Lean Startup and the Business Model: Experimenting for Novelty and Impact

Lean Startup has been impacting how companies – small and large – innovate their business models. However, academic understanding of Lean Startup and the related  experimentation process is only emerging. Recent academic critique on Lean Startup highlights the inadequate guidance provided for hypotheses generation; limits related to experiential learning that can be generated from customer feedback; and the potential incremental nature of experimentation outcomes.

In this article, we aim to contribute a more positive perspective on the opportunities of Lean Startup. We highlight how it can enable continuous innovation and stakeholder engagement for novelty and impact. First, we argue that Lean Startup has not been conceived for ideation, but rather for iterative experimentation to reduce uncertainty, engage stakeholders, and promote collective learning. The figure below shows our interpretation based on Ries (2011) of where and how the Lean Start-up is positioned –  after entrepreneurs have formed their vision and initial business model idea(s). Second, taking a process perspective on experimentation, we suggest that novel business models can emerge during experimentation.

 

Lean startup experimentation

 

The full open access article can be found here.

 

Sources:

Bocken, N., & Snihur, Y. (2019). Lean Startup and the Business Model: Experimenting for Novelty and Impact. Long Range Planning, 101953.

Felin, T., Gambardella, A., Stern, S., & Zenger, T. (2019). Lean startup and the business model: Experimentation revisited. Long Range Planning, 101889.

Reis, E. (2011). The lean startup. New York: Crown Business

 

Developing Circular Business Model Innovation Tools

The circular economy is now seen as potential driver for sustainable development by business, academia, and policymakers. In such a future circular economy, new business models need to be developed that slow, close and narrow resource loops to address key resource and climate challenges. However, this is not easy and new tools and methods are necessary to support the transition and development of such new business models.

In the new collaborative paper with Lars Strupeit, Katie Whalen, and Julia Nußholz, we map the field of Circular Business Model Innovation (CBMI) tools. We find that there are many generic tools and approaches that might be used, such as the lean startup approach by Eric Ries, or the business model canvas by Osterwalder & Pigneur. Also there are various sustainability focused tools such as the value mapping tool. However, few specifically focus on CBMI, and the generic tools and approaches might ‘dilute’ the circularity or sustainability message. We classify the tools according those that focus more on Ideation and Design, Implementation and Testing, and Evaluating and Improving circular business models, building on the work on business model innovation by Frankenberger and colleagues, amongst others. Finally we develop a checklist that could support future ‘tool developers’ (Figure 1, below). This checklist might also be of interest to those developing sustainability tools, by replacing the first line with ‘The tool is purpose-made for sustainable innovation’.

Future work will involve collaborative development of CBMI tools and roll-out to help make circular business models more widespread.

Checklist for tool CBMI development

Figure 1. Checklist for CBMI tool development. Source: Bocken, Strupeit, Whalen, Nußholz (2019). 

 

Source:

Bocken, N., Strupeit, L., Whalen, K., Nußholz, J. 2019. A Review and Evaluation of Circular Business Model Innovation Tools. Sustainability, 11(8), 2210.  https://doi.org/10.3390/su11082210

 

 

 

Experimenting with a circular business model: Lessons from eight cases

From 2016 to 2017, we conducted action research with eight case studies at Delft University of Technology, in collaboration with a societal and environmental purpose-driven innovation consultancy firm, Innoboost, both based in the Netherlands. The objective of this collaborative project, ‘Kickstarting circular business experimentation’, was to help eight case companies transition to profitable circular business models through experimentation.

The case companies varied in terms of size and age and included:

  1. Fresh-r (decentralised ventilation system with heat recovery);
  2. Mud Jeans (leasing jeans);
  3. Bugaboo (strollers);
  4. Peerby (product sharing platform);
  5. Evides (drinking water & water services);
  6. Vereijken Hooijer (stables and nursing homes for pigs);
  7. Philips (electronic appliances for a healthy lifestyle); and
  8. Boska (accessories for cheese, also called cheesewares)

In the journal paper, we report on the process of experimentation as well of the role of experimentation in the sustainability transition of the companies:

Process: The case studies showed that there is a certain sequence in steps, but companies tend to go back-and-fourth between steps, for example, going back to the business purpose or redoing a value proposition experiment. Circular business experimentation tends to be an iterative process rather than a linear checklist type of approach.

Role of experimentation: The cases showed that experimentation could serve as a way to create internal and external traction for a sustainability transition. Tracking progress against sustainability goals was found to be an important part of the experimentation process in addition to the need to move from experiments to scaling up.

In the journal paper, we also develop a “Circular Business Experiment Cycle”, which shows a potential sequence of experiments, starting  with the business purpose and sustainable value proposition. In contrast to just ‘making money’, the business purpose for a sustainable business includes clear societal and environmental goals. A value proposition experiment then focuses on the customer viability of the product/service offering. Value delivery experiments focus on customer relationships, customer segments and channels. Other stakeholders, such as local community representatives (‘society’)  or environmental NGOs (‘environment’) can get involved in these experiments to test whether and how the business can create and capture wider societal and environmental value. Value creation and value capture experiments are about including stakeholders to operationalise the business model, and developing the business case for all stakeholders involved respectively. Finally, a field experiment can test all assumptions together including operational aspects.

The Circular Business Experiment Cycle includes “triple bottom line checks” (i.e., checks for sustainability performance, which can be done using something like the streamlined environmental value proposition approach)  in addition to deliberate learning after each experiment. After the field experiment, a more thorough LCA could be performed to assess the full environmental impact.

CBME cycle                                             Figure. Circular Business Experiment Cycle.                                                                      Developed in Bocken, Schuit and Kraaijenhagen (2018).

 

More information about this work can be found here.

 

Sources: