International Journal of Tourism & Hotel Business Management

(IJTHBM) (ISSN: 2641-6948) 2020

SciTech Central Inc., USA Vol. 2 (2)
250-264

WHAT IS LEAN STARTUP: A SOLUTION TO

STARTUP FAILURES OR NOT?
John M York1
Rady School of Management, Institute for the Global Entrepreneur, Jacobs School
of Engineering, The University of California, San Diego, San Diego, CA, USA

Received 17 September 2019; Accepted 03 October 2019; Published 05 April 2020

ABSTRACT

Lean Startup (LS) is a popular framework for efficiently developing entrepreneurial ideas.
It involves a problem-solving approach using a scientific methodology for developing businesses,
products and even business challenge solutions. It has garnered following in the startup community,
along with several major corporations (e.g., General Electric) and within the United States
government. This paper defines the LS methodology and its theoretical foundation. It examines
several essential activities around customer discovery, minimum viable product (MVP) business
model experimentation, validated learning and innovation accounting. LS involves two phases
(search and execution) involved with LS and ties in several canvases (business model canvas, lean
canvas and value proposition canvas) support LS practices.
LS fit some businesses well (e.g., web-based, tech, software and mobile spaces). Materials-
based businesses and those involving long development and lead times, investment, intellectual
property and regulatory constraints (e.g., biotech and pharmaceuticals) may not be as ideal. LS
does offer potential application to areas within the travel, hospitality, hotel and restaurant business
sectors. It offers a problem-solving approach that could be a strategy for organizations to approach
various challenges.
LS possess several limitations involving several of its core elements and their use:
customer discovery, experimentation, MVP and iteration/pivoting. Another relates to outcomes as
much of the LS literature is anecdotal. While some empiric studies exist, the LS area would benefit
from further research with structured studies to (1) define whether the methodology contributes to
meaningful business outcomes and (2) its role and that of other influencing factors on startup
success.

Keywords: Business Model Canvas, Customer Discovery, Entrepreneurial

Experimentation, Entrepreneurship, Lean Startup (Start-Up), Lean Canvas, Lean
Fit, Lean Limitations, Minimum Viable Product, Product/Market Fit, Startup
Performance Outcomes, Value Proposition Canvas.

INTRODUCTION

In the United States each year, entrepreneurs venture forth and start over
six hundred thousand new ventures (Balle, 2015). Unfortunately, half are still in
business within five years and one-third remains within ten years (Nazar, 2013;
SBAUA FAQ, 2012). Of these new businesses, investors engage in less than 1%
(Rao, 2013) and, of these firms, 75% will not survive (CB Insights, 2015; Deborah,

1
Correspondence to: John M York, Rady School of Management, Institute for the Global
Entrepreneur, Jacobs School of Engineering, University of California, San Diego, 9500 Gilman Dr, La
Jolla, CA 92093, USA, Tel: 949-489-5570; Fax: 949-203-6115; E-mail: mailto:[email protected]

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2012). When considering these statistics, it is incredible to think that one would
want to start a new venture, no less in the hospitality and travel industry space.
One of the problems with startups is how an entrepreneur approaches the
business. Starting a new venture involves a tremendous amount of uncertainty that
the startups needs to address. In particular, they fail to understand their
marketplaces, competition and customers, as many are product-focused rather than
market-focused. Interestingly, CB Insights (2017, 2018) identified, as part of a
post-mortem of 101 startups, that the lack of market need (seen in 42% of the
cases) was the primary reason for failure.
Ries (The Lean Startup: How Today´s Entrepreneurs Use Continuous
Innovation to Create Radically Successful Businesses) saw this problem in the first
two startups in which he worked (Rousch, 2011). He noticed that these companies,
similar to many other startups, failed to understand that in many ways, starting a
new business is similar to solving a problem. As a student of Steve Blank (The
Four Steps to the Epiphany and The Startup Owner’s Manual) at the University of
California, Berkeley, Ries drew upon Blank’s concepts of customer discovery in
his next startup IMVU (Ries 2011). Based on his experience using this concept
along with lean principals embodied in the Toyota Production Principal, he started
a blog that turned into a national best-selling book. His and Blank’s efforts led to a
tremendous following that embraced the concept of “The Lean Startup” (LS). Not
only have thousands of entrepreneurs used this methodology, but also the National
Science Foundation (NSF) Innovation Corps™ (I-Corps™) program, the United
States Military (“Hacking for Defense”, H4D), numerous universities and multiple
corporations (e.g., Dropbox, General Electric (GE), Intuit and Proctor and Gamble)
have embraced this approach (Blank & Dorf, 2013; H4D, 2019; Lashinsky, 2018;
National I-Corps™ grants, 2015; Nnakwe et al., 2018; VentureWell, 2015).
In order to help entrepreneurs in the hospitality and travel space, this
paper seeks to provide a review of the LS. It will examine its theoretical basis,
essential components and issues to consider.

