lean start-up principles: exploring transferability to the...
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LEAN START-UP PRINCIPLES:
EXPLORING TRANSFERABILITY TO THE SOUTH AFRICAN CONTEXT
A Research Report
presented to
The Graduate School of Business
University of Cape Town
In partial fulfilment
of the requirements for the
Masters of Business Administration Degree
by
Waldo Noordermeer
December 2013
Supervised by: Trevor Williams
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PLAGIARISM DECLARATION
I know that plagiarism is wrong. Plagiarism is to use another’s work and pretend that it is
one’s own.
I have used a recognized convention for citation and referencing. Each significant
contribution and quotation from the works of other people has been attributed, cited and
referenced.
I certify that this submission is my own work.
I have not allowed and will not allow anyone to copy this essay with the intention of passing
it off as his or her own work.
Waldo Noordermeer
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ABSTRACT
This thesis focuses on a qualitative exploratory study of the constructs of lean start-ups, and the
transferability of the lean start-up principles to the South African context.
To this end, the study firstly reviews literature on the fields of study related to lean start-up ventures
and lean start-up principles. Secondly, it explores the current business practices of South African
entrepreneurs. The researcher encouraged the entrepreneurs to respond with accounts which were
strictly based on current or past practices, without ‘leading’ the respondents with any lean start-up
concepts or theory. Lastly, by commenting on the divergent and convergent aspects of the theoretical
lean start-up principles and the observed South African practices, the researcher concludes with
comments on the level of transferability of the lean start-up principles to the South African
practitioner.
Key Words:
Start-up, Entrepreneur, Innovation, Change, Strategy, Lean start-up, product development
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Table of Contents
PLAGIARISM DECLARATION ............................................................................................... i
ABSTRACT ............................................................................................................................... ii
Key Words: ................................................................................................................................ ii
Acknowledgements .................................................................................................................. vii
Research Title ............................................................................................................................ 1
SECTION 1: INTRODUCTION ............................................................................................... 1
1.1 Purpose of the Study ........................................................................................................ 1
1.2 Context of the Study ........................................................................................................ 1
1.3 Research Problem Statement ........................................................................................... 4
1.4 Significance of the Study ................................................................................................. 5
1.5 Limitations of the Study................................................................................................... 5
1.6 Assumptions ..................................................................................................................... 6
SECTION 2: LITERATURE REVIEW .................................................................................... 6
2.1 Introduction ...................................................................................................................... 6
2.2 Background Discussion ................................................................................................... 7
2.2.1 Capabilities of the Firm ............................................................................................ 7
2.2.2 Start-up Firms and Complexity ............................................................................... 10
Table 1: Decision Making Models based on the Cynefin Model .................................... 13
2.2.3 Start-up Firms and Dominant Design Theory ......................................................... 13
2.2.4 Start-up Firms and Innovation ................................................................................ 15
2.2.5 Start-up Firms and Strategy .................................................................................... 18
2.2.6 Start-up Firms and Growth Orientation .................................................................. 19
2.3 Literature Relevance, Discussion and Reflection .......................................................... 21
SECTION 3: RESEARCH METHODOLOGY....................................................................... 24
3.1 Research Approach ........................................................................................................ 24
3.1.1 Advantages of Qualitative Research ....................................................................... 25
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3.1.2 Disadvantages of Qualitative Research .................................................................. 25
3.2 Research Design............................................................................................................. 25
3.2.1 The Scope of the Study ........................................................................................... 25
3.2.2 Data Generation ...................................................................................................... 26
3.3 Population and Sampling ............................................................................................... 27
3.3.1 Population ............................................................................................................... 27
3.3.2 Sampling ................................................................................................................. 27
3.4 The Research Instrument ............................................................................................... 27
3.5 Data Collection .............................................................................................................. 28
3.5.1 Data Gathering Sequence ........................................................................................ 28
3.6 Data Analysis Techniques .............................................................................................. 29
3.7 Limitations of the Analysis ............................................................................................ 29
3.8 Validity and Reliability .................................................................................................. 29
3.8.1 Validity ................................................................................................................... 29
Table 2: Validity and Reliability ...................................................................................... 30
3.8.2 Reliability ................................................................................................................ 30
3.9 Informed Consent and Research Ethics ......................................................................... 31
SECTION 4: RESEARCH PLAN ........................................................................................... 32
Table 3: Research Plan..................................................................................................... 32
SECTION 5: RESEARCH FINDINGS ................................................................................... 33
Table 4: Emerging Codes..................................................................................................... 33
5.1 Community Focused ...................................................................................................... 33
5.1.1 Strong Customer Relations ..................................................................................... 34
5.1.2 Meaningful Customer Feedback ............................................................................. 34
5.1.3 Collaborative Product Development ....................................................................... 35
5.1.4 Building Partnership ............................................................................................... 35
5.2 Start-up Strategy ............................................................................................................ 36
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5.2.1 Growth Orientation ................................................................................................. 36
5.2.2 Planning .................................................................................................................. 37
5.2.3 Clarity and Focus .................................................................................................... 37
5.2.4 Scaling..................................................................................................................... 38
5.3 Learning Approach ........................................................................................................ 38
5.3.1 Past Mistakes .......................................................................................................... 38
5.3.2 Lack of Initial Business Knowledge ....................................................................... 39
5.3.3 Continuous Learning ............................................................................................... 39
5.4 Attitude towards Change ................................................................................................ 40
5.4.1 Adaptability............................................................................................................. 40
5.4.2 Innovative Ability ................................................................................................... 41
5.4.3 Revision of Goals Period ........................................................................................ 41
5.4.4 Speed of Change ..................................................................................................... 42
5.5 Characteristics of the South African Entrepreneur ........................................................ 42
5.5.1 Driven by Passion ................................................................................................... 43
5.5.2 Time Constraints ..................................................................................................... 43
5.5.3 Inherent Optimism .................................................................................................. 43
5.5.4 Past Experience and Current Skillset ...................................................................... 44
5.6 Applied Lean Practices .................................................................................................. 44
5.6.1 Design Constraints .................................................................................................. 45
5.6.2 Financial Constraints .............................................................................................. 45
5.6.3 Human Resource Constraints .................................................................................. 45
SECTION 6: ANALYSIS AND DISCUSSION...................................................................... 46
SECTION 7: RESEARCH CONCLUSIONS .......................................................................... 51
SECTION 8: FURTHER RESEARCH RECOMMENDATIONS .......................................... 53
SECTION 9: IMPLICATIONS FOR ENTREPRENEURS IN SOUTH AFRICA ................. 54
REFERENCES ........................................................................................................................ 56
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APPENDICES ......................................................................................................................... 65
Appendix A: Differences between lean and traditional start-ups .................................... 65
Appendix B: The Research Instrument ............................................................................ 66
Appendix C: Consistency Matrix..................................................................................... 67
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Acknowledgements
Foremost, I would like to express my sincere gratitude to my supervisor Trevor Williams for his
support, wisdom and guidance during the research process. Working with him has been my privilege
and pleasure.
A special thanks to Mary Lister for assistance in the library. Without her friendly guidance and words
of encouragement this institution would have been a lesser place.
I also want to acknowledge Heidi le Sueur and Kate Hunter for giving me direction during the early
stages of this project.
Lastly, I thank all my fellow students for the shared memories during 2013. In particular, I extend a
word of gratitude to Johnny Appleseed my seminar room comrade and confidant.
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Research Title
Lean start-up principles: Exploring transferability to the South African Context
SECTION 1: INTRODUCTION
1.1 Purpose of the Study
This is an exploratory research report that aims to understand the level of transferability of
the lean start-up principles to the South African entrepreneur. The incentive to determine the
level of transferability of these principles to the South African entrepreneur lies in: (1) the
benefits that lean start-up principles offer entrepreneurs, especially in resource-stricken
environments, (2) the high failure rates of South African start-up ventures and (3) the
simplicity of teaching and applying the lean start-up principles (Ries, 2011). Business
schools around the world have started teaching the lean start-up methodology (Ries, 2011). If
the lean start-up principles proved to be transferable to the South African entrepreneurs, then
there is a strong argument for South African education institutions to adjust their syllabus
accordingly.
1.2 Context of the Study
Start-up
Based on the work of Blank (2006), Ries (2011), argued that “A startup is a human institution
designed to create a new product or service under conditions of extreme uncertainty” (Ries,
2011, pp. 27).
Lean
With the turn of the new century a group of scholars (Ries, 2011; Furr and Ahlstrom, 2011;
Blank 2006) built on existing entrepreneurship literature and established what they claimed
was new methodology called ‘lean start-ups’. Ries studied the lean manufacturing ideas,
originating in the Toyota Production System in Japan, and started applying them to his
entrepreneurial experiments. From these experiments, Ries formulated a set of principles that
addresses some of the needs of start-up ventures. Ries (2011) believed customer
development should happen faster so he added agile practices to the customer development
process and called it ‘lean start-ups’. There are a number of characteristics that define lean
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start-ups. For a summary of the key differences between lean and traditional start-ups refer to
Appendix A. For more background information, please refer to Dennis (2006) in the
references section for further reading on the topic of lean.
Agile
Agile development is a method used, particularly in software development, to increase
productivity in projects by increasing the speed of iterations within the product development
processes (Ries, 2011).
Build-Measure-Learn Feedback Loop
In this study, the concept of iterations, used in the new product development process, will be
based on the Build-Measure-Learn feedback loop illustrated in figure 1. According to Ries,
“The fundamental activity of a startup is to turn ideas into products, measure how customers
respond, and then learn whether to pivot or persevere. To pivot is to change strategy by
testing a new hypothesis of what the customer or market wants. All successful startup
processes should be geared to accelerate that feedback loop (Ries, 2011, p.18).”
Figure 1: The Build-Measure-Learn Feedback Loop. Source: Adapted from Ries (2011)
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Lean start-up Principles
The foremost principles emerging from current lean start-up literature (Blank, 2006; Ries,
2011; Furr and Ahlstrom, 2011) are summarized below.
PRINCIPLE 1: Get out of the building
To execute step one and two of the build-measure-learn feedback loop, entrepreneurs need to
involve customers. Owing to the levels of complexity and uncertainty, and the nature of
innovation associated with creating a start-up business, intuition and theory can get you only
so far (Ries 2011). Knowledge about the true needs of the customers is limited at the start of
the new product development process. During the start-up creation process, entrepreneurs
need to: interact with the customer as soon as possible; leave the guess work behind; and get
to know what is important for the customer (Ries, 2011).
PRINCIPLE 2: Minimum Viable Product also Service
Entrepreneurs need to offer the customer a prototype called the minimum viable product, in
order to get valuable feedback from customer interaction. “The MVP is that version of the
product or service that enables a full turn of the Build-Measure-Learn loop with a minimum
amount of effort and the least amount of development time (Ries, 2011, p.77).” Often the
best feedback on new products happens when customers comment on the features and
benefits of products. The features in the early versions of products could be reduced to
include only the most important aspects that clearly show how the needs of the customer will
be solved (Furr and Ahlstrom, 2011).
PRINCIPLE 3: Pivoting
The first two lean start-up principles facilitate continuous learning, as the entrepreneur
validates both the customer’s needs and the developing solution to those needs. When
feedback from the customer shows that the strategy proved to be incorrect, the entrepreneur
needs to pivot the strategy by starting a new iteration with an improved proposed solution.
Ries (2011, p. 149) defines a pivot as a “course correction designed to test a new fundamental
hypothesis about the product, strategy, and engine of growth.”
