever conducted. Not only have it brought me extensive competence in
writing a scientific paper, but I have also been granted the opportunity to focus entirely
on one of my main areas of interest, namely the chaotic reality of an entrepreneurial
venture.
Due to highly unforeseen circumstances, my initial supervisor Suzanne C. Beckmann had
to cancel her commitments halfway trough the project. Needless to say, this put me in a
highly unfavourable position in which I will not recommend anyone conducting such an
extensive piece of work. Reluctantly to admit, unforeseen changes do occur, both in real
life and the world of academia, but as this paper profoundly suggests, will the winners in
the long run be those who manage to tackle these unwanted changes, and turn them into
a future advantage.
I would therefore, grant my full gratitude to Patricia Placket for partaking in the task of
landing this thesis. Without your help, guidance and positive spirit, this thesis would
have never been written.
Aleksander Blomberg
Copenhagen Business School -‐ June 28th 2012
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Executive summary This paper explores some highly popular entrepreneurial principles, labelled under a
common term known as the Lean Startup movement. It has been relatively little
research on the topic of early stage entrepreneurship in general, and the Lean Startup
movement in particular. Because of this, the overarching goal for this thesis has been to
extend the theoretical perspective of the Lean Startup approach, as I see it as somehow
insufficient.
This paper highlights some of the key issues with the traditional entrepreneurship
theory, and explains how the Lean Startup movement arouse out of these issues. Next, I
argue how I see Lean Startup principles as focusing too much on companies typical for
the high-‐tech scene of Silicon Valley. Out of this observation, I want to explore the Lean
Startup principles applicability on what I refer to as low-‐tech physical products. In order
to do this experiment, I will put my own assets at stake, by applying the Lean Startup
principles on one of my own companies.
My report is in the form of an exploratory study, and the result is a critical evaluation of
my personal experience. My research suggests seven hypotheses, pinpointing some
potentially significant limitations to using a Lean Startup approach for low-‐tech
manufacturing companies by comparison with high-‐tech manufacturing companies. I
believe that there is value for future entrepreneurship students in testing these
hypotheses in a range of low-‐tech companies to determine their robustness.
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Table of Contents
ACKNOWLEDGEMENTS 2
EXECUTIVE SUMMARY 3
LIST OF FIGURES 7
LIST OF TABLES 8
INTRODUCTION 10
PROBLEM STATEMENT 11 THE COMPANY 11 OBJECTIVE OF THE STUDY 12 THE RESEARCH QUESTION 12 AN OVERVIEW OF THE PAPER 12
LITERATURE REVIEW 15
FIRST PART – THE PRODUCT DEVELOPMENT PARADIGM 16 THE DIFFERENCE BETWEEN STARTUP VENTURES AND ESTABLISHED CORPORATIONS 16 THE CONTRADICTIONS IN LITERATURE – AN EXAMPLE 17 CORPORATE PRODUCT DEVELOPMENT MODELS 18 THE DIFFERENCE BETWEEN EXPLORATION AND EXPLOITATION 18 SECOND PART – THE LEAN STARTUP APPROACH 20 OLD WAY OF THINKING IN A NEW WRAPPING 20 THE OODA LOOP 21 KEY PRINCIPLES OF A LEAN STARTUP 22 KEY MANAGEMENT PRACTICES OF A LEAN STARTUP 25 SUMMARIZING THE LEAN STARTUP PRINCIPLES 28
METHODOLOGY 31
THE RESEARCH DESIGN 31 PHASE 1 -‐ THE INITIAL ASSUMPTIONS 33 CUSTOMER AND CUSTOMER PROBLEM ASSUMPTIONS 33 MARKET POTENTIAL ASSUMPTIONS 34 SALES CHANNEL AND PRICING ASSUMPTIONS 34
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DEMAND ASSUMPTIONS 34 PRODUCT FEATURES AND BENEFITS: 34 PHASE 2 – FOCUS GROUP 35 PICKING THE RESPONDENTS 35 THE RESPONDENTS 35 PREVIOUS EXPERIENCE WITH FOCUS GROUPS – THE SUPERVISOR AND PARTICIPANTS 36 THE FOCUS GROUP INTERVIEW GUIDE 36 PHASE 3 – THE FIELD STUDY 37 TRANSFORMING THE HYPOTHESES INTO “PHYSICAL” PRODUCTS 37 THE PROBLEM OF SELLING A NON EXISTING PROTOTYPE 37 THE PROBLEM SHEETS 38 THE RESPONDENTS 39 THE FIELD STUDY INTERVIEW GUIDE 40 PHASE 4 – EXPERT INTERVIEW 40 THE EXPERT INTERVIEW TOPICS 41
ANALYSIS 43
ANALYSIS OF PHASE 2 -‐ FOCUS GROUP 43 CUSTOMER AND CUSTOMER PROBLEM ASSUMPTIONS 43 SALES AND PRICING ASSUMPTIONS 45 DEMAND ASSUMPTIONS 46 PRODUCT FEATURES AND BENEFITS: 47 ANALYSIS OF PHASE 3 – THE FIELD STUDY 47 FIRST REALITY CHECK 47 FINDINGS FROM DAY 1 48 FINDINGS FROM DAY 2 50 FINDINGS FROM DAY 3 51 SUMMARIZING THE FINDINGS FROM THE ANALYSIS: 52 ANALYSIS OF PHASE 4 – EXPERT INTERVIEW 53
DISCUSSION 60
PAUSE/REWIND -‐ GETTING BACK TO THE FOUR PRINCIPLES 60 1) QUESTION YOUR ASSUMPTIONS 60 2) ITERATE RAPIDLY 62 3) BUILD MINIMUM VIABLE PRODUCTS (MVPS) 63 4) VALIDATE LEARNING AND PIVOT AS NECESSARY 65
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A PERSONAL REVELATION 66
CONCLUSION 68
IMPLICATIONS FOR FUTURE RESEARCH 68 HYPOTHESIS 1 68 HYPOTHESIS 2 68 HYPOTHESIS 3 68 HYPOTHESIS 4 69 HYPOTHESIS 5 69 HYPOTHESIS 6 69 HYPOTHESIS 7 69 STANDING ON THE SHOULDERS OF DAVID 70
ATTACHMENTS 74
ATTACHMENT 1 – THE FOCUS GROUP INTERVIEW GUIDE 74 ATTACHMENT 2 -‐ THE EXPERT INTERVIEW TRANSCRIPTION 78 ATTACHMENT 3 – THE VIRTUAL PROTOTYPES USED IN THE FIELD STUDY 83 ATTACHMENT 4 -‐ PACKAGING 96
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List of Figures
FIG 1 -‐ STAGE GATE MODEL FOR PRODUCT DEVELOPMENT 16
FIG 2 -‐ PRODUCT AND CUSTOMER DEVELOPMENT 17
FIG 3 -‐ CUSTOMER DEVELOPMENT 24
FIG 4 -‐ THE BUILD MEASURE LEARN CYCLE 26
FIG 5 -‐ AN OVERVIEW OF THE RESEARCH DESIGN 31
FIG 6 -‐ THE PROBLEM SHEETS 40
FIG 7 -‐ THE PRODUCT DEVELOPMENT HISTORY FOR THE SIPSUIT 54
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List of Tables
TAB 1 – THE FOCUS GROUP INTERVIEW GUIDE 37
TAB 2 – THE FIELD STUDY INTERVIEW GUIDE 41
TAB 3 – ANALYSIS OF FOCUS GROUP INTERVIEW 48
TAB 4 – ANALYSIS OF FIELD STUDY – DAY 1 50
TAB 5 – ANALYSIS OF FIELD STUDY – DAY 2 52
TAB 6 – ANALYSIS OF THE FIELD STUDY – DAY 3 53
TAB 7 – ANALYSIS OF EXPERT INTERVIEW 59
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Introduction
Literature Review
Methodology
Analysis
Discussion
Conclusion
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Introduction Entrepreneurship is one of the key drivers of economic development. By shaping new
innovations, entrepreneurs introduce competition to the established and speed up the
structural changes in the economy. Regardless of the importance of this field, a coherent
theory of entrepreneurial expertise has thus far eluded academics and practitioners
alike (Sarasvathy Saras D. 2001). Up until lately, both practitioners and educators in the
field of entrepreneurship have been applying old product development processes used
in established corporate ventures. This is a common corporate practice where the actual
customer feedback is collected at the very end of the process. The problem with these
product development practices is the fact that they are developed for established
corporations and is hence inappropriate in the chaotic field of early stage
entrepreneurship. The consequences have been high product failure rates with products
being released in markets where no real customer wants it (Ries et al., 2011).
Recently a new and controversial approach has been rising, supposedly better fitted for
the chaotic world of entrepreneurial ventures. Shaped by scholars and practitioners of
entrepreneurship, it has been commonly coined as the Lean Startup movement. During
my two years in the Copenhagen startup scene, I kept running into people preaching this
mystique approach, and it seemed to be the new Messiah of entrepreneurship – a holy
grail for founders to raise the chance of company success.
The core idea behind the movement is to include the customers at the very early stage of
the product development. This is done in order to make sure that the product is actually
solving a problem and that it is something customers are willing to pay for. It may seem
like reversing the old product development model, but rather it is applying another
dimension labelled as Customer Development, and the purpose is to orchestrate both
dimensions in parallel while establishing the company (Blank 2005). Due to the nature
of the Customer Development process, the approach is centred on continuous iterations
where elements of the business plan get iterated over time based on the continuous
feedback gathered by real life customers. This approach has some serious implications
on how we view entrepreneurship both in real life, and in the world of academia. After
Blank ignited the movement by releasing his “Four Steps to the Epiphany” (2005), an
array of researchers and practitioners have been further developing these key principles
of a so called Lean Startup.
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Problem Statement As I dug further into this new and controversial approach to entrepreneurship, both by
attending entrepreneurship electives at CBS as well as reading most of the prominent
literature, one thing struck me. Although the authors behind this movement claimed that
the Lean Startup approach was applicable to almost every product1, most of the success
stories mentioned were companies developing high-‐tech products, online services,
ecommerce or smart phone applications. Most of the success stories were from the
entrepreneurial scene of Silicon Valley. Fair enough, since we are currently in a gold
rush where high-‐tech companies get established and sold at a tremendous pace with
thrilling IPO’s, there is no doubt that the authors behind the movement have a sizable
audience, but let us not forget all the other companies – outside Silicon Valley.
If we want to establish entrepreneurship theory as a coherent academic discipline, the
Lean Startup approach may be a good start, but it need to include an assessment on low-‐
tech physical products. This issue ignited my interest in personally exploring the
applicability of the Lean Startup principles, especially on low-‐tech physical products. In
order to conduct this investigation meaningfully, I was willing to experiment with one of
my own early stage ventures, the raingear manufacturer SipSuit.
The company The initial plan for the company was to create a new standard for urban raingear by
manufacturing an innovative whole piece design. The key target customer would be the
student who walk or cycles to the university every day, and the main selling
propositions were that it could be taken on and off in 15 seconds, as well as be stored in
a small bag when at university or similar.
During the process of writing this thesis, I have assumed the joint role of researcher and
entrepreneur, by matching the feedback collected in this study with the manufacturing
activities situated in Shanghai. As the study reveals, it was my decision to apply Lean
Startup principles that was one of my best moves as an entrepreneur because I may
have saved me from investing millions of kroner in a product failure. Not only have my
journey uncovered some crucial limitations to my initial product concept, it may also
have uncovered some limitations to this hyped movement.
1 Exceptions were mentioned like advanced pharmacy, space shuttles, etc.
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Objective of the study During my research, the overarching goal has been to extend the theoretical perspective
of the Lean Startup approach, as I see it as somehow insufficient. I wanted to discover if
there existed some gaps in the literature, in other words; some key principles that did
not make sense for a low-‐tech product like raingear. In order to do so I needed to locate
the key principles based on current literature, and personally apply these principles on
my own venture. With a personal first hand experience with the Lean Startup approach,
I was able to conduct a personal evaluation of the applicability of the Lean Startup
approach, with some implications for future study.
The research question Based on the given problem statement, the following research question have been
guiding my research:
Are there limitations to a Lean startup approach
for low-‐tech manufacturing companies?
With the research question in mind, it is necessary to emphasize how the title of the
thesis should be read as a play with words; “outside Silicon Valley” is referring to low-‐
tech physical products, regardless of the company’s geographical position.
An overview of the paper The paper starts with a thorough literature review of the most prominent literature
from the Lean Startup movement. To enable the reader to understand the problem with
the old product development paradigm, I start the review with a brief review on some
important findings from traditional entrepreneurship theory, and use this as a backdrop
to explain how the Lean Startup movement ignited. Part two of the literature review will
address more specific theory in relation to the Lean Startup movement and ends with a
list of principles that I want to test in the methodology.
The methodology is divided into four chronological phases. Each of them has an
individual purpose, as well as building on each other. The first phase will be listing all
the assumptions about the initial product concept, solely based on the founders’ vision.