DEFINING LS AND ITS FOUNDATIONS

Over this past decade, LS became a popular framework for efficiently

developing entrepreneurial ideas. It involves a problem-solving approach using a
scientific methodology for developing businesses, products and even solutions to
business challenges. The approach focuses on shortening the product development
cycle visa vie business-hypothesis-driven experimentation, iterative product
releases, validated learning and customer feedback (Everything explained, 2019;
Investopedia, 2015). LS draw on insights from the Toyota Production System’s
lean manufacturing principles and agile software development processes (Krafcik,
2015; Ohno, 1998; Investopedia, 2015).
Several academic theories support LS. These include creation, discovery,
dynamic capabilities, effectuation, bricolage, business model and customer
development (Alverez & Barney, 2007; Baker & Nelson, 2005; Blank, 2005;
Eisenman, 2012; Frederikson & Brem, 2017; Ghezzi, 2015, 2018; Ladd, 2016;
Rappa, 2001; Saravanthy, 2001; Shane & Venkataraman, 2000; Teece, 1997; Yang
et al., 2018). Frederikson and Brem (2017) examined the underlying theoretical
basis and identified evidence specific to the five essential pieces and graded data
with a subjective rating based on their evaluation of the quality and quantity of
supportive literature (Frederikson & Brem, 2017). These include: (1) user and

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customer involvement (very strong); (2) effectuation (strong); (3) iteration in new
product development (strong); (4) early prototyping for proof-of-business (MVP);
and (5) experimentation in new product development (Frederikson & Brem, 2017).

ESSENTIAL PIECES AND PHASES

Essential to LS are two phases (Figure 1) involving (1) search and (2)
execution. LS use several core pieces within these phases: (1) customer discovery;
(2) experimentation; (3) a minimum viable product (MVP); (4) validated learning;
and (5) innovative accounting.

Figure 1. Blank’s steps to lean startup.

Reprinted from York, J.M. (2018) Archives of Business Administration and Management: ABAM-
104

In the first phase, the startup focuses on searching for customer needs,
product/market fit and a repeatable sales model. The team starts with the first
essential part of LS, that of customer development, which concentrates on
understanding customer problems and needs- pains, gains and the job to do. Blank
introduced this concept, which is as important as product development (Blank,
2005; Blank, 2013). He emphasizes that discovery should start early in the process.
It involves the creation, testing and refinement of hypotheses or guesses through
direct conversations with customers by “getting out of the office or building” or
“GOOB” to get inside the customers head (Blank, 2013). With such data, the
startup team can build an MVP to validate the problem and identify viable
solutions, including a product, value proposition and business models. This process
should connect the customer needs with the product. In particular, it is to define a
value proposition, in which Figure 2 and Table 1 from Bain consulting highlight as
elements of value in the business-to-consumer space.

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Figure 2. Example of value sets (Bain triangle).

Reprinted from York, J.M. (2018). Archives of Business Administration and Management: ABAM-
104
Table 1. Example of value sets by industry (Bain triangle).
Auto Consumer Credit Discount Food and TV Service
Apparel Retail Brokerage Grocery Smartphones
Insurance Banking Cards Retail Beverages Providers

Provides Avoids Avoids Design/

Avoids Hassles Heirloom Quality Design/Aesthetics Quality Connects
Access Hassles Hassles Aesthetics

Makes Reduces Reduces Fun/

Quality Design/Aesthetics Heirloom Heirloom Quality Organizes
Money Cost Cost Entertainment