PRINCIPLE 4: Iterate Rapidly
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To iterate, in the context of the Build-Measure-Learn feedback loop, means to complete a full
circuit from an initial idea to an improved idea. Start-ups should increase the speed with
which they iterate through the Build-Measure-Learn feedback loop. The benefits of fast
iterations are that strategy could be proved wrong fast and cheaply, in order to move on and
test a new hypothesis. The iterations through the feedback loop, in the new product
development process, produce “continuous innovation” as new features are applied to solve
evolving customer needs (Ries, 2011, p. 14). Entrepreneurs can learn from their mistakes
through iterative experiments (Harper, 1999). Entrepreneurs can manage inherent uncertainty
more effectively (Sull, 2004) by following Harper’s (1999) three-step decision-making
process: (1) formulate a working hypothesis based on specified assumptions, (2) acquire the
resources needed to test the assumptions without over-spending (Sull, 2004) and (3) design
and run experiments in the market. These assumptions concerning strategy can be tested in a
sequence of repeated iterations (Ries, 2011).
This study will focus particularly on the first two phases of the lean start-up methodology
where the entrepreneur is looking to identify valid customer needs and valid solutions to
those needs. During primary data collection in this research, the constructs of the lean start-
up principles will be tested during interviews with practitioners, entrepreneurs and business
owners managing start-ups in South Africa.
The lean start-up methodology is based on an eclectic combination of concepts borrowed
from various fields of study and tailored to the specific needs of the entrepreneur involved in
new business creation. The principles address the importance of reevaluation and
modification of the ways the entrepreneur engages with what Christensen (1997) calls
‘previously nonexistent’ markets, where time-honored methods fail to deliver results.
Essentially, the lean start-up principles are the idea that, in current times, markets emerge in
new and different ways and that the entrepreneurial approach to new business creation should
adapt to these trends.
1.3 Research Problem Statement
“To what extent are the evolving insights into lean start-up principles transferable to the
South African entrepreneur?”
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1.4 Significance of the Study
The importance of new ventures to an economy in terms of tax proceeds, research and
development, job creation, exports and innovation have been well documented (Christensen,
1997; Schumpeter, 1934). While entrepreneurship and technological innovation have been
identified as key factors boosting national economies (Crosby, 2000), the majority of the
business start-ups that provide these factors to the economy usually fail within the first few
years of existence. Recent studies confirm that, regardless of the best intentions of
governments to create a business-friendly environment, a considerable proportion of start-ups
fail to become successful even in developed nations like the United States of America
(Shane, 2008).
The high failure rates of start-up initiatives have been the focus of numerous studies in recent
years, exploring some of the key characteristics and antecedents of start-up success (Ensley,
Hmiellski, & Peers, 2006; Barron & Hannan, 2002; Brinchmann, Grichnik & Kapsa 2010).
More recently, the body of lean start-up research has emphasized the importance of
developing start-ups by following a more practical and streamlined approach to product
development through continuous improvement of initial strategy and continuous learning
with role-players such as suppliers and end users (Blank, 2006; Furr and Ahlstrom, 2011;
Ries, 2011). Entrepreneurs can develop their human capital by consulting experts (Chrisman
and McMullan, 2004), independent strategic partners (Zahra, Neubaum and Huse, 2000), and
social networks (Ruef, 2002), thereby enhancing creative action and innovation.
This study explored the nature of the South African start-up ventures and the extent to which
these ventures could apply and have in practice applied lean principles in order to innovate in
the face of limited resources and high uncertainty.
1.5 Limitations of the Study
The sample size, sampling method and the number of entrepreneurs from whom data will be
sourced is a limiting factor to this study. Nevertheless, with the thoughtful selection of the
group of respondents and interviewees, meaningful insight will be gained.
Owing to the qualitative nature of this study, it is possible that the findings of this study will
not be applicable to and valid in situations with a different context. Further research with a
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larger sample size and a more representative sampling method would be recommended to
improve validity.
A further possible limitation on the validity of the findings in the study is researcher bias.
The researcher’s background, world views and ideology could be imposed on the findings
and interviewees.
The challenges in terms of inconsistency of interview responses are another limiting factor in
terms of data collection using the semi-structured interview approach. For further detailed
reference to limiting factors refer to the Validity section below.
1.6 Assumptions
The researcher assumes that the interviewees are truthful and that the information provided in
the interviews is accurate. The risk of this assumption will be mitigated to an extent through
the extensive review of articles on the subject matter. The researcher will be able to identify
to some degree apparent inaccuracies in responses.
SECTION 2: LITERATURE REVIEW
2.1 Introduction
Ideas in this document are communicated in both past and future tense. This approach shows
the researcher’s intent to communicate in terms of the planned research approach but also
reflection on the process as the research unfolds. In particular, the future tense is retained,
from the original research proposal, to a significant extent in sections 1 through 4 in order to
show what was initially intended and to facilitate comparison with what was found during the
research.
The lean start-up principles were developed and published very recently. The researcher had
to take a broad approach to the literature review, in order to expand on the four lean start-up
principles summarized in section 1.2. As a result, the literature review became a substantial
part of this document. However, with the benefit of hindsight, the researcher reviews and
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reflects on the relevance of the different concepts in the concluding paragraph of the literature
review section.
A comprehensive understanding of the lean start-up principles is fundamental to this study
and to understanding the approach to the literature. With this in mind, the researcher
developed and summarized the constructs of the lean start-up principles in section 1.2 before
the literature review section was discussed. Although parts of the information in the context
section could have been part of the literature section, the researcher intended to encourage the
reader to a full understanding of the principles and the origins of the principles before delving
into past literature supporting these principles.
The literature review focused on 7 concepts related to business studies and start-up literature.
Start-up ventures are multifaceted, inherently uncertain and extremely complex and therefore
the concepts underlying the start-up literature are numerous. These concepts include
resource-based view of the firm; capabilities of the firm; uncertainty; complexity; dominant
design theory; innovation and lean start-up principles. The purpose of the literature review is
to provide the researcher with a foundation of knowledge on the existing literature on the
concepts underlying the research problem. This knowledge would be the starting point for
the interview process and is therefore done wholly before the interview process begins. It
will assist the researcher to better identify existing and potential application of lean principles
in the South African ventures under study.
2.2 Background Discussion
2.2.1 Capabilities of the Firm
Resource-Based View of the firm
Various theories and frameworks have been employed to understand how businesses achieve
and maintain competitive advantage over time. The resource-based view of the firm (Penrose
1959; Nelson, 1991; Peteraf, 1993; Schumpeter, 1934; Wernerfelt, 1984) focuses on strategic
organization of resources within the firm relative to the external structure of competitors and
“To what extent are the evolving insights into lean start-up principles transferable to the
South African entrepreneur?”
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market conditions (Prahalad and Hamel, 1990). Researchers theorized that firms with
resources that have valuable, rare, inimitable and nonsubstitutable (VRIN) attributes are best
positioned to stay competitive over time. With these resource characteristics firms are
uniquely positioned to deliver unrivalled products and services, but only if the resources of
those firms are dedicated to the right activities (Conner and Prahalad, 1996; Nelson, 1991;
Wernerfelt, 1995; Barney, 1991). The expertise necessary to determine the activities of the
resources are defined in strategic management, managerial decision making and
entrepreneurship literature (Wernerfelt, 1995).
Dynamic Capabilities of the Firm
Recently, the resource-based view of the firm has been updated to include the importance of
dynamic capabilities, the ability to reconfigure resources in ever-changing markets (Teece,
Pisano, and Shuen, 1997). The challenge for business owners is to remain competitive in
markets known for rapid and unexpected change. Dynamic capabilities are operational and
strategic routines, by which firms reconfigure resources (obtain, retire, combine and
recombine) in order to generate strategies that provide sustained competitive advantage
(Grant, 1996) in response to environmental change (Zollo and Winter, 2002). The somewhat
vague terminologies of dynamic capability theory have at times been criticized as being
recursive and nonoperational (Mosakowski and McKelvey 1997). However, these
capabilities have very practical application. One example is new product development
routines, where managers combine pre-existing skills and knowledge and current resources to
develop new revenue streams. Other practical dynamic capabilities include strategic
decision-making, resource-allocation and procurement of resources (Eisenhardt and Martin,
2000).
Dynamic Capability of Start-up firms
The dynamic capabilities of start-up firms, which have fewer resources, are bound to differ
from those of established companies. Start-up firms are often forced to resort to
‘bootstrapping’ activities, owing to limited availability of resources (Brush, 2008). More
than just financial constraint, bootstrapping techniques includes the use of various creative
means to make do with currently available resources: this is referred to as bricolage. It
includes borrowing resources, temporary hiring of human resources, shared office space and
acquiring knowledge, skills and support from family and friends (Sequeira, Mueller, and
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McGhee, 2007). Bricolage, as described by Lévi-Strauss (1967), is the skill entrepreneurs
apply to envisage available resources that are often disregarded by established firms (Baker
and Nelson 2005), in the process of learning how to solve new problems and capitalize on
new opportunities in creative ways (Easterby-Smith and Prieto, 2008). While in agreement
with the dynamic capability theory, some believe this type of creative learning process to be
fundamental to advancing dynamic capability (Zahra, Sapienza, and Davidsson, 2006), while
others believe learning itself is a key dynamic capability (Bowman and Ambrosini, 2003).
Entrepreneurs apply high levels of social skills to access networks which provide the
necessary technical and functional knowledge (Holt and Macpherson, 2010).
Systematic Combinative Capabilities
Zander and Zander (2005) introduced a further development of dynamic capabilities by
adding the important role of privileged information of customers and their needs to the
resource-based view of the firm. While other studies confirmed network embeddedness as an
important contributor to start-up performance (Adler and Kwon, 2002), Zander and Zander
emphasized the importance of accessing information about customers in a broad social
network. The systematic combinative capabilities of firms (Zander and Zander, 2005), are
based upon a method of building continuous relationships and procedures to detect emerging
needs of the current customer (Ruekert and Walker, 1987), to continuously adapt skills,
resource-base and human capital through utilization of ties in both internal and external
networks (Danneels, 2003), and finally to exploit both old and new skills and resources in a
continuous process of adaptation (Helfat and Eisenhardt, 2004).
Dynamic capability theory defines not only the importance of resource management but also
that of knowledge management by sustained customer relationship management. With the
knowledge of the customer needs, dynamic capabilities of start-up firms create opportunities
or market positions, superior to those of the competitors in the market, for which an
economic rent could be charged (Foss, Klein, Kor, and Mahoney, 2008). More importantly,
for start-ups dynamic capability proves to be less about ownership of resources and more
about activities and processes (Ambrosini and Bowman, 2009), which offer growth
opportunity despite resource scarcity (Baker and Nelson, 2005) in current rapidly changing
business environments (Wu, 2007), by using social networks to access information on
emerging needs (Zander and Zander, 2005).
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2.2.2 Start-up Firms and Complexity
High Levels of Uncertainty: Planning vs. Discovery
The ability to handle high levels of uncertainty effectively is an important skill for
entrepreneurs looking to start a new venture (Sull, 2004). One way practitioners and scholars
deal with high levels of uncertainty is to question the validity of traditional planning practices
associated with new venture creation. While previous studies confirm that business plans
have intrinsic value (Shane and Delmar, 2004) and form part of the process of attracting
financing (Karlsson and Honig, 2009; Gruber, 2007), some scholars contend strongly that the
time start-up business owners spend on the creation of business plans could be spent much
more effectively, in a more dynamic fashion, on building the business and on customer
relations (Bhide, 2000; Brinckmann, Grichnik, & Kapsa, 2010). Some opponents of the
‘hands-on get out of the office’ approach go as far as to say start-up business owners must
write a business plan before interacting with the customer (Shane and Delmar, 2004), while
similar studies found that planning upfront can impact positively on new venture survival rate
(Gartner and Liao, 2005). However, comprehensive business plans may not have the same
value for start-ups as they do for well-established corporations. Some new-venture scholars,
growing increasingly skeptical of business plans, argue that investors need to see momentum
in implementation as well as a plan of action (Gumpert, 2003B).