The second phase will be testing the initial assumptions from Phase 1 trough the use of a
focus group. Phase 3 is the main part of my research where I acquire first hand
experience with the Lean Startup principles. By conducting a field study, I turn the
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revised assumptions from Phase 2 into virtual prototypes in which will sell to real life
customers.2 The first three phases will enable me to conduct a personal evaluation of the
process, and suggest which principles that were well fitted, and which ones that were
not. The fourth Phase serves the purpose of modifying my personal evaluation by adding
robustness to my suggestions trough the recommendations of a real life practitioner.
The analysis section will analyze the findings from the methodology, and is naturally
structured by following the 4 phases in a chronological manner.
In the discussion, I will get back to the Lean Startup principles extracted from the
literature review. I will be balancing my personal experience from the field study with
both the suggestions from the literature, as well as the external input from the real life
practitioner in order to make a critical evaluation of the Lean Startup approach, and its
applicability on a low-‐tech physical product.
In the conclusion, I will be listing a brief summary of my findings. Based on my research
I suggest seven hypotheses in which I encourage future entrepreneurship students to
test on a higher significant level.
2 In accordance with the Lean Startup principles, I will not sell the products per se. Rather, I will put the customer in a situation where he/she needs to make a buying decision, with the purpose of revealing more true feedback about the product concept.
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Introduction
Literature Review
Methodology
Analysis
Discussion
Conclusion
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Literature Review The Lean Startup movement has gained a lot of traction the recent years, with its radical
approach to business establishment. Being practiced and spread by both leading
entrepreneurs and scholars, the increasing momentum can potentially have a significant
impact on how companies are built, funded and scaled. After its early dawn in the
Silicon Valley area, the concept has spread far beyond “the Valley” with so-‐called Lean
Startup meetups’ being arranged all over the world. Denmark is one of the 32 countries
partaking in this movement, where over 60.000 entrepreneurs’ worldwide learn, share,
and create businesses trough official meetups arranged by leading practitioners of the
movement itself. 3
In spite of its severe increase in popularity, and the fact that its principles is being taught
at well known business schools around the world including both Harvard and CBS, the
concept has limited coverage in academia. In fact, there has been an overall limited
research on early stage entrepreneurship in general (Zott & Huy, 2007) and Lean
Startup companies in particular (Kählig 2011). This leaves the final question of whether
ventures following the Lean Startup methodology are better off, yet to be proven.
This limited academic coverage, makes it challenging to critically evaluate the validity
and effectiveness of the proposed principles and its related management practices. With
this in mind, the review has been divided into two sections. In order to understand how
the movement arouse, the first part of the review will be addressing the problem with
the old Product development paradigm, previously a standardised tool for the early
stage processes of modern entrepreneurship. The first part explains some of the
problems with the old paradigm and explains how the Lean Startup movement ignited.
The second part of the review will aim more specifically at the Lean Startup Approach,
and its purpose is to identify the main principles that can be applied and tested in the
methodology section.
The review is intended to outlay some of the important literature and research findings
in the given field of early-‐stage entrepreneurship, and in accordance with the common
intentions of a literature review, it is conducted in order to benefit in three main areas.
Primarily it is created for the author to gain specific knowledge about the research that
3 Taken from http://lean-‐startup.meetup.com/ at April 17th 2012
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has already been written in the proposed area of study. Second, the review serves as an
inspirational source, where new ideas for the research study can be revealed. Third, the
review gives an understanding of how the research endeavour fits into the already
existing literature (Bui, 2009).
First part – The Product Development Paradigm Although both practitioners and scholars in a great extent have tried to develop and
establish common theory in the chaotic field of entrepreneurship, there is still an
absence of agreement about the central “ingredients” of entrepreneurship. As a result, a
universal theory capturing the essence of entrepreneurship has not yet become
accepted. (Ricketts, 2008; Alvarez, 2005). The basic assumptions for entrepreneurship
are lacking, and common terms and frameworks from different scholars of
entrepreneurship are absent (Alvarez, 2005).
Some researchers use the historical development of management and organizational
theory responsible for the lacking theory and propose a different perspective (Furr &
Cavaretta, 2011). Furr & Cavaretta argues how they view general management theory as
“forced upon” entrepreneurship, viewing entrepreneurship as just another business
context. They argue how this “context view” leads to an inappropriate application of
existing theory on management and organization, hence ignoring the tremendous
difference between established large corporations, and un-‐established entrepreneurial
ventures.
The Difference Between Startup Ventures and Established Corporations While the chaotic reality of an entrepreneurial startup is mainly aimed to explore
potential opportunities, larger corporations operate under complete different terms by
primarily focusing on exploitation of a clearly affirmed opportunity by applying
efficiency and control (Furr & Carvetta 2011). Although the two organizations differ in
several ways, most of the entrepreneurial theory and framework is forced upon the
entrepreneurship discipline from the (academic) corporate world. This “reapplication”
of general management is revealing itself on many dimensions; strategy planning in
large corporations becoming business plan documents in the entrepreneurial context,
corporate marketing transforming into entrepreneurial marketing, and, highly relevant
for this thesis, how the traditional product management approach became the process
for developing a startup. (Blank & Furr, 2011 ; Furr & Cavaretta 2011). This
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transformation-‐practice may seem odd, so in order to further investigate both the
application of this transformation way of thinking, and at the same time shed light at the
contradictions in entrepreneurship theory, the popularity of the business plan may
illustrate this key point.
The Contradictions in Literature – an Example The business plan still serves as a core fundament in for both practitioners and
preachers of entrepreneurship, as well as external funding environments (Lange, Mollov,
Pearlmutter, Singh & Bygrave, 2007) with an estimate of 10 million business plans
conducted per year. The documents vary in their scope, and are written either because
the founders find it valuable or the fact that external partners like a bank or venture
capitalist demands it. (Gruber 2005; Karlsson & Honig, 2009). The business plan may
also provide a common language for communicating the driving forces of the business
and entrepreneurial process, describing the team, the opportunity to be explored and
the resources needed in order to explore it (Timmons & Spinelli, 2009).
Based on its popularity, writing a business plan should be perceived as a vital effort by
both scholars and practitioners. However, it exist little empirical research concluding
that writing a business plan makes the startup perform better or increase the chance of
success (Gruber 2010). In short, some researchers see business plans as a decision
making support and a vital activity for company success (Shane & Delmar 2004). Other
researchers claim that a fixation on planning can actually lead to cognitive rigidities,
suggesting that the time invested in planning is waste compared to actual company and
customer establishment (Bhide 2000). Other researchers concluded with a similar result,
claiming that for companies operating under high uncertainty, will the use of prototypes,
rapid iteration and sense making trough direct contact, be more valuable than a
compressed business plan strategy in which well-‐understood links in a system were
squeezed together. This implies that variance-‐creating strategies seems more valuable
than mean-‐enhancing strategies (Eisenhardt & Tabrizi, 1995 ; McGrath, 2001).
Disagreement on such a shared and basic matter illustrates the divergence in this new
and emerging area of entrepreneurship academia. It may also indicate that something is
fundamentally wrong with the current transformational-‐practice. The diverse research
findings inspired Brinckmann et al. (2010) to conduct a meta-‐analysis examining the
stated relationship between business planning and actual performance. The study did
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indicate a beneficial effect, yet contextual factors such as the “newness” of the company’s
cultural environment, significantly affected the relationship. In addition, the study
concluded that with business environments characterized by high uncertainty and
limited information, typically for entrepreneurial startups, a basic business plan rather
than a detailed and sophisticated one, is advised. In other words, a more dynamic
approach was suggested, that combines planning, learning and actual doing
(Brinckmann et al., 2010).
Corporate Product Development Models Some of the most prominent product development models for established companies
are the mechanic Stage-‐Gate and Waterfall models. Although they are somehow different,
the overall approach is that the innovation development is structured in phases and is
organized in a linear fashion.
Figure 1 -‐ The Stage Gate model for Product Development4
This may be a good approach for a large corporation exploiting a well-‐known
opportunity, but may be less effective for startup companies operating under highly
different conditions. Still, the development process for early stage entrepreneurship has
typically been described in this sequential way of thinking. As in general corporate
innovation models, the product and market development is separated and the process
split into sequential steps.
The Difference Between Exploration and Exploitation The proposed mismatch between startups exploring new opportunities and established
companies exploiting identified opportunities, has revealed contradictory effects for the
aforementioned transposition of existing theory. Some researchers suggest that the
transformation of this “Corporate mechanic approach” is inaccurate in an
entrepreneurial environment. (Bhide, 2000; Kirsch, Goldfarb, & Gera, 2009; Ries et al.,
4 Model taken from www.stage-‐gate.com
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2011; Wasserman, 2003). Serial entrepreneur turned educator, Steven Blank, suggested
for the very first time in his comprehensive work “The four steps to the Epiphany”
(2005), a new controversial approach that ignited a whole new movement for
entrepreneurs. This was the early beginning of what should later be known as the Lean
Startup movement.
Blank suggested trough his customer development model that market and product
development should be considered parallel activities from the early stage of company
establishment, emphasizing that the Customer Development is as important as the
development of the product itself (Blank 2005)
Figure 2 -‐ Product and Customer Development5
Blank’s view got further support in a case study research where product and market
development activities were carried out in parallel, while cumulative learning was
iteratively implemented in order to preserve flexibility and adaption to changing
environments (Silberzahn & Midler, 2007). A year later the same researchers took the
case study further by comparing two companies; the first following a portfolio approach
without cumulative learning, the second implementing a lineage based management
strategy, where cumulative learning combined with simultaneous exploration and
exploitation was executed. The researchers concluded that the second approach did not 5 Model taken from Blank S. (2005) The Four Steps to Epiphany
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arrive at a promising opportunity immediately, but converged towards greater success
trough continuous iteration.
With these new findings, a new approach to entrepreneurship emerged, supposedly
increasing the odds of success for early stage startups in an uncertain and high-‐risk
environment. With an untraditional way of decision-‐making, the lean startup approach
represented an exiting perspective. By combining many of the latest findings in research
and practice that support entrepreneurs in the process of effectively dealing with
uncertainty and limited resources, will the new perspective supposedly speed up the
process of establishing a company while at the same time sustaining low failure rates.
Second Part – The Lean Startup Approach Although Steven Blank ignited the movement that later should be named as the “Lean
Startup Movement”, the term is not coined by Blank himself. Rather it was one of his
graduates at Stanford, Eric Ries, that for the very first time used the term in September
2008 trough his popular blog Startuplessonslearned.com.
According to Ries (2008), a Lean Startup is best described by three characteristics. The
first directly derives from Blank, and deals with Customer Development (Blank 2005)
trough a ferocious customer-‐centric focus centered on rapid iteration. Next is the
application of agile development methodologies and third the use of platforms enabled
by open source and free software. The approach can in its simples form be described as;
“rapidly building and testing a product, and then based on customer feedback quickly
refine the promising concepts and ruthlessly cull the flops.
“My belief is that these lean startups will achieve dramatically lower development costs,
faster time to market, and higher quality products in the years to come. Whether they also
lead to dramatically higher returns for investors is a question I'm looking forward to
getting answered.” – From the very first blogpost on Lean Startups (September 8th 2008).
Old Way of Thinking in a New Wrapping Ries suggested approach strives for systematic identification and elimination of waste in
manufacturing and administrative processes trough a process of continuous
improvement by following the product or service at the pull-‐rate of the customer
(Widman, Hua & Ross, 2010). Toyota was one of the first companies applying this way of
iterative product development, named as Lean Thinking, a core element of the Toyota
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Production System. Lean is defined as the process for doing more with less, and the aim
is to use less human effort, less equipment, les space, and less time – while still getting
better at providing the customers precisely what they want (Womack & Jones 2003).
In manufacturing, short production cycles are used to reduce inventory and eliminate
manufacture related waste. In product development, brief development cycles are used
to gain rapid market response and eliminate “waste” in the development process and
capital spending. Besides lean thinking, the concept of a Lean Startup also borrows
concepts from areas such as Design Thinking, Agile Development, Customer
Development and last but not least the OODA loop (Observe-‐Orient-‐Decide-‐Act) (Ries et
al., 2011). The differentiation for the Lean Startup methodology is that it combines the
existing principles with original practices applied by successful entrepreneurs, hence
developing the very first all-‐inclusive model for building a new business (Ries et al.,
2011). The customer development is a vital “borrowed” management practice in the
Lean Startup approach, and will be further elaborated in a later section, but before that a
brief explanation of the OODA loop’s formative influence on the Lean Startup approach
is necessary.
The OODA Loop It was the military strategist and professor at the U.S. Military Academy, Colonel John
Boyd, which pioneered the OODA loop as an innovative time-‐based theory (Marchisio,
Sheperd & Woods, 2010). The basic principle of the loop is that every decision maker
repeatedly executes a cyclic process of Observation, Orientation, Decision and Action.
Osinga summarized Boyd’s main ideas as follows: “Life is full of complex adaptive systems.
Such systems require understanding at the system level and are perpetually changing.
Therefore, our methods of gaining understanding must be perpetually adapting, as well.”
(As cited in Samuelson, 2010, p. 36). If we apply this way of thought to a competitive
business environment, a simplified operation of an OODA loop could be described as
follows: “Decision makers gather information in the Observe phase, they filter this
information in the Orient phase and then make Decisions (hypotheses) and take Action.