Reduces Provides Provides Provides Rewards Rewards

Quality Sensory Appeal Quality Quality
Anxiety Access Access Access Me Me

Reduces Saves Sensory Reduces

Saves Time Quality Quality Quality Therapeutic Value Reduces Cost
Cost Time Appeal Effort

Reduces Rewards
Variety Variety Variety Variety Variety Variety Variety Variety
Anxiety Me

Reprinted from York, J.M. (2018). Archives of Business Administration and Management: ABAM-
104

Integral to LS is the process of experimentation. Once the startup team has

completed discovery, it can then focus customer validation based on an MVP and
building a replicable sales model visa vie experimentation. Heavy use of
effectuation-logic is evident, with a clear and explicit emphasis on experimentation.
Ries characterizes this part as the “build-measure-learn” loop in which the
entrepreneur sets up a hypothesis (or guess), an experiment (e.g., A/B, landing
page, Kickstarter campaign) to test it, and a threshold metric for success or failure.
The idea of this loop is that the startup begins with an MVP and gets it into the
hands of customers quickly for feedback that will help to either reject or validate
assumptions and to gauge traction. The purpose of this cycle is to minimize the
time through the feedback loop-build, measure and learn faster. Essential is the
MVP, a most minimal product or solution (e.g., cupcake as a sample for a wedding
cake) to address the customer need.
In testing hypotheses, innovation accounting and metrics are essential. LS

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promote the metric-based evaluation technique to help validate learning. Startups

can test their hypotheses in a quantitative way, such as in evaluating click-through
rates, sign-ups and customer acquisition costs via a minimal landing page. Ries
cautions against “vanity metrics” (Ries, 2011; Mueller & Thoring, 2013). He points
to the use of “innovation accounting” to measure the progress while validating
learning and defines actionable metrics linked to a specific business model. In
testing hypothesis, Ries differentiates among three “engines of growth” (viral,
sticky, and paid) and offers metrics for each of them. He also highlights the value
of A/B testing, something that frequently appears in the evaluation of software
programs (Mueller & Thoring, 2013).
According to Croll and Yoskovitz (2013) and Rompho (2018), these metrics
can vary based on the type of startup (e.g., e-commerce, software-as-a-service,
media site, user-generated content, mobile app, two-sided marketplaces) and the
stage of its development (e.g., empathy, stickiness, virality, revenue, scalable). It is
in this experimentation phase in which the entrepreneur validate one’s learnings.
Customer interviews and hypothesis testing to drive learning to provide qualitative
data and quantitative data that the startup can make an informed decision.
Based on what the entrepreneur learns, one can iterate, pivot, or continue
forth with the idea since the experiment validated the hypothesis. It is essential to
recognize that the iteration and pivot are not the same actions. Iteration involves
small changes in the product or business model based on learning from interviews
and experiments conducted. Pivot involves moving off one’s initial premises and
MVPs to alternative ideas. This action involves significant and structured changes
from the initial hypothesis and MVP to new ones concerning product and business
model.
Throughout this process, the goal is about learning from interviews,
research and testing of ideas. This effort aids the startup team to efficiently make
“go forward” or “fail fast” decisions. Ries points out that central to the learning
process is his “Build-Measure-Learn” feedback loop (Figure 3), similar to what
occurs in AGILE product development (Ries, 2011). If the idea is to fail, then the
startup should “fail fast” to minimize resources and time wasted and to maximize
learning.

Figure 3. Ries’s BUILD-MEASURE-LEARN LOOP.

Reprinted from York, J.M. (2018). Archives of Business Administration and Management: ABAM-
104

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By talking to customers and testing, the startup can identify where its
product and business model have achieved product/market fit (P/MF) or traction.
Hence, the ultimate end of this learning process is P/MF. Netscape founder and
venture capitalist, Marc Andreessen, describes P/MF as “being in a good market
with a product that can satisfy that space” or that “the startup has built something
people want” (Andreessen, 2015). Blank refines this definition as to whether the
startup identified a repeatable and scalable sales model before the venture can
proceed to the next phase and scale up the business (Blank & Dorf, 2012).
The second phase involves execution. This part involves customer creation
and company scaling. The startup’s focus changes from learning to scaling. The
entrepreneur concentrates on creating customers, driving demand and building the
company. If the lean process has been successful, then scaling should occur more
efficiently and effectively. Nonetheless, the startup will continue to talk to
customers, test hypotheses and run experiments to refine the product and business
model. Sean Ellis another leading entrepreneur (Dropbox) and author, characterizes
this effort as hacking for growth (Ellis & Brown, 2017).