Gumpert, (2003B) argued that start-ups seldom engage in theoretical research and
development of new ideas owing to limited time and cash. In fact he argues that the arena of
the typical start-up and the way entrepreneurs operate is almost not researchable, owing to the
fact that entrepreneurs generally explore essentially new ideas in a niche market place with
high levels of uncertainty.
Businesses and especially new ventures and start-ups have characteristics of complex
adaptive systems. As a system, the business world is a set of sub-parts that interconnect to
form the whole. As a system it has emergent properties that cannot be predicted. More
importantly, analysis of complexity is not possible without running the system. Therefore,
entrepreneurs must take action in the process of testing initial hypotheses. To study an
intrusion in the system the entrepreneur must first intrude.
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Using the Cynefin framework, Snowden and Boone (2007), explained how entrepreneurs and
start-ups can function on the edge of chaos (Kuhn, 2009) by implementing applicable
practical methods to deal with either ordered or complex realms. According to Snowden and
Boone, (2007) most managers are unable to identify the particular domain they function in
and are unaware of how to function within that particular domain.
The Cynefin Framework
Snowden and Boone, (2007) created a framework to help managers decide on an appropriate
course of action. Contrary to a traditional ‘one size fits all’ approach of management theory,
Snowden and Boone argued that managers should tailor their approach, the way they think,
analyze and act, to fit the level of complexity they operate in. The model helps managers
determine appropriate choices according to the underlying context of managerial situations.
Snowden and Boone explained four unique decision-making models categorized in domains
distinguished by different levels of complexity and cause and effect relationships.
Simple Ordered Domain
In the simple domain, there are predictable self-evident relationships between cause and
effect. It is the domain of previously established algorithms on which business decisions are
based and exploited without rethinking their validity. Methods to solve problems are
repeatable. The decision making model is Sense – Categorise – Respond. Managers can
apply best practice. Managers who spend considerable time in this domain, a bureaucratic or
process-driven environment, will tend to interpret all problems as a failure of process. A very
limited amount of entrepreneurial activity takes place in the simple order domain. To
function in this domain co-ordination can be used (Snowden and Boone, 2007).
Complicated Ordered domain
In the complicated domain, there are relationships between cause and effect, because it is still
an ordered system, but the relationships are not self-evident. Methods used to solve problems
in this domain are analytical and require expertise in order to identify solutions. The decision
making model is Sense – Analyze – Respond. Managers can analyze or call in experts to get
to good practice. Good, as opposed to best, because there is more than one solution to
problems in a complicated domain. Depending on the level of expertise there could be
several different good solutions which could all be legitimate in addressing the problem. The
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social aspect of conflict between choosing one solution and enforcing one of the many
solutions could upset role-players in this environment. According to the knowledge and
awareness matrix, managers apply principles based on things they know that they do not
know. Experts tend to interpret all problems as a lack of appropriate time to analyze the
situation to come up with a solution. However, market conditions and technological change
have driven significant portion of business to resemble unordered systems. In fact the need to
innovate necessitates the shift into a less ordered system. To function in this domain co-
operation is necessary (Snowden and Boone, 2007).
Complex domain
In the complex domain, the relationships between cause and effect are only obvious in
hindsight. Methods to solve problems are based on the principle of experiments. During
these experiments managers probe the situations in order to sense whether a solution might
emerge. The result is emerging practice, new, different and unique in comparison with
currently known practices. Emergent outcomes are not necessarily relevant for future
application because of the fact that the nature of the system is dynamic. The decision making
model is Probe – Sense – Respond. According to the knowledge and awareness matrix,
managers apply principles based on things they do not know that they do not know. Those
with experience working in this domain of unknowns will often react to emergencies by
getting together various role-players from various backgrounds in an attempt to solve the
problem collectively. To function in this domain collaboration is necessary between various
role-players (Snowden and Boone, 2007).
Chaotic domain
In the chaotic domain, no relationship between cause and effect exists; not even in hindsight
can patterns emerge in obvious ways. Managers entering this domain on purpose do it for
innovation purposes; those who enter by accident must stabilize the position quickly. The
decision making model is Act – Sense – Respond (Snowden and Boone, 2007).
Lessons from the Complex Domain
Start-up firms actively looking for new markets will have to function in the complex domain.
It is clear from the decision making model that theory and intuition can bring you only so far.
Entrepreneurs and innovators need to base efforts on practical experiments in a world of
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complexity and uncertainty. The Cynefin Framework proposes specific decision making
models for each domain. The different decision-making models are relevant to this study
owing to significant similarity to the Build-Measure-Learn feedback loop proposed in the
lean start-up methodology. There is a striking similarity to Build-Measure-Learn, especially
for the complex domain decision making model, which proposes Probe-Sense-Respond.
Table 1: Decision Making Models based on the Cynefin Model
LEVEL OF COMPLEXITY DECISION MAKING
MODEL
MANAGEMENT
STRATEGY
Simple Ordered
Domain Sense-Categorise-Respond
Simple Intuitive Co-
ordination
Complicated Ordered
Domain Sense-Analyze-Respond Strategic Co-operation
Complex
Domain Probe-Sense-Respond
Wide-ranging
Collaboration
Chaotic
Domain Act-Sense-Respond
Pure Innovation
Purposes Only
Source: Adapted from Snowden and Boone (2007)
2.2.3 Start-up Firms and Dominant Design Theory
Start-up firms should be concerned with the implications of the design path in their industry,
because of their unique position in the market, specific innovative role and competitive
advantage over incumbent firms. Dominant design is concerned with the design paths that a
specific industry follows that shifts the terms of competition in that industry (Utterback and
Suarez,1993). According to the model of technological change, a technological breakthrough
triggers a process of technical variation and selection, followed by the creation of dominant
design as the technology gets established and is a critical process in the progression of an
industry (Anderson & Tushman, 1990). Design paths, in dominant design theory (Utterback
and Abernathy, 1975), are influenced by both technology factors and market factors (Clark,
1985).
Technology Change
In their studies of process and product innovation, Abernathy and Utterback established that
technology change is cyclical (Utterback and Abernathy, 1975) and emphasized that the
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process is complex as it requires input from heterogeneous role-players (Bijker and Law,
1992) before it is accepted as the market standard (Utterback and Abernathy, 1975). Most
importantly, Anderson and Tushmen (1990) argued that any progress toward dominant design
reduces uncertainty and therefore changes the very nature of innovation in the industry. In
the quest to beat the opposition, companies may be influenced by competitor strategies and
adapt or change pursued strategies, making strategy an emerging phenomenon parallel to the
dominant design process. Furthermore, this emergence is associated with restriction of
differentiation of products (Bijker and Law, 1992), because of standardization, production
economies and the formation of effective competition on the basis of product specification
and price (Utterback and Abernathy, 1975). Harvard business School professor and author,
Clayton Christensen, an expert on disruptive change and innovation, argued that dominant
design formation reduces the market penetration opportunity for small or entrant firms. He
argues that start-up firms would normally avoid competing with incumbent firms and rather
compete in post-dominant design niche markets in which innovation rates are already reduced
(Christensen, 1997). Opposing this view, Bamford et al (2004) argued that one of the
competitive factors of start-up firms is the ability to adapt resources and approaches faster
than incumbent firms (Bamford, Dean and Douglas, 2004). While incumbent firms might be
more adaptable to technology change, start-up firms are increasingly more responsive to
changes in the market.
Market Change
Start-up firms are associated with permanent fluidity owing to constant ‘bottom-up’ (Jansen,
2004) approaches to change in both social systems and operational procedures (Tsoukas and
Chia, 2002). Christensen, in his work on innovation management, contributed with the
theory of disruptive innovation, describing how well-established firms can fail because of
previous successes, as current competitive advantage becomes obsolete during unexpected
market change. According to Christensen (1997), disruptive innovation refers to the change
that is caused through changing application of current technology. Interestingly, Christensen
noted that the majority of disruptive innovation is caused not by technology change but
change in the application of existing technology. His theory differentiates between sustaining
technology, a process which companies use to improve a product that has an established role
in the market, and disruptive technology, a process which companies use to create or change
a market based on technology change. Established companies are more familiar with the
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process of competing in sustaining technology. Christensen (1997) argued that firms struggle
to identify and develop emerging potential disruptive innovation because of the inability to
analyze markets that are currently nonexistent. Start-up firms, owing to their experience in
probing, finding and serving markets that were previously nonexistent, are well positioned to
engage in disruptive innovation.
Another aspect that favors start-ups is path-dependency (David, 1985), a term used to
describe the notion of how past decisions limit future options. Start-up firms are not exposed
to strategic ‘lock-in’ by historic events to the same degree as established firms are. A further
benefit of start-ups in terms of design path and unforeseen market change is the absence of
institutional inertia, or resistance to change, in the culture of the start-up firm. To overcome
resistance to change, change-based momentum must be generated (Miller and Friesen 1980).
2.2.4 Start-up Firms and Innovation
Innovation is as old as time, even though the field of innovation acquired particular
importance only in the twentieth century when it started emerging as a separate field of
research in the 1960s. Before this date, innovation literature approaches were tied to multiple
individual academic disciplines isolated within management, sociology, organizational
science and business studies. After this date, professional associations were initiated to
synthesize insights from various fields and disciplines to ensure a more cross-disciplinary
approach to innovation (Fagerberg, Mowery and Nelson, 2006).
The central topic of the body of innovation studies is that of acquiring new knowledge
(Fagerberg, Mowery and Nelson, 2006). Cognitive science has shown that there is something
inherently human about the propensity to improve life by doing things in new ways. Today,
the pursuit of innovation is so intensely competitive that some even suggest the prescription
of cognitive enhancing drugs as a means to improve the innovative abilities of mankind
(Greely, 2008).
At this point, it is important to differentiate between creating a new idea (invention) and
commercialising a new idea (innovation). In the past, invention has been described as the
original discovery of a method to perform a new action, which normally goes together with
development, new application or new methodology (Mason, 1895), whereas innovation is the
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first commercialisation of an idea or invention (Schumpeter, 1934). For successful
commercialisation to take place, the innovator, whether an individual or a firm, requires a
mix of several other skills, capabilities and resources to capitalize on the potential offerings
of inventions. These offerings needs to be linked to consumer needs in order to create value
for that user group. The resource-based view of the firm can be used to improve
understanding of new product development performance (Verona, 1999). The processes that
firms use to acquire information on customer needs (so called ‘sticky information’) are often
demanding and costly (Von Hippel, 1998; Von Hippel, 2001). Start-ups capitalize on social
networking to acquire necessary customer information cheaper and more effectively than
larger firms. User innovation (Bogers, Afuah & Bastian, 2010) happens when intermediate
or end-users are central to the product development or enhancement processes rather than the
more traditional role-players like producers, suppliers or manufacturers.
Schumpeter, an innovation theorist, considered by some as the father of entrepreneurship,
noted the important role of the innovator, laying the groundwork for future entrepreneurial
studies. Further distinction has been made between improvement of production, which refers
to the process of innovation, and improvement of the product, which refers to the innovation
of a particular product (Schumpeter 1934 and Schmookler 1966). The fact that both
invention and innovation could happen in the context of product or process links the two
concepts so closely that clear distinction is often impossible (Fagerberg, Mowery, and
Nelson, 2006). For the purposes of this study, innovation from a business perspective could
be seen more widely as the amalgamation of knowledge in the process of introducing new,
original, relevant and valued products, services or processes (Katz and Luecke, 2003).
Difficulty to study innovation
The inability to understand and report on the inner workings of innovation and how it occurs
in the business world rendered the field under-reported in mainstream social science.
Schumpeter (1934) contributed with Mark I, the first of two theories in the field of
entrepreneurship, in which he articulate three main themes relevant to this study. The Mark I
theory explains (1) the fundamental uncertainty of innovation, (2) the need to process
information efficiently instead of over-analyzing all available data to find a so called
‘optimal’ solution and (3) the human tendency to resist change referred to as inertia.