The cycle is repeated continuously as the organization works to execute rapid OODA loops.”
(Marchisio et al., 2010, p. 10). This responsiveness requires a constant series of
interactions with the environment, constantly evaluating change as well as ways to
diminish risk, and finally iterate faster than the competition to generate a considerable
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advantage. Because of this, the term; “the shorter OODA loop always wins”, originates.
In the case of a startup in its initial years, the scarce resources and high uncertainty can
be compensated with a mindset of responsive agility. The validity of the OODA loop as a
beneficial strategic tool in a business context has been supported, and recently an
explicit fit with the nature and characteristics of early stage entrepreneurship was
declared. (Marchisio et al., 2010) In accordance with the previous mentioned findings of
Furr and Cavaretta (2011), Marchisio also advice against understanding strategy and
strategic thinking in an entrepreneurial context on the basis of practice of large
enterprises. Marchisio rather suggests considering different tools, frameworks and
heuristics, with the OODA loop as a particular framework of choice.
The interactive and non-‐sequential process of the OODA loop provides the necessary
flexibility for long term survival in an unpredictable and constant changing environment
(Richards 2004). The nature of the framework offers not only a useful heuristic
entrepreneurial tool, but also a useful way of approaching strategy and iteration trough
the decision making progress (Marchisio et al., 2010). Baron (2004) portrays the OODA
loop as a rule of thumb or heuristic that can act as a mental guidance in order to make
fast but accurate decisions. Building on this suggestion, Alvarez and Barney (2002)
argue that the widespread application of heuristics by entrepreneurs, allows them to
more easily navigate through a wide array of problems and irregularities occurring in
the establishment of a company. The attainment of knowledge in this way is an
intangible asset that, because of its rareness among business leaders, may be a potential
competitive advantage for entrepreneurs (Marchisio et al., 2010) and in that sense well
suited as a guiding theme for a Lean Startup.
Key Principles of a Lean Startup According to Ries (2011), there are four main principles that portray the Lean Startup
approach: (1) Validate learning, (2) Pivot as necessary, (3) Iterate rapidly, and (4) Avoid
premature scaling.
1) Validate learning In the chaotic world of startups, many entrepreneurs struggle to identify when they
make progress in establishing their company. They need to know that they somehow
strive towards the aim of validating the highest uncertainties in their business model.
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The product Development paradigm defines a new product development effort to
successfully make progress as long as budgets and deadlines are fulfilled. However,
potentially releasing a product or service that no real customer will pay for is obviously
not considered good entrepreneurship management. Instead of meeting the
requirements of traditional (corporate) management milestones, a Lean Startup
processes validates learning that can be leveraged in the next iteration (Ries et al., 2011).
As startups face great uncertainty, a mindset of learning, experimentation and
adaptation is required in order to increase the odds of success (Mullins & Komisar,
2009). Lean startups strive for frequent market feedback in order to reduce the degree
of uncertainty. By arranging experiments and thoroughly confirm or disprove uncertain
parts of the business model, this process finally returns validated learning – the effective
measurement for advancement in a Lean Startup.
2) Iterate rapidly Iteration is a key element of a lean startup in order to eliminate waste and secure a
sustainable company. According to the main authors behind the movement, there are
two types of waste that need to be taken into account. First are the activities that do not
generate any value, but are currently necessary in order to create value. The second is
activities that do not generate any value and could be eliminated immediately (Blank &
Ries, 2010). By continuous customer engagement, the entrepreneur can test core
hypotheses about the customer and the problem, to find a solution that creates a fit
between the two (Copper & Vlaskovits, 2010).
In order to viably test the vital assumptions, the authors claim that common
questionnaires are insufficient. Getting a “yes” on a questionnaire, where the respondent
is asked if he or she would think there is a need for a new type of raingear that is
storable in a bag, is not the same as a sale. So in order to test if this particular feature is
something that customers will actually pay for, several Minimum Viable Products
(MVPs) are created. There are currently two definitions of a MVP. The first goes as: “The
minimum set of features required to secure the next round of validated learning” (Ries,
Eisenmann and Furr, 2011). The second is a more customer centric and more graspable;
“A product with the least number of features needed to achieve a specific objective, and
that users are willing to pay for in some form of a scarce resource” (Cooper and Vlaskovits,
2010). Paying with a scarce resource is a key element, meaning that the customer has to
24
give something away in order to obtain the specific feature. The resource can be time,
money or attention, and the point is that striving for “just enough” features, reduce the
risk of wasting time on features that no customer wants. By adding or removing one
“vital” feature separately and testing it by offering it to customers for a trade of
resources, the entrepreneur will know the true value of adding an extra feature (Ries et
al., 2011).
3) Pivot as necessary By combining the two first characteristics, testing hypotheses and iterating rapidly to
seek for validated learning, the Lean Startups seeks continuously to disprove its current
business model by pivoting towards success and “fail forward”. A refuted business
model leads to a new pivot, and as a result, affected elements of the business model are
altered – typically one element only – while the other elements are retained in order to
reduce waste (Cooper & Vlaskovits, 2010; Ries, Eisenmann, & Furr, 2011). Obviously the
magnitude of the pivots varies, and it is reasonable that the larger pivots will happen
more occasionally in the early stage of the startup. The company achieves a
product/market fit when the product or service can be validated by a strong demand by
passionate users representing a sizable market. Before the Product/Market fit is
reached, the focus should be to validate learning by means of pivoting. After the fit is
found, the focus should change to growth via optimizations (Cooper & Vlaskovits, 2010).
4) Avoid premature scaling Another way to eliminate waste is to reduce the initial investments in marketing,
product development and infrastructure. In general, the company should obtain a low-‐
burn mentality to allow for fast and continuous cycles of validated learning.
However, there are two exceptions to this rule: 1) long lead times in the deployment of
capacity and significant preemption risk, and 2) hyper growth models where typically a
viral network effect leads to a magnificent growth in user base. Social media and
network dependent e-‐commerce websites are examples of the exception to this rule.
These businesses are dependent on a viable user base, large enough to appeal to
ecosystem partners who could participate in iterative experimentation to find a way to
monetize the platform. This may seem like an antithesis to the LS approach, but the
principle of rigorous hypothesis testing in order to reach validated learning trough rapid
prototyping and pivoting, is still viable (Ries et al., 2011).
25
Key Management Practices of a Lean Startup The two basic management practices of a lean startup are based on extracts from
Blank’s comprehensive Customer Development approach, and practices from Lean and
Agile product development. To ensure a sufficient understanding of these new principles,
the following section will provide the backdrop necessary in order to understand the
research design, analysis and discussion.
1) Customer Development On a conceptual level, the Customer Development model frames innovation and new
product development in two focus areas; technical and market feasibility (Silvernagel &
Clemet (2010). As mentioned in the first part of the review, Blank understands Product
and Customer Development as a parallel process. This is almost heretical in comparison
with traditional business literature, but Blank suggest “the customer and product
development to be considered parallel activities, and must remain synchronized and
operate in concert” (Blank 2005, p.27)
The comprehensive model developed by Blank is based on a four-‐step approach with
numerous sub steps. The model has been criticized for being too confusing with its total
of 64 steps, and other authors have written books to simplify and explain the approach
(Cooper 2010). Coopers simplified model from Customers Guide to Customer
Development is illustrated and briefly explained in the next section:
26
The model moves from left to right, but never leave the second step before verifying
vital parts of the business model trough Customer Discovery and Validation. The first
step, Customer Discovery, both identifies the proposed problem and examines if there is
a need for this problem to be solved. In order to solve this the entrepreneur need to find
out whom the customers are, and whether the problem the company believe to be
solving is important to them. Before these questions are answered, the business model
rests solely on the vision developed by the founder(s). In order to discover if the
problem, product and customer hypotheses in the business plan are correct, the
entrepreneur need to “get outside the building” and interact with customers to either
validate or pivot the business model assumptions (Silvernagel & Clement, 2010; Ries et
al., 2011).
The second step, Customer Validation, is about building a proven and repeatable sales
roadmap that has been field tested by successfully selling the product to early customers.
As the names suggest, the second step validates that the entrepreneur has located a set
of customers and a market that react positively to the product.
Figure 3 -‐ Customer Development
27
Step three and four simply build on the success of the first two, and tries to create end-‐
user demand in the market trough Customer Creation and then scale the company
trough Company Building. Notice that the heavy marketing costs in step three is after
the point where the startup acquire their first customers, allowing the startup to control
its cash burn rate.
The first two steps verify the business model and is by far the most interesting.
Completing these two steps verifies market, locates customers, test the perceived value
of the product, identify the economic buyer, establish pricing and channel strategy and
checks out the sales cycle process. If, and only if, the entrepreneur find a set of
customers acquired with a repeatable sales process, and then find that those customers
yield a profitable business model, do the entrepreneur move to step three (Blank 2005).
This explains why the two first steps are most central when discussing Customer
Development, this also counts for this thesis.
2) Lean and Agile development Agile development is a light-‐weight method that works with short, iterative
development and feedback cycles and involves the customer and other important
stakeholders tightly in the development process. Lean development, in essence, is about
applying Lean principles to product development from an end-‐to-‐end perspective by
putting a strong focus on eliminating waste from the development process in order to
optimize customer value contribution. (Petersen, 2010)
Although the two represents different paradigms, Petersen (2010) concluded in a
thorough analysis that they both share the same goals and principles, only differing on a
more practical level, with Agile using practices that do not exist in Lean. Another
perspective given by Robert Charette – the originator of Lean development – sees the
main difference as Agile as a bottom-‐up approach, while Lean is a top-‐down approach
(Highsmith, 2002). Given this distinction, the two will be treated with Agile
Development as a supportive practice in the context of a Lean Development philosophy,
and the two will commonly be referred to as Lean/Agile.
Comparing the two with the corporate product development models discussed earlier,
the Lean/Agile development is learning focused by employing many short iterations of
the development cycle and getting feedback from the customers as early as possible in
28
the process (Ries et al., 2011). In line with previous findings from Eisenhardt and
Tabrizi (1995) in which investigated strategies for accelerating product development
under uncertainty, the researchers found that under the mentioned conditions, rapid
iteration cycles and sense-‐making trough direct customer contact were more valuable,
than a compression strategy were well understood links in a system were squeezed
together.
The Lean/Agile mantra can be summarized in the following three steps:
a) Turn your ideas into a minimum viable product.
b) Measure the product against the reality for the customer.
c) Learn for the next iteration.
All of this should be done in the fastest way possible, by balancing the two extremes
“release early and often” and “maximize the chances of success”. The challenge is to find
out about the minimum set of features necessary to engage with the early customers, in
order to start the learning feedback loop; the Build – Measure – Learn cycle:
Summarizing The Lean Startup Principles In order to test the Lean Startup approach’s applicability on low-‐tech physical products,
a list of principles suitable for testing in the methodology section needs to be conducted.
Based on the literature review in general, and “The principles of a Lean startup” and its
“Key management practices” in particular, the key features can be summarized as:
Figure 4 -‐ The Build-‐Measure-‐Learn cycle
29
1) Question your assumptions – by getting out of the building and talk to your
customers
Questioning your assumptions is one of the key elements of the Lean startup movement,
and I will use selected elements from Blank’s (2005) framework in order to test in what
extent this is transferrable to a low-‐tech physical product. Verifying assumptions help
the company to avoid building a product solely based on the founders vision. I will
therefore in the methodology, use Blank’s concept of hypothesis testing to validate the
Product and Customer assumptions, as well as assumptions regarding the Sales channel
and Pricing.
2) Iterate rapidly
A fundamental point of the Lean startup approach is centered on continuous iteration.
This makes sense in a tech-‐startup, where features, design, layout, user interface and
other key abilities can be modified and tested on a near daily basis, but how can this be
handled when the company is selling a physical product that needs to be designed and
manufactured before its features can be tested -‐ without burning cash at a severe high
rate? I will therefore in the methodology, test if I find the concept of iteration beneficial
in a low-‐tech physical product.
3) Build Minimum Viable Products (MVPs)
Is it possible for a low-‐tech physical product company to use the concept of MVPs? If so,
I see this point in alignment with the rapid Iteration, and I will figure out how to sell
these different MVPs in order to understand what features the customer are willing to
pay for.
4) Validate learning and pivot as necessary
I want to test how I can systematically validate the learning and feedback I acquire, to
continuously pivot and change key elements of the business plan. In a high-‐tech startup,
one can more easily reach out to a greater extent of users as well as getting more valid
data that are easy to organize and measure. So in what extent can I keep track of the
gathered customer feedback and how do I know that the feedback I gather is reliable or
valid in order to “know” when to pivot?
30
Introduction
Literature Review
Methodology
Analysis
Discussion
Conclusion
31
Methodology The Research Design The limited research on the chosen area of study makes it natural to choose an
explorative design structure. Babbie (1989) recommends an explorative approach when
the problem is in a preliminary stage, or when the topic or issue is new. The flexibility of
an exploratory approach suits my purpose and it can be used to address research
questions of all types. The explorative approach implies that the data results will not be
valid on a scientific significant level. The overarching aim of this research is thus to get
hands-‐on experience with the Lean startup approach, in order to give a personal critique
on its applicability on low-‐tech physical products. On the basis of my experience, I will
be able to create formal hypotheses, in which can be tested at a later stage on a more
significant level.