THE ROLE OF CANVASES

Several canvases, or one-page frameworks for recording hypotheses and

changes, provide the back-end to support LS activities as the front end. Three are
relevant to LS: (1) the value proposition canvas (VPC, Figure 4); (2) the business
model canvas (BMC, Figure 5); and (3) the lean canvas (Figure 6).

Figure 4. Osterwalder’s and Pigneur’s value proposition canvas.

Reprinted from York, J.M. (2018). Archives of Business Administration and Management: ABAM-
104

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Figure 5. Osterwalder’s and Pigneur’s business model canvas broken into VALUE (right) and
EFFICIENCY (left) segments.
Reprinted from York, J.M. (2018). Archives of Business Administration and Management: ABAM-
104

Figure 6. Maurya’s lean canvas.

Adapted from Maurya, A. (2012). Running lean: Iterate from plan A to a plan that works.
Sebastopol, CA: O'Reilly

Osterwalder and Pigneur (2010, 2014) developed both the VPC (Value
Proposition Design) and the BMC (Business Model Generation) and have taught
entrepreneurs all over the world on their use. The VPC involves two components,

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customer on the right and product/service on the left. With this canvas, the startup
can track for each of its essential customer segments the critical pains, gains and
“jobs-to-do” on the right side (the circle). The entrepreneur uses this tool during
customer discovery to focus on the critical customer issues to develop out and then
test the hypotheses developed in this section. Once one has gained some insights,
the entrepreneur then can sketch out on the left side (the box) the pain relievers,
gain creators and essential elements of the product or service on the left side. In
essence, one can map the customer information and needs he/she has gathered
through interviews. These components help to share the most minimal and critical
attributes that the entrepreneur can more clearly build an MVP.
The BMC consists of nine pieces that define the business model and would
support the value proposition. The right-hand segment, the “value side,” focuses on
value creation and extraction. It includes: (1) customer segments; (2) value
proposition; (3) customer relationships; (4) channels (distribution); and (5) revenue
streams (models). This part focuses on the pieces needed to create and extract
value. Essential is to connect the customer segments with the value proposition,
which should closely align with what the entrepreneur does with the VPC.
Further, the entrepreneur needs to consider how to create customer
relationships to acquire (and keep) them. This segment involves utilizing tactics
and tying them into the marketing funnel of “get,” “keep,” and “grow.” The “get”
piece is essential as it outlines the customer journey from awareness, to interest, to
decision, to finally acquisition. It is in this part that the entrepreneur needs to tie in
various marketing tactics to guide the customer along. The channels (as in
distribution, not communication channels) piece is critical as it defines how the
entrepreneur is going to get the product to the customer, either directly or via
intermediaries (e.g., wholesalers, retailers) and whether it involves a physical or
digital route. Finally, the revenue model accounts for how the entrepreneur will
capture value, which can be via direct purchase, subscriptions, two-sided or
multiple other options. Overall, it supports the value side of the canvas and, most
importantly, the value and revenue model must be sustainable enough to cover a
firm’s expenses.
The left-hand segment, the “efficiency” or “operational” side focuses on the
operational side of the venture to deliver on the value proposition. It includes: (1)
key resources; (2) key activities; (3) key partners; and (4) cost structure. Key
resources involve people, physical (e.g., plant, equipment), intellectual property
and capital. Key activities can vary depending on the type of firm and whether it
can either perform them directly or outsource to partners. Such activities include
manufacturing, marketing/sales, consulting, customer service, accounting and legal,
among others. Essential is that the entrepreneurs measure them to assess
performance. Key partners include one’s supply chain, but also strategic alliances,
joint ventures and coopetition (e.g., trade organization). Finally, there is the cost
structure, which considers the other pieces within the operational side. The cost
structure usually accounts for the use of such resources and activities via fixed and
variable costs.
The Lean Canvas is a take on the business model canvas Ash Maurya’s
Maurya (Running Lean: Iterate from Plan A to A Plan That Works) (2012). He
outlined this one-page template to help entrepreneurs deconstruct their ideas into its
essential assumptions that one would develop further into a business plan (Mullen,
2016). Maurya breaks the canvas into two sides, product (left side) and market
(right side). The product side involves the following parts: (1) customer