Schumpeter added, overlooked in Mark I, the corporate dimension of innovation in Mark II,
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acknowledging the role of groups and teams in the process of innovation, laying the
groundwork for what would later become principles of ‘co-creation’ ((Lakhani, Jeppesen,
Lohse, and Panetta, 2008; Perkmann and Walsh, 2007; Gassmann, 2006; Franke, Von Hippel,
and Schreier, 2006) in the new product development process. Findings in more recent
innovation studies echoed Schumpeterian theories (Nelson and Rosenberg, 1993) and
acknowledged that there is still no single model to encapsulate innovation owing to the fact
that multiple bodies of knowledge are required to comprehend its intricacies (Kuhn, 1970),
and agreed that factors leading to successful innovation can vary dramatically between
industries (Pavitt, 1984). More recent approaches to expand on innovation literature followed
case-based empirical studies aimed at finding out how innovation occurs in firms. However,
success in the process of taking innovation patterns from the heuristical level to the algorithm
level still eludes scholars.
Open Innovation: New Product Development
The benefits of cooperation between companies are increasing as companies are expanding
their networks of innovation (Chesbough and Prencipe, 2008). Companies that manage
relationships with suppliers and customers closely grow their knowledge base continuously
and increase innovative ability (Lauren and Salter, 2006; Piller and Walcher, 2006). The two
separate processes of developing innovation and commercializing innovation can be
combined and expedited through the practice of co-creation within communities (Lakhani,
Jeppesen, Lohse, and Panetta, 2008), universities (Perkmann and Walsh, 2007), cohorts in
other industries (Gassmann, 2006) and the end users (Franke, Von Hippel, and Schreier,
2006) in the new product development process. The concept of open innovation implies the
use of more than just external sources such as competitors, customers and academic
institutions in the quest for intellectual property. Primarily it proposes change in the ways
intellectual property is handled and employed (West and Gallagher, 2006). In fact, firms that
do not collaborate or share intellectual property in some form could lose the ability to enter
into future exchange relationships (Koschatzky, 2001). To summarize, current information
technology brings the customer and the suppliers to the centre of new product development
(Chesbrough and Prencipe, 2008). Enkel, Gassmann and Chesbrough (2009) argued that
partners from other industries are a strong source of innovation, because innovation is in
essence just regrouping of current ideas and concepts in a new form (Enkel, Gassmann and
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Chesbrough, 2009). Openness to new ideas and eagerness to change are key skills and
knowledge necessary for innovation in start-ups (Lynskey, 2004).
New product development, as a core dynamic capability of firms, might be one of the most
important capabilities for firms (Nelson, 1991) and even more important for start-ups (Bhide,
2000). Bhide (2000) further noted that both entrepreneurship and innovation literature fail to
realize the importance of the new product development process in start-ups. Costly and time-
consuming redesign can be avoided by constantly involving customers and checking with
them as the product development process progresses (Hauser and Clausing, 1988). Start-up
firms operating in turbulent, unsettled markets should see responsiveness and flexibility as
key success factors in product development (Iansiti, 1995). Time to market is of great
importance in highly competitive environments. To save costs, companies need to reduce the
time to market of new products (Gupta and Wilemon, 1990). In a study on product
introduction, Schoonhoven, Eisenhardt, and Lyman (1990) defined lead-time to first
shipment of a new product as important for the following reasons: (1) to progress in the
process of becoming financially independent; (2) to gain market share before competitors
respond with similar products; (3) to start building visible brand and become legitimate in the
market place and (4) to maximize the likelihood of survival.
2.2.5 Start-up Firms and Strategy
According to Christensen (1997), disruptive change is caused less by technology change and
more by changes in application of existing technology; consequently start-up firms should
strategize to discover new applications instead of new technology. Start-ups firm owners and
entrepreneurs in general are often closer to the customer and therefore in a stronger position
to discover customer needs. Christensen (1997), argued that entrepreneurs and start-ups
should work with customers and end users to find future opportunities in a practical way,
saying: “Markets that do not exist cannot be analyzed: suppliers and customers must discover
them together” (Christensen, 1997, page 165). In this way Christensen proposed that strategy
for start-ups should be emergent rather than deliberate. The concept of emergent strategy and
action orientation in order to improve strategy continuously echoes organizational
management literature (Bijker and Law, 1992) and strategic management literature
(Mintzberg, 1987).
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The concept of planning through interaction echoes previous work on discovery orientation
and practice orientation in terms of planning and building a business (McGrath and
MacMillan, 2000). The notion of discovery-orientated practices complements Peter
Drucker’s observation about start-ups. He claimed that if “a new venture does succeed, more
often than not it is in a market other than the one it was originally intended to serve, with
products and services not quite those with which it had set out, bought in large part by
customers it did not even think of when it started, and used for a host of purposes besides the
ones for which the products were first designed (Drucker, 1985, p.185).”
The notion of pivoting strategy until a viable strategy has been reached resonates with
previous inquiry into the antecedents of success for well-established companies. In a study
involving successful American companies, Amar Bhide found that “93 percent of all
companies that ultimately become successful had to abandon their original strategy - because
the original plan proved not to be viable. In other words, successful companies do not
succeed because they have the right strategy at the beginning, but rather because they have
money left over after the original strategy fails, so that they can pivot and try another
approach. Most of those that fail, in contrast, spend all their money on their original strategy
- which is usually wrong” (Bhide, 2000, p. 107).
2.2.6 Start-up Firms and Growth Orientation
One of the most common reasons way start-ups fail is premature ‘scaling’ (Christensen,
2000). Any function that doesn’t relate to optimizing product/market fit is a scaling function
and should therefore be postponed until identification of the best business model with a
repeatable sales process (Furr and Ahlstrom, 2011).
For the purposes of the present study, categorizing the various financial sources for funding
startups is not important: what is important is the purpose of the funding. Christensen argued
that any capital investment in companies has one of two main purposes, profitability or
growth. For his theory he segregates start-ups into two categories, those who are still looking
for a viable strategy and those who have reached a viable strategy. Investors in companies
which have not yet reached viable strategy should be patient for growth and impatient for
profit (Christensen, 1997). Capital invested in companies which have reached viable strategy
should be patient for profit and impatient for growth (Christensen, 1997). Owing to the
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nature of start-ups and the search for a viable strategy during formation of new ventures, the
Christensen theory implies the priority of profitability above growth for start-up firms. Lean
start-up methodology echoes this notion.
Factors including technological and scientific uncertainty, lack of tangible assets, time to
market, and information asymmetry and lack of track record increase financial risk for
investors looking to invest in start-ups (Bozkaya and De La Potterie, 2008) and lead
entrepreneurs to resort to their own funds during formation and early development of the
venture. The question relevant to ‘bootstrapped’ start-up firms remains: is there a clear
relationship between innovation speed and level of funding?
Although the number of startups financially supported by venture capital is very small
(Bhide, 1992, Sahlman 1990), studies found that venture capital involvement speeds up the
time to market (eg. Hellman and Puri, 2000). Contrary to the findings of Hellman and Puri
(2000), other studies showed that time to market for startups with higher monthly expenditure
and more financial support is longer than that of those with lower monthly expenditure
(Schoonhoven, Eisenhardt, and Lyman 1990). While there could be other limitations that
could have caused the divergent findings, Schoonhoven et al argued that firms with more
financial resources are committed to more ambitious new product development projects that
take more time and are less disciplined because of less financial pressure. Interestingly,
neither of these studies controlled for the specific stage of development of the startup at
founding. This is a clear weakness in the validity of the findings. It is probable that there are
significant differences in time to market statistics of more established start-up firms.
Consequently, the effect of venture capital involvement for start-ups at similar stages of new
product development is understudied. Future studies in this area might pose an opportunity
for meaningful contribution to the field. Recent studies established no support for the
hypothesis that increased financial resource leads to decrease in time to market (Heirman and
Clarysse, 2007). They further showed that venture capital involvement diverts attention to
various other functions like customer relations, operations and procurement which dilute the
already limited resources allocated to product development. This phenomenon could explain
the contrary results to the Schoonhoven et al findings.
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The principle of postponement of funding, normally in the form of venture capital, until a
viable strategy has been found, is at the centre of the lean start-up methodology. Minimizing
business risk by avoiding premature scaling is one of the key differentiation factors between
lean and traditional start-up processes. According to Christensen, viable strategy comes over
time as the initial strategy of a company proves not to be viable. After subsequent iterations
to the strategy, at a point in time in the future, a viable strategy will be reached. While some
authors agree that capital provides safety in business environments with high levels of
uncertainty (Sahlman, 1999), others demonstrated that it can lead to needless spending which
leads to further costs (Sull, 2004). In the lean start-up methodology, an appropriate level of
funding can be defined as the smallest amount necessary to complete the next round of
experiments (Sull, 2004).
2.3 Literature Relevance, Discussion and Reflection
This study is not in any way a critique of the lean start-up principles, put forward by Ries
(2011), nor will it comment on relevance and application of the word lean used by Ries in
relation to its origin in the Toyota Production System in Japan. From here on, the researcher
accepts the term without further comment on origin and meaning. In this study the term
‘lean’ in the phrase ‘lean start-up principles’ will refer to an approach to venture start-ups that
challenges traditional methodology. For a better understanding of differences between
traditional and lean approaches to venture start-up in the context of this study, please refer to
Appendix A.
This study is an investigation into the transferability of the lean start-up principles to South
African ventures, with the focus on possible future application in practitioner education. A
literature review has been conducted to expand on the constructs underlying the lean start-up
principles. To this end, literature on the firm and the entrepreneur has been reviewed. A
comprehensive review, before the interviews were conducted, gave the researcher the needed
holistic view of the complex assembly of the various fields of study related to the lean start-
up principles. Reflecting on the literature review process, the researcher shares the following
observations after the findings from the South African entrepreneurs where reconciled with
the literature.
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Few concepts of the lean start-up principles, put forward by Ries (2011), are new to
the entrepreneurial body of literature. It was interesting to see how all the principles
could be complemented by academic demonstration based on work by previous
authors. In fact, the majority of the concepts on which the lean start-up principles are
based have been established and explained in the work of various previous scholars
and practitioners.
While the lean start-up principles have clear merit in the way that they facilitate a
better logic for venture creation in a world that experience ever-increasing speeds of
change, the level of applicability for different types of start-ups changes significantly.
The principles have been borrowed from the lean manufacturing ideas originally used
in the Toyota Production System. Over the last decade, lean manufacturing has been
implemented in the rest of the world with mixed results.
Owing to the evolution of general business practices, some of the time-honored
venture start-up methods have proven to be invalid in current times. Some
shortcomings of the traditional methods and business functions are eloquently solved
and addressed by the lean start-up methodology. The most prominent of these are:
business model risk, planning cycle, design orientation, new product development,
design objective, intellectual property, strategy, engineering and organization. For a
summary of the key functional differences between the lean and the traditional
approach refer to Appendix A.
The literature and the research confirmed the difference in new venture creation
approach between corporations and owner-manager entrepreneurs. The benefits that
lean methods hold for the owner-manager entrepreneur are remarkable, especially in
the current business environment. The researcher found the level of competitiveness
of the owner-manager entrepreneur very interesting. While there could be many
reasons for this change in balance of competitiveness between the corporation and the
small scale entrepreneur, some of the main reasons are changes in consumer behavior,
consumer awareness, customer proximity, the speed of change in the business
environment and availability of customer information. While these changes favor the
local entrepreneur, they pose major challenges to the big corporations with more
institutional inertia.
The research highlighted the importance of basic business education levels and the
lack of general business skills of the South African entrepreneur. Surprisingly, the
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literature did not highlight the important role that business education plays in the
venture start-up process. While there might be good reasons for the exclusion of the
specific fields of study that discuss aspects related to business education in this
particular study, the researcher clearly underestimated the impact of the general
business skills gap on start-up venture success.