When collecting the data there are two overall approaches, either a qualitative or a
quantitative approach – or a combination of these. Qualitative research is aimed to
collect in depth understanding of human behavior, hence smaller but focused samples
are more often needed (Creswell J. W. 2003). My research design is based on personal
interaction with customers in the field and therefore, a fully qualitative approach is
applied.
In order to test the Lean Startup principles, the following humble, yet reasonable and
well-‐thought research design, was conducted.
Phase 1 – The initial assumptions
The first phase of my research is to conduct a list of assumptions solely based on the
founders’ vision. This will be a minor, yet important phase of the research design, and
serve as a starting point and backdrop for the further research.
Phase 2 – Focus group
In the second phase, a qualitative study in the form of a focus group is conducted in
order to gain a fundamental, yet initial, understanding about the customer and their
problem(s). Although the data gathered from a focus group is not statistically significant,
I will iterate some of the assumptions from phase 1 if I find it necessary. The revised list
32
of assumptions will be transcribed into prototype product that will be used in the final
field study.
Specific Lean Startup principles used in phase 2:
- Questioning your assumptions
- Validate learning and pivot as necessary
Phase 3 – Field study
The purpose of phase 3 is twofold. First, I want to further iterate the revised
assumptions from phase 2 trough various methods deriving from the Lean Startup
approach. This will not only test the validity of the revised assumptions, but also enable
me to achieve the main purpose of this study; to get a first hand experience with the
applicability of the Lean Startup principles. As proposed in the literature, I will “get out
of the building” and approach customers by trying to sell different variations of the
product. This will enable me to understand what’s truly important for the customers and
ultimately if the concept of a whole piece raingear is realistic or not. Based on the
continuous feedback from potential customers, I will modify the concept as a whole and
iterate the assumptions until I have a verified business plan. If this is not feasible, a
major pivot will be necessary.
Specific Lean Startup principles used in Phase 3:
- Questioning your assumptions
- Validate learning and pivot as necessary
- Iteration
- Testing the use of Minimum Viable Products
Phase 4 – Expert interview
In order to align my personal experience from the field study, an expert interview from a
real life practitioner of Entrepreneurship consulting was created. The respondent was
Martin B. Justesen from Copenhagen School of entrepreneurship, a business developer
and sparring partner for the various companies related to the CSE hub. To give my
research more robustness I will compare my findings with the reality of other startup
companies in various industries, trough an individual and independent spokesperson.
33
Figure 4 -‐ An overview of the Research Design
Phase 1 -‐ The Initial Assumptions Most startups are built around assumptions about the market. These assumptions are in
their nature based on the founder’s vision, and need to be tested against reality in order
to ensure they have some kind of validity. Based on Blank’s Customer Discovery
framework (2005), will the first phase of this report be a complete list of the initial
assumptions, solely based on the founders’ vision. In their nature, some of them may
seem a bit optimistic, while others may seem excessive or redundant. Either way, they
are all assumptions, and the purpose is to test their validity.
Customer and Customer problem assumptions A1 Customers prefer being dry when raining.
A2 Customers do not like wearing raingear in general.
A3 Customers find raingear uncomfortable to wear.
A4 Customers find it too much hassle to get dressed.
A4 Customers find it takes too much time to remove raingear after use.
List%founder%assump0ons%Phase&1&
Modify%assump0ons%trough%a%focus%group%Phase&2&
Execute%field%study%Phase&3&
Awareness%of%ini0al%%assump0ons%
Modified%assump0ons%
First%hand%experience%with%the%Lean%Startup%principles%
Expert%interview%An%external%professional%%perspec0ve%to%align%my%%personal%field%experience%%%
Phase&4&
34
A5 Customers find it frustrating to remove the shoes to take off the pants, especially
when at university or similar.
A6 Customers find raingear frustrating to carry around when at university or similar.
A7 Customers do not like the aesthetic appeal of current solutions.
A8 The customer would accept to wear a whole suit if they find it cool/fashionable or
fun.
A9 The customer would accept to wear a whole suit if they find it practical to wear.
Market potential assumptions A10 There is a large market potential among students
A11 There is a large market potential among kids
A12 There is a large market potential among the “Sunday walk” segment6
Sales channel and Pricing assumptions A13 The customer is comfortable with buying clothes online
A14 The customer is willing to buy the suit for 1.499,-‐
A15 There is a great sales channel potential at festivals in Europe
Demand assumptions A16 The products uniqueness will draw attention and create demand
A17 The product will spread with minimal effort
Product features and benefits: The founders believe these are the most important features of urban raingear.
a) Waterproof – 10.000mm
b) Breathable – 10.000mm
c) Covering whole body
d) On&off in 15 seconds
6 This segment refers to typically established couples in the age 30-‐50 that often have Sunday walks.
35
e) Storable in a waterproof bag when arriving at destination
Phase 2 – Focus Group In phase 2, a focus group was assembled in order to investigate the relation between the
initial assumptions deriving from the founders’ vision and the feedback from the
respondents. The focus group was structured by a interview guide, with room for
flexibility if needed. The flexibility dimension facilitates group dynamics between the
participants, making it easier for the respondents to elaborate and give in-‐depth
answers. A recording device (iPhone) was used to record the session, leaving all analysis
to a later stage and enabling me as interview supervisor to gain full attention to the
answers and dynamic in the group and probe the respondents if necessary. Video
recording was also considered, but cancelled in fear of an unnatural setting for the
respondents.
Picking the respondents A chicken and egg scenario arouse when selecting the respondents. Because of the
nature of the highly iterative approach, where assumptions, including the customer
segment, get iterated over time, the choice of one respondent in favor of another became
somehow meaningless. Since the assumptions about the customer segment is solely
based on the founders vision, it may seem like a shot in the dark when picking
respondents to partake in the focus group. Still with this in mind I chose participants
that, according to the initial assumptions, had the qualities of the assumed main
customer; students in their early 20ies. The proposed target group will be discussed in
the focus group, and although the findings cannot be seen as significantly valid, another
focus group will be needed if a severe contradiction in the target segment assumptions
occurs.
The respondents In order to get a diverse understanding of the rain gear phenomenon, the initial focus
group was consisting of 6 respondents from 5 different European nationalities. They are
all part of the main target group, students between 20-‐30 and the sexes are equally
mixed. Although they are all from different nationalities, they have all been living in
Copenhagen for at least a year.
Juan – 24 year old from Spain. Studying economics and finance at CBS.
36
Georgina – 25 year old from UK. Studying politics at University of Copenhagen.
Marc – 24 year old from France. Studying medicine at University of Copenhagen
Mascha – 25 year old from Germany. Studying Law at University of Copenhagen.
Katrine – 24 year old from Denmark. Studying sociology at University of Copenhagen
James – 24 year old from UK. Studying Politics at University of Copenhagen
Previous experience with focus groups – the supervisor and participants Since I’ve had good experiences with the use of focus groups for other academic papers,
I used myself as a supervisor and moderator of the discussion. Some of the participants
had previous experience with focus groups, while some had not. I see mixed pre-‐
experience as a good combination.
The focus group interview guide The respondents knew the theme on beforehand given as “urban raingear”, enabling
them to make up some initial thoughts and frame the discussion. The interview started
with a short briefing, explaining the purpose of the interview, as well as informing the
respondents that the session would be recorded. Next, the interview followed by some
open questions to figure out the respondents’ relation to the current solutions. Followed
by these questions, the respondents each got pen and paper, and listed all the problems
they had with the current solution.
The next phase of the interview introduced my initial product, and was aiming to figure
out if it solved any of the problems that the respondents previously had been listed. The
last part of the interview was about the SipSuit as a product and the respondents
discussed the product design, the target customer, other use purposes, distribution
channels, packaging and pricing. The full interview guide can be located in attachment 1.
37
Phase 3 – The Field Study With the revised assumptions from the focus group, I was now able to hit the streets and
try to sell the initial product. I turned the revised assumptions from phase 2 into an
actual product, and iterated the product based on the continuous feedback from the
respondents in the field. The continuous feedback from the respondents helped me to
guide my iterative product development, and “fail forward”. As showcased in the
analysis section, were both the feedback and product iterations from the field study,
highly surprising for a biased entrepreneur.
Transforming the hypotheses into “physical” products Based on the feedback from the focus group, the first prototype had the following
characteristics; a wholesuit raingear for everyday usage with an integrated storing
solution. The assumed main customers were students. As illustrated in the analysis
section, did the initial product change vastly based on the customer feedback, and I
ended up with something I had not expected. This feedback and iteration process was a
perfect example of the power of the Lean Startup approach and may have saved me from
investing all my money in a product failure.
The problem of selling a non existing prototype Blank (2005) suggests that the customer development process should be done in
companion with the product development process, and Ries (2011) stress the
importance of continuous prototyping. This makes sense if the product is a smartphone
application or a web site, where daily versions can be tested and tracked on different
users. For a physical low-‐tech product this becomes more complicated and there are
several reasons why physical prototypes will be a poor solution for a bootstrapped
company like Sipsuit. Most prominent, is the fact that the company’s Chinese
manufacturer has a minimum order quantity of 3.000 pieces. I still managed to apply the
iterative OODA approach; the only difference was that I did not sell physical products. I
rather sold a proposed concept and asked if the customer was willing to give away their
email address and buy the product at a later stage, when the actual product was made7.
In this way I was following the suggestions from literature about customers giving away
some sort of scarce resource, in this case, both their time and their email address to
show their keen interest in the product.
7 The customer is not obliged to buy the prodcut, but by giving away their email they confirm a keen interest in buying the product.
38
I sold the different product variations by showing brochures with pictures of the
products, with different features and pricing information. In addition the customer was
able to feel the fabric from a product sample I brought back from Shanghai. In this way I
felt that the costumer got a “sufficient” feel to the product in order to make a buying
decision and I will further use the term “Virtual Prototype” when referring to this non
existing prototype. With this approach, I could easily change the information in the
brochures according to the feedback from costumers, and in that sense utilize the power
of the OODA loop while still maintaining a low cash burn mentality -‐ all in accordance
with the Lean Startup principles.
The Problem sheets When selling the different products I used a “Problem sheet” (Blank 2005 p. 61) to easily
list the different features for the customer. Different sheets were created for each of the
products, and obviously only one sheet was showcased per customer. This enabled me
to identify what features the customers are willing to pay for, and those features that are
irrelevant or negative to the customer. An example of the problem sheet for the first
product is illustrated in figure 6.
39
Figure 6 -‐ The Problem Sheets
The respondents When doing the field study, I was approaching potential customers in the populated
parts of Copenhagen. Although the main target customer segment was yet to be
discovered, I started by approached customers in the “assumed” main segment; younger
people 18-‐28 years old. In order to get true and unbiased feedback, I was approaching
complete strangers in the form of a cold call.
A problem worth mentioning was that during the field study the weather in Copenhagen
was extremely hot. People was wearing sunglasses and eating ice cram, and the last
thing they needed was probably a GoreTex suit covering their entire body. The
importance of this is impossible to measure in this report, but still an important problem
with the data gathered that is worth mentioning.
It is also worth emphasizing that although I was selling the concept to the respondents,
the intention was not to convince them. I was rather trying to get some true answers by
putting the customer in a real life scenario. Blank (2005) underlines this important point
and emphasize how the actual selling, by building a repeatable sales roadmap, do not
start before the product has finished the iteration cycle. So instead of selling, I was
Beneoits
100% Waterproof
Breathable
Comfortable to wear outside clothing
Fun to wear
Need to remove shoes?
Aesthetics
Storing function
Today's current solution
PVC, GoreTex
Goretex
-‐
-‐
Yes
-‐
-‐
The SipSuit solution
Yes
Yes
Yes
Yes
No
-‐
Yes
40
listening, and instead of trying to convince, I was trying to understand. As a personal
rule of thumb I kept reminding myself was that I had two ears, and one mouth.
The Field Study interview guide Since my approach to the respondents was in form of a sale, I followed a highly flexible
interview guide. To keep the respondents attention, I tried to keep the sales pitch
shorter than 45 seconds, but at the same time giving the respondents enough
information to give worthy feedback. After the sales pitch I got into probe-‐mode by
letting the respondents do the talking while I was digging into their answers to get
honest and true feedback on each of the features. The interview guide must therefore be
interpreted more as a general guidance.
Table 2 – The Field Study Interview Guide
Phase 4 – Expert Interview In order to increase the robustness of my findings from the personal field study, I
conducted an expert interview with a real life practitioner; Martin B. Justesen from
Copenhagen School of Entrepreneurship. Martin has during the last 4 years been talking
to over 1.000 entrepreneurs, including myself during mentoring on previous ventures.
Martin had previously mentioned his fascination of the Lean Startup approach, and I
wanted to figure out how his perspectives compared to my own research experience.
The structure of the interview was more in the form of an open discussion, where I
ahead of the interview listed some topics that I wanted to cover. My overall aim was to
41
uncover potential flaws with the application of the Lean Startup principles, and see how
this correlates with my own suspicion of a favouring of the high-‐tech digital products.
The Expert Interview Topics The following topics were used as a backdrop for my discussion with Martin. The
findings from the interview can be read in the Analysis section, and the whole interview
can be found in attachment 1.
1) Figure out in what extent Martin would characterize his own knowledge about
the Lean Startup principles.
2) Compare the old Product development paradigm with the Customer
development paradigm.
3) Figure out in what extent CSE applies the Lean Startup principles while
mentoring startup companies at CSE.
4) Figure out how CSE handled the concept of prototyping/MVPs.
5) Figure out any limitations of the Lean Startup approach, specifically in regards to
different products or markets and the high/low-‐tech distinction.
6) Figure out in what extent the general startup scene in Copenhagen applies the
Lean Startup principles.
42
Introduction
Literature Review
Methodology
Analysis
Discussion
Conclusion
43
Analysis I will in this section discuss the findings from the four phases in the methodology section.
Since the first phase is solely listing the initial assumptions, a comprehensive analysis is
not needed. The first part of the analysis section will therefore merge phase 1 and phase
2 and analyze the findings from the focus group in light of the initial assumptions from
phase 1.
Part two will analyze Phase 3 from the methodology section. This part will be analyzing
the process of iteratively adapting the products based on the accumulated knowledge
gathered in the field study. This will be the main area of analysis.
Part three will analyze the data gathered in the expert interview with Martin B. Justesen
and external perspective will be used as a moderator, in order to make my suggestions
more robust.
Analysis of Phase 2 -‐ Focus Group
Customer and Customer problem assumptions A1 -‐ Customers prefer being dry when raining.
This assumption got supported in the first question.
A2 -‐ Customers do not like wearing raingear in general.
I found support for this assumption already in the opening question and it was clear
that the respondents had all been thinking about this prior to the discussion8. The
arguments were massively critiquing the current solutions, and the main issues seemed
to be the general hassle of wearing, as well as the aesthetic appeal. The aesthetic appeal
was especially present for the three female participants.
A3 -‐ Customers find raingear uncomfortable to wear.
I found support for this assumption in both question 2 and 3.
8It is worth reminding that the theme for the discussion was given in advance
44
A4 -‐ Customers find it too much time to get dressed.
This was not mentioned specifically and none of the respondents wrote down this as a
major problem.
A5 -‐ Customers find it takes too much time to remove after use.
This was not mentioned specifically and none of the respondents wrote down this as a
major problem.
A6 -‐ Customers find it frustrating to remove the shoes to take off the pants.
I found support for this assumption in question 2 and 3, but as expected, the problem
was only present in a setting where the raingear is used at university or similar.
A7 -‐ Customers find it frustrating to carry around when at university or similar
I found support for this assumption in question 2, and 3 and the respondents were
usually wearing the raingear in a plastic bag when at university. Many of the
respondents also mentioned the problem of storing the product in-‐house, both long and
short term. The problem was twofold; the product was taking up too much space in
general, as well as the problem of having soaking wet raingear dripping on the floor and
wetting nearby garments. This needs to be considered when developing the waterproof
bag since the initial SipSuit storing-‐solution is only intended for short-‐term storage.
A8 -‐ Customers do not like the aesthetic appeal of current raingear
This assumption got supported in question 2, 3, 11 and 12, especially by the female
respondents. The concept of wearing your favorite outfit underneath a wholesuit
seemed very promising, and was one of the biggest hurdles with the current solutions.
Also another in-‐direct effect was how a fluctuating hood was messing up the hair,
especially problematic on windy days.
A9 -‐ The customer would accept to wear a wholesuit if they find it cool/fashionable
This assumption did not get as much support, as the group still felt that the concept of
wearing raingear was somehow putting them in a spotlight. This may indicate that
45
selling the product as fashion, may not be a good idea. As a result I changed the problem
sheets used in the field study, by admitting that it may not make you look awesome, but
it still does the job in a better way, and you may even have some fun wearing it.
A10 -‐ The customer would accept to wear a wholesuit if they find it fun to wear.
The respondents agreed that the product should be branded as a “fun” rather than a
“cool” product.
A11 -‐ There is a large market potential among students
Although the respondents claimed this was like an “umbrella product” suitable for
everyone, they still agreed that if they had to pick a customer segment to target the
marketing and branding initiatives, the student segment seemed very plausible
A12 -‐ There is a large market potential among kids
This assumption got support trough question 7 and 8, but the product would need some
major adjustments, fitted for an active kid environment.
A13 -‐ There is a large market potential among the “Sunday walk” segment9
This assumption only got support trough the general claim that the product is a neutral
“umbrella product”, suitable for many different customer segments.
Sales and Pricing assumptions A14 -‐ The customer is comfortable with buying clothes online
This assumption got supported and no respondent felt that customers should fear the
chance of online theft. The only mentioned problem was the sizing, especially since this
is a brand new product. Several suggestions were given, among others the opportunity
to manually adjust the product with velcro’s etc., or the possibility of ordering several
sizes and then return the incorrect sizes for free.
9 This segment refers to typically established couples 30-‐50 that often have sunday walks regardless of weather situation.
46
A 15 -‐ The customer is willing to buy the suit for 1.499,-‐
This assumption did not get support, when the respondents had very different
suggestions regarding pricing of the product. A weakness to the selection of
respondents was the general price level from their country of origin. The suggested
prices had an extreme spread, ranging from 60€ -‐ 300€. This was highly unexpected,
and could be explained either by the varying price levels, an unfamiliarity with pricing
of raingear, or a fundamental different understanding of the product. This indicates that
a pricing above 1.499 may be unrealistic, but I leave this to be further tested in the field
study. My decision is mainly based in the fact that general GoreTex products get sold for
twice as much in traditional (Scandinavian) stores.
A 16 -‐ There is a great sales channel potential at festivals in Europe
All the respondents supported this assumption and a summer release was discussed.
Demand assumptions A 17 -‐ The products uniqueness will draw attention
This assumption got supported trough question 4, 6 and 11 and the respondents agreed
that the product would draw attention in public. It is worth mentioning that some of the
respondents also claimed this as a negative effect, amplifying the feeling of being in a
spotlight when wearing raingear. This will need to be taken into consideration when
picking the colors for the first collection. It was clear that more subtle and sophisticated
colors were preferable, and pastel colors were suggested.
A 18 -‐ The product will spread with minimal effort
This assumption did not get support, and Although the respondents agreed that the
product would get attention, they did not see it realistic that the product would spread
by solely attention in the public sphere. The respondents did mention the effect of
friends wearing it (social proof), so perhaps a social or viral launch strategy can be
applied.
47
Product features and Benefits: The respondents agreed that the features of the SipSuit would solve their most
prominent problems with current solution, and they did not find any of them as
excessive. The breathability, storing function and the convenience of wearing the suit as
a “shell” outside other garments was considered as key features. Although they all
admitted that the product would solve their problems, the respondents were not 100%
convinced that they would buy one. The argumentation was fairly based on a price-‐
utility ratio, where many of the respondents claimed that since they used raingear at
such few occasions, the cost of acquiring the product was too high. In addition, the
social aspect was mentioned, and many of the respondents would not wear it before it
got “socially acceptable”.
Table 3 – Analysis of Focus Group Interview
Analysis of Phase 3 – the Field Study
First reality check This was the last part of my personal study, where the rubber met the road. It was in this
part my revised assumptions were taken to the streets, and I personally tried to sell10
the product to potential customers. As mentioned in the methodology, I was not trying
to sell, but to learn, and I was not trying to convince but to understand. This section will
analyze the process of iteratively adapting the prototypes based on the accumulated
knowledge gathered in the field.
It took a total of 3 days and 80 interviews to land on a promising concept. It was both
time consuming and challenging to sell products to strangers in the street, but I quickly
understood the importance of doing this properly. The initial product that was hyped in
the focus group was a complete failure, and during the three days I pivoted both the
product and the customer segment into a brand new concept. This initial failure was
quite surprisingly for a biased entrepreneur and I will in the following section, analyze
how the findings from each of the three days in the field changed both the product and
the customer segment.
10 See methodology part for an important note on the term ”sell”
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Findings from Day 1 Although I started the field research with a product that I had been working on for
months, as well as revising it trough the use of a focus group, it was a complete failure.
The data showed no mercy; after interviewing 30 strangers, only 2 customers were
interested. The aesthetic appeal, the price, and the thought of wearing the wholesuit in
an urban environment were completely unrealistic for most of the respondents. Table 4
summarize my main findings from day one.
The product from Day 1
-‐ Whole piece raingear in lightweight “GoreTex”11
-‐ Integrated storing function with waterproof bag.
-‐ Intended use; urban everyday environment.
-‐ Price; 1.999,-‐
The findings from Day 1:
- I was able to sell the product to 2 out of 29 customers
- Key input:
a) Aesthetic appeal. It was clear that the concept of wearing a wholesuit in
public was nearly unthinkable for most customers. It was clear that the social
aspect was strong, as 19 customers mentioned this as a main reason for not
buying.
b) Ok to wear outside urban environment. 12 customers would accept to
wear the wholesuit in a setting where they were outside an urban
environment. Examples referred to were fishing, skiing and music festivals. In
general, situations where it is socially accepted to think practical rather than
fashionable.
c) Price. It was clear that the price of 1.999,-‐ was too high. 21 customers
mentioned the bad cost/benefit ratio since there was a low need for “extreme
raingear” in Copenhagen.
d) A kid’s product. The product was compared to a “Flyverdragt” for kids, with
11 It is important to mention that the actual product do not apply the GoreTex © patent, when this is highly expensive due to the need for licnesing. That said, the term is simply reffering to a certain level of waterproofness vs. Breathability, and is very cheap to produce. The actual product feature would need to be labelled as something else (SipTex, BreathTech etc.)
49
a childish and unfashionable appeal. 5 customers suggested that this would
be a perfect product for kids.
e) Practical solution. All customers liked the idea of a lightweight garment
combined with a storing function, though many customers also raised the
concern of leaving the product in the bag for too long. This led to the idea of a
welcome letter with caring instructions.12
f) iPod connectivity trough hood. One of the respondents suggested an iPod
connection system trough the hood Table 4 – Analysis of the Field Study – Day 1
The first day was a complete failure and a personal defeat, but the gathered data gave
me the following options:
1) Sell the product solely for kids -‐ No
Many customers suggested selling the product for kids. Initially I liked the idea,
but when looking into competitive environment and the low margins on these
products, I decided not to pursue this segment.
2) Turning the product into a ski suit -‐ Yes
Many customers said they would gladly wear the wholesuit while skiing. Popular
ski suits have very high margins with price levels ranging between 6.000-‐
8.00013,-‐,. With minor adjustments like increasing the robustness of the product,
there could be a huge potential for selling ski suits to a lower priced market. I
therefore decided to make a new virtual prototype for a ski suit.
3) Turning the product into a festival suit – Yes
Many customers mentioned how the product would be ideal for a rainy day at a
festival. I therefore decided to make a new virtual prototype for a festival suit.
4) Lowering the price permanently – Yes and No
Based on customer feedback the initial pricing of 1.999,-‐ was too high. With the
two new products ready for testing, I decided to cut my margins for the festival
suit by lowering the retail price to 1.499,-‐ while trying to sell the concept of a ski
suit for the same 1.999,-‐ pricing.
12 The letter is found in attachment 2 13 Like the Norrøna Lofoten suit, and Sweet protection suit.
50
Findings from Day 2 During the second day of the field study, I chose to pursue the concept of a ski suit. I
needed more robustness to my product, so I added another layer of GoreTex to my
virtual prototype14. In addition I added the integrated iPod solution suggested by one of
the respondents from the previous day.
The second day was a tremendous success and I sold the product to 22 out of 25
customers. The most interesting feedback was that 20 customers perceived the price to
be way too low, suggesting prices from 3.000-‐6.000,-‐. I find this highly fascinating, since
one of the main reasons for not buying the rain suit, in fact was the high price level. This
may suggest that it is the product context and not necessarily the features, that
determine the customers expected price level.
The product from Day 2
-‐ Whole piece ski suit in strengthened 3 layer “GoreTex”
-‐ Integrated storing function in waterproof bag.
-‐ Integrated iPod connection trough hood.
-‐ Intended use; skiing.