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pain/problem (existing alternatives); (2) solution including technical feasibility; (3)

key metrics; and (4) cost structure. The market side involves: (1) unique value
proposition; (2) unfair advantage; (3) channels or the ease of reach (path to
customers); (4) revenue streams; and (5) customer segments including market size
(early adopter). As one can see, the lean canvas utilizes parts of the BMC but takes
on new pieces such as the problem, the solution, key metrics and unfair advantage.
By doing so, it allows for consideration of the product and differentiation from the
external market. Furthermore, the channels piece considers both elements of
product distribution as well as customer acquisition. Maurya weighs the respective
parts from highest to lowest as: (1) customer pain/problem; (2) ease of reach
(channels); (3) price/gross margin (revenue streams/cost structure; (4) market size
(customer segments; and (5) technical feasibility.

BUSINESS FIT

One question that exists is whether all firms can use the LS methodology.
Considering its roots, LS might be limited to software-driven ventures (e.g., Could-
Fire, Dropbox and IMVU) that address a business-to-consumer market (Ries,
2011). Croll and Yoskovich (2013) highlight six digital models (e.g., e-commerce,
the two-sided marketplace, software as a service, free mobile app, media, user-
generated content) that use LS practices, particularly innovation accounting. In fact,
scholars have pointed out that specific practices such as experimentation, use of an
MVP and iterating/pivoting) appear most applicable to software development
(Frederickson & Brem, 2017).
Interestingly, several corporations use LS in areas beyond its software roots.
Ries highlights several notable firms (startups and established) in his book (Ries
2011). Examples include General Electric (GE), Hewlett Packard, Intuit, Paypal,
Proctor & Gamble, Telefonica, Toyota and Zappos (Frederikson & Brem, 2017;
Lashinsky, 2018; Ries, 2011).
The GE FastWorks offers an excellent example (2011). As a result, GE
experienced tremendous success in its gas turbine and appliance divisions
(Lashinsky, 2018; Power 2014). The gas turbine division saw its product
development cycle run two-years faster and 40% less expensive, along the division
seeing $2 billion in revenues. The appliance division realized product development
at half the cost and twice the rate, while it doubled its sales growth rate.
However, for some businesses, such as the material technologies space (e.g.
chemical, materials, semiconductor, silicon chips), LS is not ideal. Harms et al.
(2015) argue that materials and science-based ventures do not fit well. This
rationale is because such firms: (1) operate under a high degree of technological
uncertainty to resolve; (2) often serve business markets; (3) closely link product
and process innovation, which make for challenges for an MVP and lead to
intellectual property issues (e.g., patents to address) (Harms et al., 2015).
An example of such a firm exists in the life sciences space. Biotech and
pharmaceutical continually have to manage technological uncertainties. These
firms require a long time to market (approximately ten years) and significant
investment ($2.5 billion) (Mehta, 2011; Vedd et al., 2019). They also need to
reconcile with regulators and other value chain partners who can influence the
commercialization, development and profitabilities.
As to the travel, hospitality, hotel and restaurant business sectors, LS may
have areas that do apply and not. Examples of business areas where LS may apply
well include the online, mobile and software spaces. It is in these areas that a firm
can roll out and test an MVP or its business model. For example, Airbnb did such
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with some of its growth marketing practices in using pictures with A/B tests and
saw dramatic results (Croll & Yoskovitz, 2013). Hospitality or touring services
might be another space where LS might work well. Even food startups might
benefit from LS practices. One published example involved a case study involving
the use of LS and the BMC in the validation of the feasibility of a tour bus
company in Indonesia (Dewobroto & Siagian, 2015). Another example involves
The Brown Butter Cookie company of Cayucos, California, which used an MVP to
test and gain traction (via product demand and sales) with their specialty cookies at
the Cass House (Personal experience).
On the other hand, LS may or may not fit with setting up a large hotel or
restaurant. Significant investment, development time and regulatory considerations
involved with launching such ventures might limit the use of LS. Business plans
and cases may make better sense with these types of businesses.
However, firms can use LS can as a tool for problem-solving rather than for
product development. Many successful startups are just finding and solving of
problems that create new products and business. Hence, LS, as with lean, could be
such a methodology to address organizational problems. In many ways, consulting
firms, such as McKinsey, use the customer discovery processes and interviews to
uncover problems to identify solutions and then to experiment with MVPs or
minimum viable solutions (MVS) in test cases (Friga, 2009). The GE FastWorks
approach might exemplify such an application since the conglomerate rolled it out
throughout the corporation (Lashinsky, 2018; Power, 2014). Another example of an
organization using LS methods is the United States Military (H4D, 2019). In recent
years, it has rolled out a variation of LS in its “hacking for defense” program where
it employs discovery, experimentation and use of a Mission Model Canvases
(MMC). This canvas represents a variation of the BMC with changes in the value
or right side of the canvas to reflect beneficiaries (instead of customers), buy-in (for
customer relations and acquisition), deployment (rather than channels) and mission
achievement (in place of revenue model). Many firms can also embrace such a
model to address corporate problems and missions to accomplish.