The researcher further notes that the literature review could have been more
comprehensive, in terms of the purposes of this study, if it had included more
examination of the South African specific business environment and entrepreneurial
data. With a more in-depth understanding of the current start-up constraints for South
African entrepreneurs specifically, the researcher could have been in a position to
make more meaningful recommendations to practitioners. Owing to time constraints
and specific approach the literature review was limited to the more generic body of
knowledge on entrepreneurship and business studies.
The extensive attention given to complexity and uncertainty contributed to the
understanding of the need for better collaboration and the need for a pragmatic
approach to venture start-up verification. However, it was a difficult concept to verify
with respondents owing to the academic nature of the discussion and consequently it
did not feature in the semi-structured interview questions.
A substantial part of the literature review addresses the impact of financial support to
start-up ventures, in the form of venture capital. The research did not reflect the
importance of venture capital. It might be argued that aspects related to financial
support were not emphasized in the research instrument. The weak levels of venture
capital support, to entrepreneurs in the South African, might also have contributed to
the lack of respondent interaction with the topic.
Even with these limitations, the literature review captured the most prominent concepts of
previous scholars’ research and formed the foundation for exploration into transferability of
the lean start-up principles to the South African entrepreneur.
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SECTION 3: RESEARCH METHODOLOGY
3.1 Research Approach
This study aims to explore the degree to which evolving ‘lean start-up’ principles are
transferable to the South African entrepreneur. To this end, the researcher will enquire into
participants’ accounts of their own behavior and experience, observing subjective meaning
through examination of the language used in these accounts (Richards & Morse, 2007).
The researcher intends to use a qualitative research approach with data gathered from open-
ended questions in semi-structured interviews. This approach gives the participants the scope
to share beyond the restrictions associated with a more structured interview approach
(Aberbach & Rockman, 2002) and facilitates an emerging research process as the study’s
focus, design, measurement and interpretation can develop during the interview process
(Leedy & Ormrod, 2005).
Since the body of literature on lean start-up methodology is rather new and the application of
its principles uncertain in the South African context, the researcher considered the inductive
approach appropriate. The aim of the study is not to test previous findings (Terre Blanche &
Durrheim, 1998) but rather to identify data patterns (Taylor & Bogdan, 1998) in order to
formulate new understandings of the topic.
Entrepreneurs pursuing new markets by creating start-up firms draw from a wide variety of
skills and competencies specified in strategic management, managerial decision-making and
entrepreneurship literature (Wernerfelt, 1995). The high number of observations that need to
be interpreted in the interview process necessitates the adoption of a “grounded theory”
research strategy, which is a reverse of the traditional social science research. According to
the grounded theory method; researchers: (1) collect data in interviews, (2) identify key
points in the data by marking a series of codes, (3) group codes into logical concepts, (4)
group similar concepts into categories and (5) create theories and identify possible
explanations for the theories (Thornberg, 2012; Glaser & Strauss, 1967).
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3.1.1 Advantages of Qualitative Research
Qualitative research methods and the use of interviews offer the researcher insights not only
into relevant human behavior but also the reasoning behind the behavior (Gordon, 2011).
This depth of knowledge and the use of inductive reasoning offer the researcher the
opportunity to identify patterns, make inferences and create emerging theory (Leedy &
Ormrod, 2010). Eisenhardt (1989) concurred that the qualitative approach leads towards
empirically valid and consistent theory because it is so closely link to the evidence and also
likely to be consistent with future observation.
3.1.2 Disadvantages of Qualitative Research
However, the qualitative approach to research poses the danger that interviewee responses
could be influenced by the researcher (Leedy & Ormrod 2005). The researcher’s personal
values, previous experiences, knowledge on the subject matter and world views can cause
inherent subjectivity. The researcher will seek to be aware of and to ‘suspend’ personal
views and preconceived knowledge to avoid influencing participants’ responses.
Higgins, Power & Kohlberg, (1984) showed empirically how the researcher, using qualitative
research methods, could draw idiosyncratic conclusions inconsistent with the true
psychological meaning expressed by the interviewee. The researcher will endeavor to remain
neutral in the study and limit the challenges that the qualitative approach poses to the validity
of the emerging theory by seeking calculated objectivity during the study. The researcher
will carefully identify the relevant constructs during the data analysis process. For more
information on data generation validity refer to sampling in section 3.3.2.
3.2 Research Design
3.2.1 The Scope of the Study
The purpose of this study is to explore the degree to which evolving lean start-up principles
are transferable to the South African entrepreneur. In particular, the researcher wants to
understand whether the South African entrepreneur can benefit from the offerings of the lean-
startup principles emerging from literature.
A concise research question was constructed to convey the exact intent of the study. Owing
to the intersection of entrepreneurial literature with literature of several social sciences, the
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constructs of this study draw from various social sciences and will remain subject to
expansion as the qualitative study develops. The researcher studied literature on start-ups and
new venture creation and the following general constructs emerged:
Capabilities of the Firm
Complexity
Dominant Design Theory
Innovation
Strategy
Growth Orientation
3.2.2 Data Generation
The researcher will primarily use semi-structured interviews to gather the data. Interview
questions will be guided by the relevant constructs in the literature review. The Grounded
Theory research design will be adopted for this study. Other research design types have been
considered such as biography, phenomenology, ethnography and the case study approach.
The requirements for insight from a personal perspective and the need for understanding the
reason behind behavior indicated the grounded theory approach as most viable (Leedy and
Ormrod, 2005).
Advantages of Semi-structured interviews
‘Open-ended’ questions will facilitate a more natural flow of information between the
researcher and participants (Aberbach & Rockman, 2002). To this end, the researcher will,
with the explicit agreement of the interviewee, employ the use of audio recordings to capture
data during the interviews instead of taking notes while having the conversation.
Furthermore, with the intention of facilitating the interview in a relaxed conversational
manner, the researcher will not state the exact order of the interview questions in advance.
The researcher will be able to explore new or evolving constructs at any point in time as the
interview progress, because the semi-structured approach enables flexibility in the course of
conversation (Eisenhardt, 1989).
Disadvantages of Semi-structured interviews
Paradoxically, the semi-structured interview approach, while beneficial for conversational
flow, unfortunately makes the process of data analysis somewhat more complicated, and
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time-consuming (Aberbach & Rockman, 2002). The researcher will have to spend
significantly more time after the interview to transcribe, sort and analyse the information
from the audio recordings.
More specifically, the researcher plans to use a digital audio recorder. While sound quality
and easy of storage of the recordings are benefits of a digital recorder, there are a few
disadvantages associated with digital recording of interview. The disadvantages include: (1)
the cost of digital recorder is higher than the cassette type, (2) there is a higher risk of
accidently deleting the files if it is digital and (3) the space available to store recordings is
limited (Bryman and Bell, 2007).
3.3 Population and Sampling
3.3.1 Population
The population for this study is entrepreneurs in South Africa. More specifically, the
population includes any small business owners or managers who have engaged in any
activities relating to formation and creation of start-ups.
3.3.2 Sampling
Sampling is a process of selecting relevant entities to be researched (Leedy & Ormrod, 2005).
The researcher has identified a group of entrepreneurs, some of them currently based at a
business incubator in Cape Town, as possible participants in the study. The sample type used
in this study is non-random convenience sampling because participants are: (1) accessible to
the researcher within the scope and time limitations of this study (Richards & Morse, 2007)
and (2) at liberty to share relevant information that will enrich the qualitative exploration
process of this study (Leedy & Ormrod, 2005). Leedy & Ormrod suggested that a sample
size of between 5 to 20 participants is acceptable for the purposes of this research approach.
3.4 The Research Instrument
One of the most important aspects of the research process and more specifically data
gathering process is the researcher’s ability to ask the right questions (Yin, 2009). The
researcher approached the creation of research questions in a systematic way to ensure
consistency in the research method. For this study, a questionnaire has been created based on
selected prominent ideas that emerged from the literature review (Lewis, Saunders &
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Thornhill, 2003). The emphasis of the literature review was determined by the prominent
constructs necessitated by the research question and sub questions. Owing to the nature of
semi-structured interviews the researcher will not necessarily: (1) use all the questions, (2)
follow the previously envisaged sequence of the questions or (3) limit the conversation to
only the existing set of questions in the questionnaire.
3.5 Data Collection
Secondary data have been gathered from literature prior to the interviews and could be
supplemented by text given to the researcher during interaction with participants. Primary
data will be collected during the interviews based on, but not limited to, the participants’
responses to questions in the questionnaire in Appendix B. The consistency matrix,
Appendix C, shows how semi-structured interview questions originate in the constructs of the
literature review and how these constructs link to the topic of the research.
One weakness of having only one researcher conducting the interview in a conversational
style is the inability to take proper field notes, created by writing down immediate
impressions during the interview. Eisenhardt (1989) posits that a team of researchers are
more effective as that allows for appropriate ‘management’ of conversation and reflecting on
impressions prompted during the interview. To compensate for this loss, the researcher plans
to verbalise impressions, as far as possible, to prompt an impression event on the recording
which could be recalled and analysed during the transcription of the data.
3.5.1 Data Gathering Sequence
The primary data will be analysed consecutively to enable the researcher to learn from the
interview experiences and to make adjustments to the approach to data gathering for future
interviews (Eisenhardt, 1989). The researcher may adjust the approach to facilitate:
conversation; the interview style; the method used to transcribe voice recording to text;
method of identification of ‘codes’ in the text; and the grouping of the codes into concepts.
This immediate analysis of the recordings will ensure that the researcher analyses
impressions and emerging themes while they are still vivid in memory.
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3.6 Data Analysis Techniques
Triangulation, the use of more than one data collection method, bolsters the validity of
findings (Eisenhardt, 1989). The researcher intends to use triangulation of primary and
secondary data sources to bolster the validity of the study by identifying overlapping
constructs as these emerge from the literature and from the interviews consecutively.
Section 3.2.1 summarised the general constructs that emerged from the literature. The
theoretical background provided by the literature review contributes to the researcher’s
ability to identify emerging constructs from the interviews.
Eisenhardt (1989) warned that there may not be a strong overlap of constructs between
primary and secondary data and that the relation should not affect the actions and thoughts of
the researcher at the onset of the interview phase. More recently, Thornberg (2012)
suggested that the literature review may be postponed until after the primary data have been
analysed in order to prevent unwanted influence as the interviews are conducted. Patton
(2002) suggested that there is a general misunderstanding that data that do not triangulate are
not relevant. Patton argued that these inconsistencies enrich the study with the potential to
unearth deeper meaning.
3.7 Limitations of the Analysis
The number of interviews used to gather primary data is identified as a limitation of this
study. The data collected from the interviews are the views of the participants and may not
be illustrative of the views of the population. The sampling method is identified as a further
limitation. Non-random convenience sampling does not remove location bias factors from
the data; therefore the views of the participants in this sample may not be representative of
the views of the population. Further research with a larger number of interviews and a more
representative sampling method would be recommended for future research.
3.8 Validity and Reliability
3.8.1 Validity
The researcher plans to ensure the internal and external validity of the findings with a focus
on credibility, dependability, transferability and confirmability throughout the research
process (Bryman & Bell, 2007).
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Table 2: Validity and Reliability
Validity & Reliability
Credibility
Procedures such as feedback, checking and confirmation of meaning
during the interview will ensure that the data gather reflects the participant
as intended meaning. Credibility likened to internal validity and refers to
repeatability of the findings from a researcher point of view.
Dependability
Due to the volume of data gathered during qualitative research,
dependability may become an issue. All records will be collected and
stored during the study. Dependability refers to research error in the
process of logistics, storage and validation of the numerous records,
documents and recordings associated with qualitative research.