-‐ Price; 1.999,-‐
The findings from Day 2
- I was able to sell the product to 22 out of 25 customers
- Key input;
a) Aesthetic appeal
The social aspect of wearing a wholesuit while skiing seemed highly
fashionable, and many customers also mentioned that this would be super cool
to wear in an after-‐ski session.
b) Price
Although the product features are almost exactly the same as for the raingear
solution, the customers now perceived a price of 1.999,-‐ as way too low,
suggesting prices between 3.000-‐6.000,-‐. The customer perception of the cost-‐
benefit ratio was much better, although customers said they only go skiing on
14 3-‐Layer GoreTex is the deFacto standard for professional GoreTex equipment, referred to as GoreTex Pro ©
51
highly rare occasions.
c) Opportunity of additional underneath clothing
The 3-‐layer “GoreTex” will not be sufficient to keep you warm, and many
customers asked what to wear underneath. One of the customers suggested
offering additional wool-‐suits to complete the product. This could be a nice
add-‐on, to increase the margins.
d) Solving problem with snow under jacket
18 customers mentioned the frustration of getting snow under your jacket, and
all agreed that this suit solved their problem.
e) The storing function was still popular
Although the purpose of temporary storage falls away in a skiing environment,
almost every customer viewed this as a highly practical add-‐on.
f) Tight pockets
Two of the customers mentioned the need for pockets, and suggested that the
pockets should be “tight” so that inventory doesn’t float around when doing
tricks etc.
g) The integrated iPod connection
The customers really appreciated the integrated iPod solution and I somehow
felt that the brand value of the iPod affected positively to the SipSuit brand. Table 5 – Analysis of the Field Study – Day 2
Findings from Day 3 During the third day of the field study, I was testing the reduced-‐priced festival suit. I
was quite optimistic since this was mentioned as an attractive product by many of the
respondents from day one. Quite surprisingly I only got 4 sales out of 25 respondents,
and once again it was the price level of 1,499,-‐ that seemed too high. 9 respondents also
compared the price level with a Poncho (priced at 20,-‐).
The product from Day 3:
Whole piece festival suit in light-‐weight GoreTex.
Integrated storing function.
Intended use; festivals both in and outside an urban environment.
Price; 1.499,-‐
The findings from Day 3:
52
- I was able to sell the product to 7 out of 25 respondents
- Key input;
a) Aesthetic appeal
Most of the respondents agreed that it was socially acceptable to wear a whole piece
in an extreme setting like a festival.
b) Practicality
12 respondents mentioned the practicality of having a dirty whole piece in a
waterproof bag, but some also raised the concern of the garment rotting inside the
bag.
c) Price
The price was the main downside, and many customers did not like the thought of
buying an expensive suit after paying for an expensive festival ticket.
d) Ok to be wet in a festival setting
Some respondents did not see the problem of getting wet during a festival
e) Making a Queens Day suit
One of the respondents from Netherland suggested making an orange version to be
sold at the annual Queens Day festival in Amsterdam. Table 6 – Analysis of the Field Study – Day 3
Summarizing the findings from the analysis: After a complete fiasco with the first intentional product, I was left with 3 options; a ski
suit, a festival suit and a product for kids. After scrapping the kid’s product and getting
poor response on the low margin festival suit, I decided that the business plan needed to
be rewritten and the design and features needed to be iterated to fit a new consumer;
the ski resort segment.
Next step of the product development will be to include lead users of this demanding
customer segment in the product development, to locate other key features and discover
potential flaws with the suggested solution. The future of the SipSuit product will
unfortunately unfold itself after the hand-‐in of this paper. The product development
history of the SipSuit can so far be illustrated in figure 7.
53
Analysis of Phase 4 – Expert interview In order to modify my personal experience with the Lean Startup approach, an external
perspective seemed highly beneficial. The expert interview was carried out via Skype,
and had a duration of 35 minutes. I have naturally structured the analysis on basis of the
topics listed in the methodology section.
Discussing Martin’s own knowledge about the Lean Startup principles.
Martin mentioned early in the interview that he had learned about the Lean Startup
approach trough the general hype in the entrepreneurship community:
“Well, I know about the Lean Startup approach, like most of us, from the hype of it.”
Although he did not have as much knowledge about the specific terms and details, he
personally claimed that CSE had been using the principles for years:
“All in all I would say that I understand the “mindset of it (…) we have been using these
principles at CSE during the last four years”
Product(1)(SipSuit&as&a&cape&Product(2)(Added&integrated&storing&func2on&&3&3&3&3&3&3&&&Master&thesis&start&&3&3&3&3&3&3&3&3&&Product(3)(Changed&design&to&wholepiece&&Trip(to(Shanghai(Found&material&–&PacLite&“GoreTex”.&Designed&packaging&&Focus(group(Changed&colours&and&added&Caring&Instruc2on&leGer&&Field(study(–&Fail&&Pivot&3&Ski&suit&&Product(4)(3&layer&shell&construc2on&with&addi2onal&wool&underwear&Added&feature:&iPod&connec2on&&&&&&&&&&&&&&
January&&&&
February&&
March&&&
May&&&
June&
Figure 7 -‐ The Product Development History of SipSuit
54
Comparing the old Product development paradigm with the Customer
Development paradigm
Martin mentioned several times his personal favoring of the Customer Development
paradigm. At one time he commented;
“I see that there are two, lets call it paradigms. (…) the existing paradigm of “Doing the
Business Plan”, and many people still stick to this, then you can say that CSE represents
the new paradigm. We say that it (referring to the Business plan) may have worked
eventually, but today you need to go and test it before, and it doesn’t make sense to make
predictions (in essence Assumptions without validation), or it might make sense, but it
might also take you to a different conclusion.”
And later he emphasized his dissatisfaction with the educational system’s rigid focus on
the old paradigm, trough a strict focus on the Business Plan:
“…I think that writing the business plan is very old school, and I feel it is a general
problem with the educational system. It’s a typical way of thinking, because it is very
easily applied to the way we already teach and learn at schools today. This is not good
because I feel that the university solution is that as soon as you have done your business
plan, you are kind of done and you get your grade. This is NOT what entrepreneurship is
about, and I feel it gives the students a disadvantage because it is not about writing a
business plan, it is simply about creating value, for people and coming up with new
solutions.
Later in the interview Martin revised himself, by admitting that the old paradigm had
its benefits in some areas, mainly depending on the entrepreneur as a person and the
market or product being developed:
“I also have my personal understanding. Rather than saying that it is only the Business
plan model or the prototyping that work, I would say that for some business it is actually
really important to do the Business plan. Also what type of person you are yourself,
because some people need to have the full understanding before they are able to do things
and I feel I have come to an understanding of accepting that some people need to have full
overview from A-‐Z, while others, like myself, start acting and then build on that by finding
55
the next letter as I move along.”
Martin’s view on this matter can be summarized in the following statement:
“I still feel that fore some situations the business plan still serves it purpose, while for
others our more progressive way of thinking is more interesting.”
Martin explaining in what extent CSE applied the Lean Startup principles while
mentoring startup companies at CSE
Several times Martin emphasized how CSE’s mentoring policy was pushing the
entrepreneurs to go out in the real world and figure out how it responds to their initial
concept:
“Instead of hiding behind business plans, and there’s allot of ways to hide instead of
checking out the actual market (…) you want to find out if it is a good idea. And we have
been telling students over and over again that they need to go and test it out in the real
world and figure out how the world responds to their concept.
This practice is very much in alignment with the principles of a Lean Startup, and
Martin also mentioned how to figure out a reasonable pricing level:
“…if you talk to your first 10 customers, it is not to sell, but more to find the right market
price through experimentation.”
Also the concept of testing your assumptions was mentioned;
“You might have been designing the initial business plan in a way that does not show how
the market “really” is, because your assumptions is wrong. So I try to give the advice to
potential startups that they should be highly accurate in their understanding of the
market.”
How CSE handled the concept of prototyping/MVPs
Martin used the concept of “Showcasing” when he addressed how the entrepreneurs at
CSE were testing out their products in the marketplace:
56
“We call it “showcasing” things by showing the world your idea. Then it might not turn
out to be a good idea, but it might have some elements that we can use further by taking
the idea to the next step.”
This confirms the iterative way of thinking. Martin further explains that the showcase
can be either a real product or a mockup – the important thing is that you take your
showcase to the customer for feedback.
“Well, when I think of a showcase, then this is a prototype in the actual market. You can
off course have a mockup, but when I’m talking about a showcase then I’m talking about
going to the market and “do your thing for real”. This can be like bringing your mockup to
your showcase-‐customer, and ask the person if they would like to do that”
Martin also briefly commented how to sell the showcase to the initial customers with
extraordinary terms;
“We encourage the entrepreneurs to showcase the product by talking to actual customers
(…) and propose the customers to buy it at a special price, but if they at a later stage want
to buy they will get it at a higher price. Extraordinary terms for first sale, general terms
later.”
On limitations of the Lean Startup approach, specifically in regards to different
products or markets, including the high-‐low tech distinction
Martin mentioned his personal experienced limitations at three different times. The
first limitation was in regards to the market:
“I would say that in overall it is a good principle to showcase, but it is probably more easy
to go and showcase if it is an open market, meaning an already existing market with
existing products that you want to do in a new way. It can be difficult to approach the
market with a new way of thinking or a complete new product that the market have not
seen before.”
The second limitation of the iterative product development was in regards to the
potential danger to the people involved in the experimentation cycle. Martin mentioned
an example of a product in the building industry, where people might get killed if the
57
product turned out to be a failure:
“I have some knowledge about some very interesting business cases that might never get
into work because of some highly technical solutions. This was in the building industry,
and if the showcase would fail, it may result in people getting killed. And because of this it
has been highly difficult for this company to prove their concept and technology. (…) So
this is another example where it might be some limitations where this iteration loop
method might have it flaws.“
The third limitation was in regards to the specific customer involved, and especially
Martin mentioned the problem of selling a product B2B that could jeopardize the
business’ customers if the suggested product proved out to be a failure:
“Because your new in the business, and I’m (as a business man) is scared that you may
have influence on my customers. Come back when you have proved the concept.“
These three limitations do not correlate with my own suggestion of a limitation in
regards to low-‐tech physical products, and it seems like CSE overcomes this (proposed)
mismatch by tailoring each showcase to each individual entrepreneur. When asking
Martin if CSE tailored the process of how to validate a concept to each single company
he clearly replied;
“Yes, that is something that we try to define in a very individual way”
On figure out in what extent the general startup scene in Copenhagen applied the
Lean Startup principles.
At the end of the interview I asked Martin if he believed the practice at CSE was a
common practice in the entrepreneurial scene of Copenhagen. He once again
mentioned how this was dependent on both the decision of the entrepreneur as well as
the market they operate in. When asking Martin if he would agree that any
entrepreneur should be highly flexible when applying the Lean Startup principles and
tailor the approach to each individual company, he replied;
“Yes, I feel if you both understand how the banks and VC’s understand the business plan,
58
because some of them still value it, and by understanding both worlds you are able to
navigate trough them, if you get my point.”
Table 7 – Analysis of the Expert Interview
59
Introduction
Literature Review
Methodology
Analysis
Discussion
Conclusion
60
Discussion Pause/Rewind -‐ Getting Back to the Four Principles In order to give a natural progression in the thematic for the thesis, I have purposely
withheld all evaluation of my experience, until this section. By getting back to the initial
Lean Startup principles from the literature review, I will merge my personal experience
with the Lean Startup principles with the key insights from Martin, in order to critically
evaluate the Lean Startup approach and its applicability outside Silicon Valley.
1) Question your assumptions Questioning my assumptions was undoubtedly one of my key lessons learned. The
power of this simple principle struck me both as a researcher conducting a scientific
paper, as well as an aspiring entrepreneur. After spending months putting my concept
down in writing, fine-‐tuning PowerPoint presentations and testing my approach on
family and friends, I wanted to put my personal biases to the test. Because of the limited
sample size, I concluded that my insights were not generalizable beyond my
project. Interestingly, Martin's experiences also confirmed that a strong belief in one's
own idea -‐ entrepreneurial bias -‐ was common to most entrepreneurs. It seems natural
to view this bias as the driving force for entrepreneurship, because without a strong
belief in the potential for the product, there cannot exist a drive to execution.
This unfolds” itself as a paradox, where me as an entrepreneur need to trust in the
customer feedback, and be willing to iterate the concept or carry out a major pivot to the
initial business plan. By questioning ones assumptions I would like to emphasize the
following.
a) Awareness of assumptions is as important as questioning them
To start with, I would suggest that creating awareness of one’s own assumptions is as
important as questioning them. The actual listing of assumptions force the concept
down from a more abstract level into something tangible, making it easier for the
entrepreneur to see the bigger picture, and identify vital elements of the initial business
plan. This holds for both high tech and low-‐tech products.
b) Question your assumption as early as possible
61
This cannot be emphasized enough. To avoid the favoring of the initial concept, my
suggestion is that any early stage entrepreneur should question his/her assumptions as
early as possible. As soon as you have something to show the customers, leave the
building and start “selling”.
When reality hit me as my initial concept got shredded, I realized that all the late nights I
had spent on “polishing” my initial concept was in retrospect only helping me to
convince my own personal belief in the concept. In essence, I was only convincing myself.
This made it hard to pivot, and although the data was clearly indicating the need for a
change in my concept, I was hesitating to make a because of all the sunk costs that had
already been invested. As advocated by Martin, my suggestion is therefore that any
entrepreneur, high or low-‐tech, should start getting feedback on his/her ideas before
their pride and self-‐confirmation potentially start pulling the project in the wrong
direction.
c) Problem of talking to the “right” customers
The first problem I encountered with the customer feedback cycle was that it was not
clear to me if I was talking to the “right” customers. Many respondents suggested that
my initial raingear concept needed to be socially accepted before it would cross the
chasm into mainstream adoption. This relates with the theory, suggesting not to
developing the product for the many, but for the few (Blank 2005), but in order to cross
the chasm of social acceptance I need to locate these “few”.