LIMITATIONS

No discussion on LS would not be complete without touching on some of

the limitations of the methodology or its use in practice. This paper has already
identified business verticals to which the approach would fit. There are several
other areas that consultants and scholars have identified in both the peer review and
non-peer literature. These include several practices and the MVP. The practices
include that of: (1) customer discovery; (2) experimentation; and (3) iteration.
Furthermore, there is a need for stronger empirical outcomes data.
Concerning the MVP, several consultants and scholars have identified
challenges in its use. The problem lies in defining what the MVP is, launching it
too early, fear of launching an inferior product and launching it in markets with lots
of competition or customers not used to be innovators or early adopters (Finernan,
2013; Ng, 2015; Rao, 2015). Furthermore, there are concerns of some technical
challenges in software development that might devalue the product, lead to waste
or limit innovation (Warberg and Thorup, 2015). Scholars have pointed out that it
might limit the solution space (Frederikson & Brem 2017).
In examining several of the core practices, customer discovery is quite
concerning. Consultants have highlighted issues of not conducting an interview

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properly (Ng, 2015). Scholars have highlighted multiple biases involved with the
interview and the processing of the data (Chen et al., 2015; York & Danes, 2014).
Furthermore, others have pointed out that customers might also have their own
cognitive biases due to different expectations and frame-of-reference (Croll &
Yoskovitz, 2013). Finally, there are issues with getting adequate customer samples
for interviewing and perhaps not genuinely uncovering big ideas due to
interviewing skills and conduct (Nirwan & Dhewanto (2014); Gustafsson &
Qvillberg, 2014).
Experimentation is another that is of concern. Many entrepreneurs do not
know what goes into the development of an experiment. Consultants have seen
problems in the creation of experiments as related to hypotheses developed, design,
sample size, statistics and entrepreneur bias (Ng, 2015; Schaffer, 2014). Others
have noted that some environments are too complex and chaotic for entrepreneurs
to form and test meaningful hypotheses and that coming up with perfect
experiments provides a great excuse not to take action (Vlaskovits 2018). Others
observed entrepreneurs experiencing challenges in creating and validating the
problem and then the solution (Nirwan & Dhewanto, 2014). Finally, some have
noticed that experiments only provide a “pinhole” effect due to a limited audience
of very early adopters that may not be representative (Heitmann, 2014).
Iteration and pivoting do also have limits. Some have indicated concern
about the lack of learning and change (Heitmann 2014). Several investigators have
noticed that some entrepreneurs might have difficulty with pivoting due to lack of a
significant problem (Gustafsson and Qvillberg, 2012; Nirwan & Dhewanto 2014).
Another noticed that some entrepreneurs, despite their knowledge of LS, fail to
pivot their business models (Lliac et al., 2012). Others highlight that LS might
produce “false negatives,” translating the rejecting of good ideas without learning
from the data because the methods did not provide clear rules for defining go/no
go, success (P/MF), stopping testing, and prematurely scaling (Ng, 2015; Ladd,
2015). Finally, there is getting the whole team on the same page related to learnings
and pivots (Ng, 2015).
The final limitation concerning LS relates to outcome data. Much of the LS
literature is anecdotal. Several books that tout LS (Blank, 2007; Croll & Yoskovitz,
2013; Maurya, 2012; Ries, 2011) tie in stories and examples to illustrate the use of
LS and its success. Scholars and VentureWell have reported the Innovation
CORPS™ experience, which used LS, with up to 600 startups and $210 million in
follow on funding (Nnakwe et al., 2018; VentureWell, 2019). The Startup Genome
project surveyed over 650 web startups and found that founders who learn and
pivot a few times experience more successful business outcomes than those who do
not (Marmer et al., 2011). However, some academics do regard these experiences,
along with the other case reports or examples in the literature, as anecdotal
evidence (Frederikson & Brem 2017).
There appear to be a limited number of empiric investigations that examine
performance outcomes with LS or LS-like practices (e.g. adaptation). Many of the
so-called empiric studies involve case studies or surveys, none of which published
in a significant entrepreneurship journal. However, a few interesting empiric
studies offered useful insights concerning performance outcomes, though each
study possessed limitations (Andries & Debackere, 2007; Ladd, 2015; Ghezzi et al.,
2015; Ladd, 2015; Nilsen & Ramm, 2015). Work before the emergence of LS
showed that adaptation might significantly influence both startup and within-firm
survival (Andriew & Debackere, 2007). Cleantech accelerator data revealed that
testing and customer discovery might (or not) make a difference in a pitch
competition performance, depending on how entrepreneurs use them (Ladd, 2015).
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LS in the mobile space may lead to shorter times for the development of products,
acquisition of first customers and firm organization than a business plan (Ghezzi et
al., 2015). These differences in this study were not significant due to small sample
numbers (n=4). Finally, LS use does not necessarily correlate with success (Nilsen
& Ramm, 2015).