Transferability
The semi-structured qualitative approach facilitates the collection of in-
depth accounts of participants; the abundance of information will give the
researcher the necessary perspective to evaluate transferability of the
findings. There is still a risk that the judgment is not accurate in
determining transferability. Essentially transferability is similar to
external validity. The question is whether the local findings based on the
sample are representative of society living outside the boundaries of the
geographical sampling zone.
Confirmability
The researcher is aware of the influence that personal values, mental
models and past experiences can have on behavior during the research
process. Researcher objectivity is the key here.
Source: Bryman & Bell, (2007, p. 395 - 399)
3.8.2 Reliability
Reliability is concerned with the ability to replicate the same findings if the research were
repeated (Yin, 2009). The responsibility of the researcher, in order to ensure reliability, is to
standardize the approach to data gathering by using premeditated questions in the
questionnaire and using reliable data gathering like voice recording. To ensure
confirmability, the researcher will not ‘lead’ in any way with information on, or principles of,
lean start-ups. Without prefacing the lean start-up principles during the interview process,
the respondents will be asked to report only on what they experienced during past venture
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start-up projects and what they are experiencing in current venture start-up projects. The list
of questions that will form the basis of the questionnaire used in this study is attached in
Appendix B.
3.9 Informed Consent and Research Ethics
The researcher commits to ensure that the study is conducted in an ethical manner, consistent
with the generally accepted conduct and integrity of academic research (O’Leary, 2004).
During the process of gathering data from primary sources the dignity of participants will be
ensured by careful consideration of world views, moral code and socio-economic
circumstances.
The researcher will ensure that the purpose of the study and the expected outcomes of the
study will be communicated to all participants before interviews are conducted. Participants
will be made aware of the fact that they participate on a voluntary anonymous basis and that
they have the right to withdraw from this study at any stage before the research project hand-
in date. The researcher will personally conduct all interviews and transcribe all voice
recordings. If confidentiality agreements are required by any participant the researcher will
assist the process.
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SECTION 4: RESEARCH PLAN
The researcher proposes the schedule in table 3, in order to deliver the Research Report by
the 9th of December 2013. As indicated below, approaching the interviewees and gaining
ethics approval will overlap early in September as the researcher plans to analyse data from
an interview immediately after the interview ended. Interviews will be scheduled according
to interviewee and researcher availability. The second round is scheduled to compensate for
possible data insufficiencies in the first round.
Table 3: Research Plan
DEADLINE PROPOSED DATE
Submit Proposal 6
September
Approach potential
Interviewees
Before 13
September TERM 4 BEGINS: 7 October
Gain ethics approval Before 13
September
Conduct first round
of Interviews 16 – 20 September
Analyse Data 16 September –
27 September
Conduct second
round of Interviews 7 – 11 October
Analyse Data
7 – 18 October
Write Report
21 October –
21 November
Submit Report for
Supervision
21
November
Improve as per
Instruction TERM 3 ENDS: 27 September
27 – 30
November
Final Treatment of
Report
2 – 5
December
Submit Final Report 9
December
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SECTION 5: RESEARCH FINDINGS
The 22 codes in table 4 were generated using the open coding process to summarize the key
aspects that came from the interview process. The table below provides a snapshot of the
codes and the emerging themes from the interviews. The emerging themes in the table below
were mentioned by all the respondents in all the interviews. These themes will be ‘unpacked’
in the following chapter to facilitate a deeper understanding of the difference between and the
similarities of current entrepreneurial practice in the light of the lean start-up principles.
Table 4: Emerging Codes and Family Codes
Strong Customer
Relations
Growth
Orientation Adaptability Driven by Passion
Meaningful
Customer
Feedback
Planning Past Mistakes Innovative
Ability Time Constraints
Design
Constraints
Collaborative
Product
Development
Clarity and
Focus
Lack of initial
Business
Knowledge
Revision of
Goals Period Inherent Optimism
Financial
Constraints
Building
Partnership Scaling
Continuous
Learning
Speed of
Change
Past Experience and
Current Skillset
Human
Resource
Constraints
COMMUNITY
FOCUSED
START-UP
STRATEGY
LEARNING
APPROACH
ATTITUDE
TOWARDS
CHANGE
CHARACTERISTICS
OF THE SOUTH
AFRICAN
ENTREPRENEUR
APPLIED
LEAN
PRACTICES
5.1 Community Focused
This ‘family code’ captures the community orientation of respondents. During reflection on
communication, product design and customer interaction the respondents’ approaches
towards key role-players were assessed. From a theoretical point of view, this section is
concerned with how South African entrepreneurs allow the customer to provide feedback as
an input for product and service design.
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Community Focused Percentage
Strong Customer Relations 100%
Meaningful Customer Feedback 80%
Collaborative Product Development 80%
Building Partnership 80%
5.1.1 Strong Customer Relations
All respondents had multiple reasons why relations with customers should be one of their
main concerns.
Respondent 2 said his company would not have entered the market if he did not successfully
build the human connection to customers, “You are lost without community.”
Respondent 1 noted that their business addresses the needs of customers by reconnecting to
the initial reason for starting to provide the service. Their service originates from real
customer needs, “I know the position our customers are in because I have been in their
position and I know how I solved that problem for myself. Then I started this venture to do it
for others.”
Respondent 4 has a personal preference to work with people instead of processes, “I like the
product but a big part of the product is also people. I like people and I like working with
people. But people could also be quite demanding and exhausting, but I have noticed,
without the human aspect I lose interest.”
Respondent 5 agreed to the importance of customer relations, “Constant customer interaction
is a huge aspect.”
Respondent 3 made customer complaints part of the performance indicators of the business,
“Being reliable is one of our main customer compliments in surveys.”
5.1.2 Meaningful Customer Feedback
Respondent 1 described some of the reasons customers ask for certain products to change or
for new products to be introduced, “There is an idea, or there is a need, there might be a ‘we
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should have something in the market’ or ‘our competitor has something in the market
already’ or ‘we require an improvement of one of our products’.”
Respondent 4 said they were ‘blind-sighted’ to some knowledge about the customer’s
interaction with their services, “We would never have realized our customers’ needs have
changed after the introduction of broadband in South Africa. Just to think, we were saved by
some person that was willing to complain and make a scene.”
5.1.3 Collaborative Product Development
Respondent 3 reported on how reliant he is on customers during redesign of his products,
“The biggest thing is that from the start to where we are now our client relations form part of
the key ethos of our business. Even when we started it has always been a conversation. Our
company and our growing brand are built on the fact that you join our family and that we
love having conversations with you. We grow, our clients grow, and we grow with our
clients. A lot of our products and product development comes out of that feedback cycle. A
lot of product development comes from feedback from our clients, telling us what is
functional and what is not.”
5.1.4 Building Partnership
Respondent 1 argued that times are changing and that the idea of community might go
beyond products and services, “Things are shifting, you need to build something and find
people who believe in what you do.”
Respondent 2 also believes his industry is going through a challenging time and that he
should differentiate his services, “The industry is going through a difficult time and everyone
is under a lot of strain. I keep customers happy with specific sales terms in which we charge
only for products that sell and I give them the freedom to return items which are not
moving.”
Respondent 5 had a sympathetic rather than aggressive approach to debtors, even though he
has his own financial struggles. A sympathetic attitude during challenging times might be the
way to secure customers in the long run, “In the type of business I work I think cash flow is
key, the type of work that I do, you do the work now and then you only get paid after you
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carried all the expenses and the costs for a period of time. You only see the financial result
somewhere down the line; you still need the financial resources to carry yourself through
that. Chasing people up to pay is a tight-rope, because I can also understand where they are
coming from. They also wait for suppliers to pay them so that they can pay me. So it is a
whole chain of events and a lot of these customers work with government and the payments
don’t always happen according to deadline.”
Respondent 4 builds relationship with potential key partners proactively, “To further expand
our supply chain support groups we actively pursue hospitals and doctors and other outlets.
Also, we partner with key champions throughout South Africa.”
5.2 Start-up Strategy
This family code reveals the respondent’s alignment to strategic matters related to long-term
objectives, company size and future aspirations. From a theoretical point of view, this
section is concerned with how South African entrepreneurs get from an initial strategy to a
viable strategy, before the viable strategy is scaled.
Entrepreneurial Strategy Percentage
Growth Orientation 100%
Planning 80%
Clarity and Focus 80%
Scaling 80%
5.2.1 Growth Orientation
Respondent 3 had no real aspirations for serious growth in the beginning, “When we started
the business we started with organic growth in mind. We had an idea of what we wanted to
do and we just run with it.”
Respondent 1 has an established company with employees across South Africa, but also
reported on small beginnings with no aggressive growth in mind, “The development of my
business was very much an organic kind of approach. I suppose the fact that I am still in
business is an indication that it is not a particularly bad approach.”
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5.2.2 Planning
Respondent 1 acknowledged that his initial attempt at planning was ill-fated, “When we
started, the model was not right. We started with a business plan that was not based on
market research; it has all the best intention and vision but it had no business sense.”
Respondent 2 knew that a lack of knowledge held them back during the early days, “I think
we could have done with a little bit of research.”
5.2.3 Clarity and Focus
Respondent 2 reported on their unfortunate strategy to find solutions for anybody and nobody
in particular, “We tried a lot of things and one thing we realized is that we can’t be great at
everything.”
Respondent 4’s insight after building a financially successful service after many attempts
over the last 7 years, “This whole thing of multitasking is misleading. If you want to do a
proper job you have to focus on one thing at a time. Focus on one thing, do it phenomenally
well and grow from that.”
Respondent 5 reported on the common problem for creative entrepreneurs, who are
struggling with administration and a clear future strategy in their start-up ventures, “Clarity
and focus is real difficult and we’re still struggling with it. We are designers and the
problem with being a designer is that creativity is what feeds you. Designing is what you
want to spend your time doing, but that is very difficult because it also comes down to what
are you doing and what are you doing it for and what is your industry, so now we are talking
about product and product development and product sales and business and how it all stacks
together. So the problem that we have and what we found is clarity and focus. What are you
and what do you do?”
Respondent 3 commented on maybe overstretching themselves in the venture, “I think we
have two businesses and that is one too many; clarity and focus is currently big for us.”
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5.2.4 Scaling
Respondent 1 communicated a definite intention to growth far beyond current size, “In terms
of growth, scaling and going forward, you don’t put in the hard yards just to like stay the
same size. Our market is so small here. It is absolutely insignificant on a global scale. It is
business and we definitely want to scale in the long run. I think we can definitely scale
without losing our identity. We just need to define what scaling means for us and how much
bigger we should go, it is part of the journey. Scalability just means we need to build more
products and build the channel that it gets there. For me scalability is not as much on the
production side, it is more on the clarity of the message side. It’s tricky but we’re looking at
scaling in a disruptive way in the next three years.”
5.3 Learning Approach
This family code shows the respondents’ general attitude to aspects of learning. From a
theoretical point of view, this section is concerned with how South African entrepreneurs
engage in continuous learning as opposed to intuitive isolated planning.
Learning Approach Percentage
Past Mistakes 100%
Lack of Initial Business Knowledge 80%
Continuous Learning 80%
5.3.1 Past Mistakes
Respondent 2 reported on the importance of matching entrepreneur character, strengths and
preferences with the type of venture, “I picked an industry which was not suitable for my
personality. Sitting in front of a computer the whole day is not for me, you know, you live
and learn. It was quite an expensive exercise to change industries, but I am very happy with
what I am doing now. So I think it is almost like you try to figure out what you want to do
through a process of elimination, rather than having a set goal and moving towards that.
You know, this works, this doesn’t work. At the end of this year I would have been in
business for seven years and I feel a lot more mature as far as what the business is concerned
and what I did two or three years ago.” One interesting aspect might be how these
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preferences seem to change with time and maturity and the implications for longevity or the
lack thereof in a particular industry.
5.3.2 Lack of Initial Business Knowledge
Respondent 1 acknowledged his/her current lack of academic knowledge and practical
experience in business, “We’re not hardcore business people.”