These customers have many labels, be it lead users 15 , early adopters 16 or
earlyvangelists17, my key point here is that for some products it will be easier to locate
these customers than for others. If my product was a new and innovative fishing rod, the
customers I would want to interact with are the heavy users of that equipment who are
very knowledgeable about the cons of the existing technology. If I wanted to release a
high-‐tech application like the popular Dropbox service, I would locate and interact with
heavy users of new IT technology. But by introducing a simple mainstream product with
no clear lead users, this matter becomes slightly more complex. I could locate heavy
15 Lead users was originally coined by Eric Von Hippel (1986) in Lead users; A Source of Novel Product Concepts 16 Lead Users is a term first coined by Rogers E. M. (1962) Diffusion of Innovation 17 Earlyvangelist is a term first coined by Blank S. G. (2005 Four Steps to the Epiphany
62
users of raingear, like fishers, explorers or similar, but they are not the customers
capable of giving me feedback on the social aspect of wearing a wholesuit in public. I
was aiming for the mainstream “umbrella-‐customer”, and feedback suggested that for
the wholesuit concept to spread, it need social acceptance.
I will get back to this dilemma when discussing how to “Validate your feedback”, but for
now, I would suggest that different products may need different techniques for locating
the “right” customers for initial feedback. Building on this I will also propose that due to
the nature of high-‐tech products, it may be easier for the high-‐tech entrepreneur to
locate the lead users for their product.
2) Iterate rapidly The concept of iteration is at the core of the Lean Startup approach and although my
personal experience with iterating my initial concept was highly positive, I still want to
highlight the following.
a) Staying neutral
Also with this second principle it is worth mentioning the importance of finding the
balance of neutrality for the different concepts. Analyzing each iteration and prototype,
unbiased by the sunk-‐costs attached to it, will make it easier for entrepreneurs to make
good iterative decisions.
b) Difference between iteration and pivoting
In doing the field study, I found it a bit confusing with differing between when I was
making iterations and when I was making a pivot. From the literature it was clear that a
pivot was a major change to the business plan, but this certainly leaves a grey zone area.
For example I felt that iterating the product into a festival suit was pure iteration, but
making it into a ski suit was a pivot. Since the product specs are almost exactly the same,
this does not make immediate sense. Perhaps it was my unconscious understanding of
how the ski suit concept was changing the business plan in a greater extent; by the
change in pricing, the changing customer segment, the change from rain protection to
snow and temperature protection, or it may have been the potential increase in profit
margins of selling ski gear, that led to this intuitive conclusion. Regardless of my
personal distinction between iteration and pivoting, I feel the present problematic have
63
room for improvements and further research in this area may discover different
iteration and pivot patterns for high and low-‐tech products. This view also got
supported in-‐directly trough Martin’s suggestion on tailoring each process to each
individual company.
c) Problem with measuring the direct effect of iterating a low-‐tech product.
As Lean Startup principles suggest, one shall eliminate all features that do not give direct
value to the customer. In the world of high-‐tech, there exist several ways to measure the
importance of each individual feature. One can directly measure how many people
actually using a particular feature or even how many users clicking on a particular
button. This can help the product development team to streamline the product, by
measuring the precise effect of each independent iteration.
For low-‐tech products, this is not as straightforward and easy to measure. The direct
effect of adding magnetic zippers, tighter pockets, iPod connectivity or an integrated
storing solution is not as accessible for measurement before the product is sold at a
larger scale. The purely qualitative “selling approach” gave me excellent feedback on the
bigger picture, by enabling me to tailor each interview and really dive into the mind of
the customer, but it would be too time consuming to A/B test each of the features this
way (one product with magnetic zippers, vs. one with regular zippers).
Here the Lean Startup approach clearly has its limitations in regards to physical
products. I personally solved this limitation by asking each of customers what they
thought about each individual feature, and if they were willing to pay extra for this
particular feature (Example; would you pay 50kr extra for the integrated iPod
connectivity?). Further research may still uncover way more effective A/B testing
systems for low-‐tech physical products.
3) Build Minimum Viable Products (MVPs) Building Minimum Viable products is another core element of the Lean Startup
approach and enables the product development team to streamline the product for
increased click trough rate (sales) and in general a better product. The importance of
streamlining makes sense for high-‐tech products. The nature of the digital products have
tremendous economies of scale, and increasing the click trough rate by as little as 0,1%
64
can have a tremendous effect on the bottom line. When discussing MVPs in regards to
low-‐tech physical products I want to remark the following:
a) Problem of creating physical prototypes
In the world of high-‐tech virtual products, it is often easy to create simple mockups or
prototypes with “just enough” features to be able to get real customer feedback. Eric
Ries (2011) reveals how he created as many as five prototypes a day and how he was
able to test each of them individually, with free online software like Google analytics.
Unsurprisingly this approach turned out to be both unrealistic and irrational when
applied to a physical product like raingear. Although the concept of MVPs is listed as one
of the core elements of the Lean Startup approach, one may ask if even make sense when
dealing with real physical products, without severe high cash burn rate.
b) Suggested solution -‐ virtual prototypes
My suggested solution to overcome the problem of MVPs, was to create what I labeled as
virtual prototypes. Instead of manufacturing daily prototypes and shipping them all the
way from Shanghai, I rather spent allot of time on figuring out how to easily
communicate the different prototype concepts, and figured that using printed brochures
created in PowerPoint seemed to serve the purpose18. After each day in the field I went
back to the office and implemented the feedback into new virtual prototypes in which I
would sell the following day. On a virtual level, all in accordance with the Build-‐
Measure-‐Learn cycle.
I did not, as the literature suggests, bother to A/B test each individual feature
independently, by adding or removing them one at a time. This would be inefficient use
of time. Instead, I explained each of the specific features and ask the customer if they
believe the particular feature is of importance to them. In addition, I asked if the
customer was willing to pay extra for this particular feature. Example; would you be
willing to pay another 50kr extra to get the iPod integration?
Martin did not differ between actual or virtual prototypes, and emphasized the
importance of tailoring the process to each individual company. The most important
was to showcase the product to the real life customer to get honest feedback. If future
18 See attachment ## for an illustration of the product brochures
65
research unveils that this virtual prototyping in fact gives true and valid feedback, it may
actually be both easier and cheaper to prototype for low-‐tech physical products than for
the high-‐tech ones. The pros and cons for each method can be summarized as;
For high tech actual prototyping, a real product can be tested on large scale, with
supreme measurement tools. The potential downside is that the prototype needs to be
created/programmed, with potential dangers of biasedness effects to not kill your
programmed darlings if the reality of the market turns them down.
For low-‐tech virtual prototyping, it is more difficult to test each prototype on a larger
scale. The upside is that the low-‐tech entrepreneur can use virtual prototyping, hence
saving both time and money, as well as reducing the entrepreneurial commitment to the
prototype.
4) Validate learning and pivot as necessary One of the most challenging parts of the field study was to know when I needed to
iterate, or make a pivot. The literature did not give me a clear answer to this. The
question about what was valid feedback or not, and knowing when I had “enough”
feedback for a concept to be either proven or disproved, was left unsolved. I want to
remark the following:
a) What feedback is valid?
This gets back to the problem of knowing what customers that actually give you valid
feedback. I once again want to raise the concern of developing a product based on
feedback from the wrong customers. Some customers discover problems or needs
before others, and by early adoption of a new product that supposedly solve their
problem, the early users spread the product to their peers as opinion leaders.
If future research unfolds that it in fact it is more difficult to locate earlyvangelists for
low-‐tech physical products, it may also be true that it will be more difficult to determine
what is valid feedback and what is not for these type of products.
b) When does one have “enough” valid feedback to make iterations or a pivot?
Another problem I encountered while gathering data was to determine how much
feedback that was “enough” in order to make iterations or a pivot. With the limited data
gathered due to the qualitative approach, it was hard to determine if twenty “no’s” in a
66
row was enough to make an iteration. I know there are students at CBS dedicating their
whole thesis research on solving this particular problem, so hopefully their research will
give valuable insight in this important entrepreneurial dilemma.
A personal revelation In ending the discussion, I want to highlight my absolute eye-‐opener from this research
project, in which truly can be read as a personal solicitation to all future entrepreneurs. I
want to emphasize how easy it is to get biased of one’s own ideas. Before I started my
methodology section, I was worried that my entire research would be spoiled because of
the lacking need for iteration on my initial raingear concept. After working with the
product and idea for so long, by selling the concept (successfully) to friends, calculating
market potential, visualizing the product on strangers in the street, I assumed the
product-‐market fit was a near one-‐to-‐one relation. It became a truth, in my own head.
Although I was truly fascinated by the core ideas behind the Lean Startup movement, I
somehow felt that the principles of “failing forward” were not valid for my own idea.
This study can only confirm my own personal biasedness, but I somehow do not believe
this to be a unique case. It is difficult to admit that you are wrong, and it is especially
difficult to kill your darlings. But ultimately, it is the market and the customer that
decides if there is a need for your product.
I would also suggest that it is in the entrepreneurial nature to favour one’s own ideas
over others. By discovering (assumed) market potential, the entrepreneurs get fuelled
by their own conviction and move forward towards execution. Here the paradox reveals
itself; the Lean Startup entrepreneur needs to balance their entrepreneurial biasedness
and excitement with the unsympathetic reality. Further they need be willing to iterate or
pivot their initial ideas if the gathered data tell them so. My suggestion, based on my
personal experience, is that any entrepreneur, low or high tech, must try not to claim the
concept on a personal level. Entrepreneurs should view the initial idea as having no
value before it has been proven in the market. Building on this, the entrepreneur should
view a “failure” in the market as a success, because the product-‐market fit in fact have
been increased.
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Introduction
Literature Review
Methodology
Analysis
Discussion
Conclusion
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Conclusion After spending months of reading, conducting and executing interviews and field
research, I have had the opportunity to immerse myself into the exciting field of early
stage entrepreneurship. On the basis of my own personal journey, I strongly believe that
the Lean Startup movement have something to offer all entrepreneurs, also those
situated outside Silicon Valley. That said, my research might have uncovered some
limitations to the principles of Lean, especially in regards to low-‐tech entrepreneurship.
This can be seen both as a contribution to the small proportion of the existing literature,
as well as giving indications for future research. If this research indicates that the
proposed limitations have significant validity, this paper could potentially have ignited a
major impact on the future development of the Lean Startup principles.
It is still important to remember that the movement is currently in its early infancy. In
order to gain further understanding of the principles of Lean, more research on this
matter is needed. I would therefore summarize my findings by listing seven hypotheses,
in which I strongly encourage future entrepreneurship students to test on a more
significant scientific level.
Implications for future research
Hypothesis 1 The first hypothesis addresses the problem of talking to “the right customers”. This is of
significant importance In order to develop a successful product based on customer
feedback. Future research may investigate the scope of this problem and suggest new
methods for solving this suggested issue:
H1 – It is more difficult to locate and interact with early adopters when developing a low-‐
tech physical product.
Hypothesis 2 The unclear distinction between iterations and pivoting leads to my second hypothesis,
suggesting that there may exist different patterns in regards to this matter for low vs.
high-‐tech entrepreneurship:
H2 – The distinction between a pivot and iteration is product-‐dependent.
Hypothesis 3 Due to he problem of measuring the direct effect of iterating independent product
69
features for physical products, I suggest future research to investigate more effective
methods for A/B testing these low-‐tech physical products:
H3 – When developing low-‐tech physical products, it is more difficult to measure the direct
effect of iterating independent product features.
Hypothesis 4 Due to the limitations of gathering market feedback for low-‐tech physical products, my
fourth hypothesis address the problem of knowing when one have “enough” valid
feedback to know that a product iteration or a pivot is necessary:
H4 -‐ When developing a low-‐tech physical product, it is more difficult to know when one
has “enough” valid feedback to make iterations or a pivot.
Hypothesis 5 My fifth hypothesis addresses the limitations in regards to developing actual prototypes
in the form of a Minimum Viable Product. Future research may investigate new ways of
prototyping for low-‐tech physical prototypes, especially investigate potential problems
with my suggested “Virtual prototyping” method.
H5 – The concept of prototyping with the use of Minimum Viable Products is unrealistic for
startup companies developing low-‐tech physical products.
Hypothesis 6 My sixth hypothesis addresses the potential dangers of “favoring effects” when
developing actual prototypes. Due to the sunk costs and commitment that occurs when
developing actual prototypes, I suggest that it may be easier for entrepreneurs that
develop virtual prototypes to stay unbiased and avoid favoring of one concept before
another:
H6 – More resources spent on developing actual prototypes leads to a biased favoring of
the prototype, due to the sunk costs attached.
Hypothesis 7 The seventh hypothesis addresses the same dangers of favoring a concept before
another, but address another dimension; the time spent hiding in the office before
“leaving the building”. I suggest that the more time spent to polish an unproved product
before the first reality check, will solely increase the dangers of convincing the
70
entrepreneur, without actually increasing the product/market fit. The suggestion is to
“get outside the building” as quickly as possible.
H7 – The more time spent hiding inside the office to fine-‐tune a prototype without
showcasing it to real life customers will increase the favoring of the product concept.
Standing on the shoulders of David The Lean startup movement may be on its way to establish itself as a coherent theory,
covering all aspects in the chaotic field of entrepreneurship, but we are far from there,
yet. For this to happen, I personally believe a more flexible and tailored implementation
process would benefit everyone. It is also important to emphasize that the movement is
still in its early infancy and can at this stage, solely be viewed as an opposing rebel,
throwing stones at old and established giants.
Due to the lacking research on this new movement, it becomes highly important not to
get carried away and make hasty conclusions. Because when entrepreneurs write about
entrepreneurship, I would be surprised if not the same dangers of favouring and
biasedness are present, also for academic writers. So in order not to insult the concept of
Lean itself, authors behind the movement must avoid rigidity, which will only create the
type of problem that the movement itself so profoundly wants to solve. We must
therefore admit that the concept is new and that there may be a need for both iterations
and pivots.
This leaves the final question of whether ventures following the Lean Startup
methodology are better off, yet to be proven. Because we need to let the data do the
talking. After all -‐ only the market can reveal what companies that ultimately will
become be the winners.
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Attachments Attachment 1 – The Focus Group Interview Guide
Introduction:
Ask if anyone have participated in focus group before. Explain the purpose and benefits
from a focus group as a scientific method.
We will today talk about raingear in an urban environment. This excludes professional rain
gear for more specific conditions like fishing, mountain climbing, hunting etc. We will talk
about the clothes you choose to wear on a typical rainy day, in Copenhagen.
To make your minds spinning on this theme; what do you feel when waking up to a rainy
day in Copenhagen and you realize you have to wear raingear?
(This simple question was mainly to make everyone participate early in the interview,
but also to get an initial understanding if it is the rain or the clothing that is the biggest
downside.)
We will now run a brief open discussion on these two questions;
Question 1 -‐ Do you currently own rain gear?
Question 2 -‐ Do you prefer using both jacket and trousers?
Follow-‐up question; if you chose not to wear raingear, why is that so?
(Open discussion)
The participants each get pen and paper.
Question 3 -‐ We will now run a small experiment. Write down as many negative
features/problems with raingear as possible.
Rank them with numbers where 1 indicates the most noticeable problem.
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Show your results to the rest of the group.
Based on the other respondents, you are now allowed to add negative features and/or
change your own order.
Introduce SipSuit
I will now introduce a proposed solution to the problems with today’s raingear, and I want
your honest evaluation of what you see.
(Run presentation)19
We have made a whole piece raingear with 3 zippers, to enable you to put it on and off in
less than 15 seconds -‐ without even removing your shoes.
It’s fully waterproof, fully breathable, and it’s storable in a waterproof bag sewn into the
product. This makes it easy to handle when not in use -‐ for example on a rainy day at
university.
(Let them touch the fabric sample from Shanghai)
Question 4 -‐ What is your first initial response?
(Open discussion)
Question 5 -‐ If you look at your list of problems, can you write an S behind each of the
problems that this product solves?
Question 6 -‐ Do you want this product?
(Open discussion)
Question 6 -‐ Who is this product for? Who is the typical customer?
(Open discussion)
Question 8 -‐ Are there any other situations outside an urban environment where you could
19 See attachment 2 for the full presentation
76
see the benefit of such a product?
(Open discussion)
Question 9 -‐ With the product quality and features in mind, what is the first selling price
that pops into your mind? (Write down and do NOT tell the others)
Show your suggested price to the rest of the group.
With these different prices in mind, what is your estimated market potential?
(Open discussion)
Question 10 -‐ Would you buy this product online? If not, why?
(Open discussion)
Question 11 -‐ Let’s talk about the Aesthetics. Would you wear this rain protection in the
street?
(Open discussion)
Question 12 -‐ How do you compare the aesthetics of this product to regular rain gear?
(Open discussion)
Question 13 -‐ What do you feel about the packaging?
(Open discussion)
Question 14 – In what type of colors do you see this product? Sparkling neon or more
subtle and sophisticated?
Question 15 -‐ The last part of the interview was a game of associations. It was solely
done in order to get a perception on how the respondents compared the SipSuit brand in
comparison with traditional raingear.
Last part is a fun experiment with in-‐direct associations. Write down SipSuit and
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Traditional raingear on a piece of paper.
If they both were an animal, who would be what?
If they were two different cars?
If they were two companies?
If they were two different institutions?
If they were two different types of alcohol?
If they were a computer?
Rounding up and thank the respondents for their participation.
Table 1 – The Focus Group Interview Guide
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Attachment 2 -‐ The expert interview transcription You mentioned earlier this week that you had previous experience with the Lean Startup
approach, could you tell me in what extent you would characterize your own knowledge on
this movement?
Well, I know about the Lean Startup approach, like most of us, form the hype of it. I
bought the book, and read the first chapters, and then I’ve heard people talking about it
so I feel I have a good overview of what it is, but maybe not as much specific knowledge
about each detail. So far it seems to me like it is something we have been doing at CSE
for the last 4 years, so far from what I understand form it. All in all I would say that I
understand the “mindset of it”
It was interesting what you said about CSE applying a similar approach during the last 4
years, could you just elaborate in greater detail what you mean about that?
We have a simple philosophy. When you have an idea, on a general level, if you want to
find out if it is a good idea, we have been telling students over and over again that they
need to go and test it out in the real world and figure out how the world responds to
their concept. We call it “showcasing” things by showing the world you idea. And then it
might not turn out to be a good idea, but it might have some elements that we can use
further by taking the idea to the next step.
So, when these companies hit the street is it in form of a survey, or are they actually selling
the product?
You know that is something that we try to define in a very individual way. For the last 4
years I’ve been talking to over 1.000 ideas and the people behind them, and my function
is often to put them in contact with people from the excitsting industry, to go and test it.
These entrepreneurs may need some specific knowledge about a specific industry, so
when I ask my contacts if they have some minutes for some student entrepreneurs.
So in essence, this means that you tailor the process of how to validate the product/idea to
each single company?
Yes. And another way of showcasing, is to motivate people to do a survey. But we also
encourage the entrepreneurs to showcase the product by talking to actual customers. It
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may be people in your own network, or the CSE network. Not being afraid to tell people
about it, and they might get input on how to sell it. And they can also propose the people
to buy it at a special price, but if they at a later stage want to buy they will get it at a
higher price. Extraordinary terms for first sale, general terms later. This is how we push
our guys to go out in the world and try to sell, instead of hiding behind business plans,
and there’s allot of ways to hide instead of checking out the actual market. People will
know how to price this, and you can either do it by a survey, but also by talking to your
real customers. So if you talk to 10 customers, it is not to sell, but ore to find the right
marketprice trough experimentation.
Martin, I feel you were very right when you said earlier in the interview that you feel that
CSE have been doing this for the last year, because what you guys have been doing, is in
many ways the same as the literature suggest, they are only using different terms for the
concepts.
But when you have been guiding over 1.000 companies, have you found that there are
some limitations, by applying this method? In other words, is it some product or some
markets where this iterative way of thinking is not making sense?
I would say that in overall it is a good principle to showcase. It is probably more easy to
go and showcase if it is an open market, meaning an already excisting market with
excisting products that you want to do in a new way. It can be difficult to approach the
market with a new way of thinking or a complete new product that the market have not
seen before. That can be rather difficult. You may also have difficulties showcasing if you
are not able to access the market, if you do not have access to people that can buy it from
you afterwards. You have your idea, but not the technical terms necessary in order to
establish a good relation with the person your showcasing to, and if your not able to
establish confidence with your showcasing partner then it can be a problem. If you
suggest a showcase to a given customer, and it would kind of have influence on his
business, then he will need some kind of confidence that you will be doing good,
specifically if it is a “need to do” for him. If it is a problem that you do not succeed, he
will most likely not gamble his company by testing out your new idea. Because your new
in the business, and I’m scared and you may have influence on my customers. Come back
when you have proved the concept.
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So just to make it 100% clear, your now talking about selling B2B?
Yes, exactly. The showcases that have influence on the business he is running, let’s call
him the “showcase customer”, affects his business, he will not likely be part of the
experimentation loop. You might have been designed the showcase in a way that does
not show how the market “really” is, because your assumptions is wrong. So I try to give
the advice to potential startups that they should be highly accurate in their
understanding of the market. I also tell them to go into the kind of “nice to do” area,
because people will tend to be afraid of you if you’r in the “need to do” area. But in a
matter of which kind of business there are limitations to this showcase method, I would
say that if you need to have a highly technical understanding of the product, it may be
more difficult to do the showcase.
Exactly, so would you say that this showcase is a form of an actual prototype, or is it just an
illustration in form of a PowerPoint or similar?
Well, when I think of a showcase, then this is a prototype in the actual market. You can
off course have a mockup, but when I’m talking about a showcase then I’m talking about
going to the market and “do your thing for real”, so that can be like bringing your
mockup to your showcase customer, and ask the person if they would like to do that.
And he may say “yes, let us take this into action in the real world”, and take the
showcase from the “nice to do” to the “need to do”. I have some knowledge about some
very interesting business cases that might never get into work because of some highly
technical solutions. This was in the building industry, and if the showcase would fail, it
may result in people getting killed. Then obviously it is difficult for the showcase-‐
customer to accept the showcase product. Who would be responsible if it fails? And
because of this it has been higly difficult for this company to prove their conept and
technology. But at least, they found a way to do this. But this is another example where it
might be some limitations where this iteration loop might have it flaws.
If you find yourself in an area of “need to do”, it might be difficult to apply this
showcasing method. Then a solution can be to make a light version as a “nice to do” and
later extend the product to a “need to do”.
Very interesting. My impression is that you are highly connected throughout the startup
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community in Copenhagen, I’ve been seeing you everywhere (….) So would you say that this
showcasing practice being preached at CSE is a general for the whole startup scene. In
other words, in what extent do you believe the startup community apply this iterative way
of thinking?
I see that there are two, lets call it paradigms. And it’s funny that you use the word
preach, because it is kind of a new religion, or paradigm, because the existing paradigm
of “Doing the business plan”, many people still stick to this, but you can say that CSE
represents the new paradigm, saying that it may have worked eventually, but today you
need to go and test before, and it doesent make sense to make PREDICTIONS, or it might
make sense, but it maight also take you to a different conclusion.
So this is the two paradigms that I’ve encountered in the entrepreneurial ecosystem.
However, I also have my personal understanding, rather than saying that it is ONLY the
Business plan model or the prototyping that work, for some business it is actually really
important to do the Business plan. AND also what type of person you are yourself,
because some people need to have the full understanding before they are able to do
things and I feel I have come to an understanding of accepting that some people need to
have full overview from A-‐Z, while others, like myself, start acting and THEN building on
that by finding the next letter as I move along.
Also some INDUSTRIES will require a business plan, like in the Bioindustry will require
and need, because of their conservative business, will need to ta a more secure approach.
The funny thing is what I experienced when I was in the states a few years ago, where
they seemed to not use the concept of business plans, but however they love people
planning things. I believe they think much more in presentation, and it is highly built
into the way they talk. The business plan is EMBODIED in their language. They do not
have an explicitly written business plan, but they communicate it indirectly. I found that
highly interesting, and this seemed to work across the different disciplines.
Interesting, so you would say that by having the business plan embodied in their language,
they seem to know every detail by heart and taking it for granted?
Exactly, they go straight to the point. And I think that writing the business plan is very
OLD SCHOOL, and I feel it is a general problem with the educational system, and a
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TYPICAL way of thinking, because it is very easily applied to the way we teach and learn
at schools today and that is not good because I feel that the university suggestion is that
as soon as you have done your business plan, you are kind of done and you get your
grade. This is NOT what entrepreneurship is about, and I feel it gives the students a
disadvantage because it is not about WRITING a business plan, it is simply about
creating value, for people and coming up with new solutions.
Very interesting, could you please elaborate on this problem with an educational fixation
on the business plan?
I see a huge problem in general in the educational system by using this business plan in
such a great extent trough education, and actually we are trying to build a new way of
working with ideas, we call it the Pool of Ideas, where instead of working with ideas, we
have a new learning system that we want to apply in the educational system, or perhaps
in combination with the old paradigm. I still feel that fore some situations the business
plan still serves it purpose, while for others our more progressive way of thinking is
more interesting.
Exactly. So all in all my impression from what your saying is that one should be highly
flexible on these matters. Since entrepreneurship is included in every industry, it may be
hard to come up with a system that is covering 100% of the niches out there. Rather you
suggest to tailor the solution to each individual company
Yes, I feel if you both understand how the banks and VC’s understand the business plan,
because some of them still value it, and by understanding both worlds you are able to
navigate trough them, if you get my point.
I believe you have covered all my content from the interview guide, thanks’ allot for your
time Martin!
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Attachment 3 – The Virtual Prototypes used in the field study
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Attachment 4 -‐ Packaging
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