CONCLUSION

LS has garnered quite a following in the startup community, along with

several major corporations and United States government departments. This
discussion defined the problem of business failures and posed the question of
whether LS was a potential solution. Considering the failure rate of startups, even
with those who receive funding, LS has provided a more structured framework to
address market and customer uncertainties. This paper defined the methodology
and its theoretical foundation. It examines several essential activities around
customer discovery, MVP and business model experimentation and validated
learning. It also discussed the two phases involved with LS and customer
development: search and execution. Furthermore, it has tied in several essential
canvases that serve as a backend to support LS practices and to define (and test)
appropriate value proposition(s), MVP and business models.
LS appears to best suit businesses where the entrepreneur can experiment,
iterate and pivot with ease. Applications-based business sections, such as the web-
based, tech, software, and mobile spaces, seem to be the ideal areas to use LS.
Additionally, service businesses may be able to use LS effectively as well.
Materials-based businesses and those involving long development and lead times,
investment, intellectual property and regulatory constraints (e.g. biotech and
pharmaceuticals) may not be as ideal. However, the effectiveness of GE with its
FastWorks program represents a notable success example. LS do offer a potential
application to areas within the travel, hospitality, hotel and restaurant business
sectors. Those that fit within the web, tech and service space might find LS to be an
effective method for identifying customers, their needs and the testing of MVPs
and business models. In contrast, those that require more substantial investment and
development may not find LS as the ideal approach. However, readers should note
that LS offers a problem-solving approach that the United States Military is using
and could be a strategy for organizations to approach various challenges.
LS does possess several limitations, of which some are inherent to the
methodology and others that relate to its implementation. In addition to the
business fit area, the most notable include issues with LS and the implementation
of several of its core elements. Customer discovery has issues with the conduct and
implementation of interviews, the gathering of adequate interview samples and
interview (and interpretation) bias. Experimentation has issues with hypothesis
development, design of experiments, adequate samples for statistical significant,
interpretation of data. The MVP has multiple issues surrounding its definition, how
entrepreneurs should use it in testing and where it may be appropriate to use or not.
Iterating and pivoting have considerations concerning entrepreneurs understanding
the difference between the two and implementing them because the team is not in
agreement and the startup have not identified a real big issue with the customer.
The final area relates to outcomes. Much of the LS literature is anecdotal. A
few empiric studies do exist but are limited in their design and findings. The LS
area would benefit from further empiric research with structured studies to: (1)

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define whether LS contributes to meaningful business outcomes (e.g., customer

acquisition, financial independence, funding, growth, positive cash flow for 6
months, revenue, survival, time to first customer); and (2) the role of LS and other
influencing factors on startup success.

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