Respondent 5 reported on his insecurity as an young entrepreneur because of a lack of
business knowledge, “One has to remember we’re doing something new and we don’t have
years of experience. So we kind of feel on the back foot in terms of confidence because of a
lack of personal track record.”
Respondent 2 commented after a few years of experience and learning practically, “I should
have equipped myself better with how a business actually works, the nuts and bolts of how a
business works, like, what are creditors and debtors, invoicing and proforma, you know, all
of those kinds of things. I didn’t do any business subjects at school. I think if you don’t have
the business understanding of how a business works, then you make it very difficult for
yourself and that is what I have done.”
Respondent 4 also reported a skills deficit and a possibility of unbalanced skills in the team,
“Our team was very good at being creative, but the business side is not one of our strong
points.”
5.3.3 Continuous Learning
Respondent 5 revealed his/her knowledge gained from past experience, revealing the reason
why continuous learning should be important for longevity in start-up ventures. “It was part
of our strategy in a saturated market. If you come into a market and you’re undifferentiated,
then nobody has an incentive to get to know who you are. You need a client base, but we held
onto that original strategy for far too long.”
Respondent 3 declared the need for more business knowledge, “I am still learning, I am not
nearly where I have to be in terms of the knowledge and the theory of how business works.”
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Respondent 2 summarised a very common theme of slacking in the areas where there is a
lack of interest, in this case, general business administration. Outsourcing these functions to
a certain extent in a practical learning environment where knowledge and insight can be
gained might be a prudent way to deal with these less exciting business functions. “We had a
fantastic session with a business coach to get ourselves ready for next year. But it was not
what any of us like doing. Which is a quick way to get in trouble but we caught it in time and
now we’re fired up for having it done properly next time.”
Respondent 1 reported on a full circle of acquiring new knowledge, taking the lesson onboard
and changing the business model accordingly. “We learned a lot about budgets. We only
recently learned that our advertising clients budget one year in advance. So if you don’t get
them to commit for advertising in the beginning of the year it is very difficult to get funding
for the last three quarters’ issues. We had to change our business model to encourage
advertisers to sign for advertising on an annual basis and not per issue.”
5.4 Attitude towards Change
This family code indicates the respondent’s general approach and ability to embrace
inevitable change. During reflection in the interview process, specific examples of internal as
well as external change experiences in the ventures have been deliberated. From a theoretical
point of view, this section is concerned with how South African entrepreneurs engage with
the iterative design process in which continuous adjustment is embraced instead of execution
according to a premeditated plan.
Attitude towards Change Percentage
Adaptability 100%
Innovative Ability 80%
Revision of Goals Period 80%
Speed of Change 80%
5.4.1 Adaptability
Respondent 4 had such a drive to bring a certain product/service to the market that he/she
showed willingness to switch from a for-profit to a not-for-profit venture. “When we first
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started we intended the business to be profitable, not an NGO. At the time we started the
magazine industry started dying and it was not good timing and its completely advertising-
based because we wanted it to be free. So that was somewhat challenging. We have since
recognized that it is more important for us to get the message out, and in order to make it
sustainable we need to find a way that is not only based on advertising. Our goal is to
spread the information in our magazine but we realised in order to be sustainable we will
have to make it profitable.” They started accepting corporate sponsorship to support the
business model in addition to the advertising income. They also built a relationship with the
department of health for more financial support. The relationship with the department of
health was a sensible one because they had the same goals and aspirations in a way.
Respondent 2 gave an example of a costly change in strategy, “Adaptability is huge. For
example, we had a studio; space next to the studio became available so we took more space
on. The rates were reasonable, so we made the call, it became our retail space. Then we
found that we were in the wrong retail environment, the space was not suited to us. So we
changed that, because certain products were not moving.”
5.4.2 Innovative Ability
Respondent 1 gave an example of how quick iteration of strategy and approach enabled them
to save the venture, “We started when the recession hit this industry specifically. All the
investors kept saying that their budget has been cut and that they are unable to support us.
But we still had to make ends meet. This financial pressure on the supply side caused us to
try a new strategy of acquiring sponsorships to fund our initiatives; it was something we
haven’t thought of before. So the dip in funding for this industry was a good learning curve
for us, it made us get creative and think outside the box, instead of going the original route.”
5.4.3 Revision of Goals Period
Respondent 5 argued that annual reviews are enough for their industry, “We review our
approach at year end.”
Respondent 1 observed that review period could be an important point on the agenda to
ensure innovation and change, “Don’t know why we review only annually, I guess that is
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when we make time for it. We have not been managing our business by financial reporting,
so there is no need to revise only when the accounts update the financial statements.”
5.4.4 Speed of Change
Respondent 1 acknowledges that he was cynical of employing more people and purposefully
postponed this important change for the venture. “One big change was I used to do
everything by myself and then it came to a point where I realised this is not sustainable.
There is a lot of work out there and I wouldn’t be able to do it all on my own. So for me to
take that step and employ someone else, it was quite a big step for me.”
Respondent 2 agreed that the venture could have benefitted from a more proactive marketing
media strategy, “We did not innovate fast enough.”
Respondent 5 reported on the importance of the timing of particular change in the venture,
“Then we started to understand pricing margins. We did not understand pricing models as
well as we should have, it cost us dearly. Even now we’re restructuring the business.”
Respondent 4 reported on imbalances in the venture owing to sudden demand for the services
and limited expertise to provide the service, “Our skills development was not fast enough.”
5.5 Characteristics of the South African Entrepreneur
This family code captures the human aspects of the respondents that might impact on
business model decisions and orientation towards lean start-up principles. The researcher
noted typical character traits in all the South African entrepreneurs interviewed. From a
theoretical point of view, this section is concerned with the South African entrepreneur’s
character, aptitude and preferences which might impact on the transferability of the lean start-
up principles in their ventures.
Characteristics of the SA Entrepreneur Percentage
Driven by Passion 100%
Time Constraints 80%
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Inherent Optimism 80%
Past Experience and Current Skillset 80%
5.5.1 Driven by Passion
Respondent 3 explained how he and his partner trained while working for someone else,
while building expertise to follow their own passion. Starting their own company provided
more ‘creative feedback’ on a more regular basis, “We practiced for a number of years and
we saw that it offers us a shorter creative life-cycle. It was a time that we wanted to do
something for ourselves on the one side and secondly we wanted to express our creativity in a
short life-cycle. The creative cycles in the industry we came from were too long.”
5.5.2 Time Constraints
Respondent 1 reported that time is a severe limiting factor for his/her moonlighting venture,
“I don’t have as much time as I would like to have. If I was able to work on my venture
fulltime we would skyrocket.”
Respondent 5 reflected on time management and his commitment to review goals more often
in order to save time. This respondent alluded to the fact that time constraints are a key
factor in his life and business venture, “I think you could do monthly evaluations of where
you are in terms of your goals and then make adjustments as far as that is concerned, but we
live such challenging lives you know, you can’t take too much on, you got to keep this very
simple. I think an important lesson for me, cause I take on too much, was to cut it down to
the basics and that’s it. I think that is a valuable way of organizing your business.”
5.5.3 Inherent Optimism
The researcher observed high levels of optimism bias in the majority of the respondents.
Respondent 1’s attitude and expectations for the future, “I think next year will most certainly
be better.”
Respondent 5’s believes that a certain initial strategy, which had to be adjusted in order to
become viable and sustainable, didn’t need any adjustment, “I still think it is a superb idea.”
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Respondent 4 voiced these words, after explaining how the current year was a major
challenge and how the following year might be better. The respondent could not explain the
logical basis for the statement, “We are sorted for next year.”
5.5.4 Past Experience and Current Skillset
Respondent 5 explained the key factor of their venture’s successes in terms of teamwork and
team skills, “Balance, have a team of people that has diverse skills and ability.”
Respondent 2 explained how their venture started as a combination of past experience and
acquired skills, “My involvement in this industry came from a combination of factors, my past
experience of going through that process myself, my interest in this industry and my passion
for the service. I was a freelance publisher for a number of years before I realised there is a
gap in the market in terms of people who publish their own books.”
Respondent 3 also mentioned that experience and skills, combined, lead to a more viable
strategy for the venture, “We have a mixture of skills in the team but my personal experience
also played a major role in identifying the niche market for the product.”
Respondent 2 gave more proof of how initial knowledge and past experience in a certain
industry might contribute positively to ventures start-up in that industry, “That’s why we
started this venture because we had done it professionally and we understood the industry.”
5.6 Applied Lean Practices
This family code summarizes the proof of applied lean practices in the business models of the
respondents. Without alluding to lean start-up principles during the interview process, the
researcher identified clear examples of lean practices in all the respondents’ business models
during operational and strategic reflections on the ventures and business models. From a
theoretical point of view, this section is concerned with how South African entrepreneurs
have successfully tried and tested lean start-up principles with positive results.
Applied Lean Practices Percentage
Design Constraints 50%
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Financial Constraints 100%
Human Resource Constraints 80%
5.6.1 Design Constraints
Respondent 2 reported on successfully implemented lean practices in their start-up venture in
terms of design, “Taking our products to market and incubating it in a way we tried to
incorporate principles of the tech industry, lean start-up and the methods of Toyota. We have
tried to see how we can incorporate these principles in our design, like designing certain
panels that can be repeated throughout. Does it apply to us; does it work for us? We have
taken that on to put it through the test. We have seen savings in our material costs by going
leaner.”
5.6.2 Financial Constraints
Respondent 5 reported on successfully implemented lean practices in their start-up venture
brought about by financial pressures, “When we started out, our idea was superb, but not
sustainable. Our business model was built on the idea of posting magazines to customers but
postage costs were far too high. We followed this model for the first couple of issues and
then realized that we will have to switch to sending bulk copies to specific locations where
partners distribute it.”
Respondent 3 also reported on successfully implemented lean practices in their start-up
venture brought about by financial pressures, “When we started we made a number of foolish
mistakes. Our distribution was too expensive; we had to pursue key partnerships in order to
lower the costs associated with getting the product to the customer. Reducing the
distribution costs while earning the right amount of income, we realised that it (finances) can
balance out.”
5.6.3 Human Resource Constraints
Respondent 1 reported on successfully implemented lean practices in their start-up venture
brought about by limiting human resource for the business model, “We are lean in terms of
employees, we only employ on a non-permanent basis. All our team members have day jobs
as well. We also outsource production and other functions associated with high capital
expenditure and unnecessary assets, but we didn’t start this way.”
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Respondent 4 reported on successfully implemented lean practices in their start-up venture
brought about by limiting human resource for the business model, “Another one of our giant
learning curves was the way we started out as a non-lean business model. We were planning
to have all three of us on a permanent half-day basis/salary with an office and we would go
direct to the individual posting of the magazine. We now take it as lean as is humanly
possible and we do it on a non-permanent project basis. We all freelance and have other
steady income. We cover our expenses so that we don’t go into debt, but we are not making a
profit.”
SECTION 6: ANALYSIS AND DISCUSSION
The findings from the five South Africa respondents provided rich information that could
now be compared to the literature and the theoretical lean start-up principles. This
comparison between practices and the principles will expose divergent and convergent
aspects. The researcher will use the balance, between divergent and convergent aspects, as a
mechanism to assess the level of transferability. To this end, it is necessary to analyse the
main findings of the research.
The research revealed that South African entrepreneurs are both strategically and
operationally positioned for interaction with their community. Ries (2011) noted that
entrepreneurs need to: interact with the customer as soon as possible; leave the guess work
behind, and get to know what is important for the customer, especially during the start-up
creation process. All of the respondents showed clear examples of interaction with customers
and examples of how customers contributed to the knowledge with which they design
products and services. In terms of customer interaction, the South African entrepreneurial
practices seem to be convergent with the principles of lean practices.
Writing a business plan is a prudent way for entrepreneurs to systematically acquire:
knowledge of the industry, important information about the potential market for their
products and services and the position of current competitors in the market. While some
observers have shown that planning impacts positively on new ventures’ success rates
(Gartner and Liao, 2005), many others argue that entrepreneurs can spent their time better by
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interacting with customers dynamically in order to discover viable strategy over time (Bhide,
2000; Brinckmann, Grichnik, & Kapsa, 2010). The two schools of thought that emerged
since 2011 are planning versus discovering orientation. The traditional business plan
approach, if executed incorrectly in start-up ventures, could form part of what Ries referred to
as ‘guess work’. In fact, from the literature, it was clear that entrepreneurs deal with high
levels of uncertainty by questioning the validity of a premeditated business plan. Constant
change in technology, application of technology and customer needs further discourage the
planning methodology. The findings confirmed the same trend in South African
entrepreneurs. Only one respondent reported that they started with a very basic business
plan. All the other ventures had no business plan but rather business models that facilitated
the emergence of strategy through inputs of the end user. While the absence of a business
plan is not categorical proof that the venture is following lean start-up principles, it is
however an indication that the business model is geared towards discovering a repeatable and
scalable strategy dynamically as opposed to executing according to a preconceived intuitive
plan. In terms of strategy, the South African entrepreneurial practices seem to be convergent
with the principles of lean practices.
The fact that South African entrepreneurs have strong customer interaction has been
discussed. The next logical question is whether entrepreneurs act on the information they
receive from the customer. Do new venture entrepreneurs in South Africa have the ability to
learn continuously or do they have the tendency to execute to a premeditated plan? From the
literature it is clear that co-creation with the customer is the enabler for continuous learning
for the start-up entrepreneur (Blank, 2006; Furr and Ahlstrom, 2011; Ries, 2011). All
respondents revealed that they made strategic errors in the past and 80% gave clear examples
of embracing continuous learning on a regular basis. Respondent 1 noted, “We learned a lot
about budgets. We only recently learned that our advertising clients budget one year in
advance. So if you don’t get them to commit for advertising in the beginning of the year it is
very difficult to get funding for the last three quarters’ issues. We had to change our business
model to encourage advertisers to sign for advertising on an annual basis and not per issue.”
In terms of learning approach, the South African entrepreneurial practices seem to be
convergent with the principles of lean practices.
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While these and other learning experiences might be elementary and require only minor
operational adjustments, some challenges require entrepreneurs to acquire new skills, or
engage in activities that they are not naturally interested in. How do the South African
entrepreneurs respond to required learning, which is outside the boundaries of preferred
behavior? These learning experiences might be far more difficult in the short term. In fact,
in terms of life style choice, entrepreneurs often migrate away from these undesirable
requirements in order to pursue their specific passions. For example, respondent 2 reported,
“I picked an industry which was not suitable for my personality. Sitting in front of a
computer the whole day is not for me, you know, you live and learn. It was quite an
expensive exercise to change industries, but I am very happy with what I am doing now.”
Acquiring new skills is often a painful experience and entrepreneurs need to create change-
based momentum (Miller and Friesen 1980) to successfully bridge the skills gap. However,
this momentum is difficult to create, especially if the skills are outside the natural strengths or
interests of the entrepreneur. Respondent 4 reported, “Our team was very good at being
creative, but the business side is not one of our strong points.” Respondent 2 reported, “We
had a fantastic session with a business coach to get ourselves ready for next year. But it was
not what any of us like doing. Which is a quick way to get in trouble but we caught it in time
and now we’re fired up for having it done properly next time.” From these examples, the
researcher notes the skills gap that often exists between current aptitude or preferred behavior
and required learning. Starting new ventures in a complex resource-stricken environment
requires cross functional skills and some of these skills are often outside the practitioners’
preferred behavior and personal interests. The literature suggests that entrepreneurs normally
resort to high levels of social skills and network embeddedness (Adler and Kwon, 2002) to
bridge these gaps (Holt and Macpherson, 2010). Complexity theory suggests that
collaboration is a key component in complex business environment (Snowden and Boone,
2007) where multiple role-players engage to find solutions. Bricolage (Lévi-Strauss, 1967)
and bootstrapping techniques (Sequeira, Mueller, and McGhee, 2007) are often employed,
with great success, to creatively bridge the personal skills gap experienced by practitioners.
However, the findings exposed the fact that there are limitations to what skills individual
entrepreneurs prefer to acquire. If South African entrepreneurs refrain from building
partnerships or embracing consultation in order to compensate for this skill gap, they might
resort to execution according to premeditated plan. With this in mind, in terms of a learning
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approach concerning skills outside preferred behavior, the South African entrepreneurial
practices seem to be both convergent and divergent with the principles of lean practices.
As highlighted in the literature, owing to the innovative nature of discovering new markets
and specific customer needs, Christensen (1997) argued that suppliers of products and
services and their customers should discover new markets in close collaboration. This
implies that ventures implement emergent strategy and continuous change in order to adapt
perpetually. However, the importance of clarity and focus in terms of overarching venture
vision and mission cannot be over-stated. The research confirmed this argument with 80% of
the respondents declaring that clarity and focus are extremely important in their current
business activities. The majority of this 80% had clear examples of how past failure was
rooted in the lack of clarity and focus in their businesses. Respondent 2 reported, “We tried a
lot of things and one thing we realized is that we can’t be great at everything.” Respondent 4
reported, “This whole thing of multitasking is misleading. If you want to do a proper job you
have to focus on one thing at a time. Focus on one thing, do it phenomenally well and grow
from that.” Respondent 5 reported, “So the problem that we have and what we found is
clarity and focus. What are you and what do you do?” Respondent 3 reported, “I think we
have two businesses and that is one too many, clarity and focus is currently big for us.” A
word of caution for the misconception that continuous change means ‘nothing remains
constant’ is in order. While products, services, tactics, markets and customer needs might
change significantly over time; overarching strategy and company identity should be clear
and focused by the entrepreneur and the employees of the company. In terms of clarity and
focus, the findings from the South African entrepreneurial practices seemed to introduce an
area that necessitates divergent behavior on strategic and tactical level respectively. While
this idea or conflict in focus is not a new revelation, it still has powerful implications for
practitioners and practitioner education.
One clear shortcoming of the lean start-up principles and their application in a developing
country is the lack of inherent business skills of entrepreneurs. The lean start-up principles
originate in a first world country and were applied in the technology industry. The
importance of relevance of traditional business education should not be underestimated
during grassroots business level application of these principles. Respondent 1 acknowledged,
“We’re not hardcore business people.” Respondent 5 reported, “One has to remember
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we’re doing something new and we don’t have years of experience. So we kind of feel on the
back foot in terms of confidence because of a lack of personal track record.” Respondent 2
commented, “I should have equipped myself better with how a business actually works, the
nuts and bolts of how a business works, like, what are creditors and debtors, invoicing and
proforma, you know, all of those kinds of things. I didn’t do any business subjects at school.
I think if you don’t have the business understanding of how a business works, then you make
it very difficult for yourself and that is what I have done.” Respondent 4 also reported, “Our
team was very good at being creative, but the business side is not one of our strong points.”
In terms of general business skills deficiency, the South African entrepreneurial practices
seem to be divergent with the principles of lean practices.
A full iteration of the design, measure and learn feedback loop for products and services
should be accelerated in order to increase the speed of change and innovation in start-up
ventures. According to Ries, “The fundamental activity of a startup is to turn ideas into
products [or services], measure how customers respond, and then learn whether to pivot or
persevere. All successful startup processes should be geared to accelerate that feedback loop
(Ries, 2011, p.18).” The findings in this research suggest that South African practitioners are
very successful in achieving sufficient iteration speeds, especially if the longevity of a start-
up venture is at stake. All respondents could site examples of how they implemented timely
iterations successfully to improve the viability of the strategy of the venture. Respondent 5
reported, “When we started out, our idea was superb, but not sustainable. Our business
model was built on the idea of posting magazines to customers but postage costs were far too
high. We followed this model for the first couple of issues and then realized that we will have
to switch to sending bulk copies to specific locations where partners distribute it.”
Respondent 3 reported, “When we started we made a number of foolish mistakes. Our
distribution was too expensive; we had to pursue key partnerships in order to lower the costs
associated with getting the product to the customer.” Respondent 1 reported, “We also
outsource production and other functions associated with high capital expenditure and
unnecessary assets, but we didn’t start this way.” Respondent 4 reported, “Another one of
our giant learning curves was the way we started out as a non-lean business model. We now
take it as lean as is humanly possible and we do it on a non-permanent project basis.” In
terms of iteration speed, the South African entrepreneurial practices seem to be convergent
with the principles of lean practices. Financial constraint, as experienced by the majority of
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the respondents, facilitates faster venture innovation. An abundance of finances often leads
to overspending and less prudent strategies with fewer iterations (Sull 2004). Over time, with
high iteration speeds, ventures will achieve viable strategy as the initial strategy is improved
constantly (Christensen, 1997). In terms of iteration speed, the South African entrepreneurial
practices seem to be convergent with the principles of lean practices.
The literature is divided on the significance and benefit of early financial support for start-up
ventures. Some scholars argued that a resource-stricken business environment is good for
general business prudence and focus, in terms of moving from initial to viable strategy before
scaling viable strategy. Some demonstrated that an oversupply of financial resources
diverted the entrepreneur’s focus to inessential business functions and became
counterproductive and wasteful. Other studies found that ventures that had early financial
support were more likely to survive. The research failed to categorically confirm of refute
any of these previous findings in literature. However, the researcher observed that financial
pressure and the resource-stricken environment of the studied start-up ventures are the
foremost motivator for entrepreneurs to apply lean start-up principles in the ventures.
SECTION 7: RESEARCH CONCLUSIONS
The researcher embarked on assessing the level of transferability of lean start-up principles to
South African entrepreneurial ventures. At this time it might be valuable to consider the
merit on which transferability would be judged. The strongest indicator of transferability
would be findings that show current successful application of these principles in South
African start-up ventures.
To this end, phenomenological approach was adopted to explore current practices of start-up
businesses and the entrepreneurs behind these start-ups. Before the interview process started,
the constructs of start-up ventures were summarized in a broad literature review. Five South
African entrepreneurs were engaged for up to two semi-structured interviews each.
Strategies, operations and administration of the ventures during the critical start-up phases
were discussed at length without any preface, made by the researcher, concerning the lean
start-up principles. With this new-found knowledge about the inner workings of the start-up
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ventures in South Africa, the researcher coded the data from the interviews. The 22 sub-
codes that emerged were subsequently organized into 6 most prominent themes or family
codes. The family codes were: Community Focused, Start-up Strategy, Learning Approach,
Attitude towards Change, Characteristics of the Entrepreneur and Applied Lean Practices.
The conclusions were reached by comparing the collective response from South African start-
up entrepreneurs and the character of their start-up ventures with the theory and literature on
lean start-up principles.
In general, the research has highlighted strong convergence between the practices of
South African entrepreneurs and the principles of lean start-up. There are a number
of aspects that emerged from the theory that have been echoed in the findings. Based
on this strong convergence, it would be appropriate to assume that the principles of
lean start-up are transferable to the South African entrepreneur.
In terms of continuous learning, outside the boundaries of preferred behavior, there
are limitations to the skills entrepreneurs prefer to acquire. At that boundary, life
style choice and personal preference are weighed against the requirements necessary
to ensure longevity of the venture. To bridge this skills gap, while remaining true to
preferred behavior, entrepreneurs could resort to techniques like outsourcing
The majority of South African entrepreneurs function in complex resource-stricken
environments. These inherent constraints of the South African business environment
necessitate fast iterations of strategy as a means to longevity. As a result, the research
suggests that South African entrepreneurs are already accustomed to high iteration
speeds.
Certain industry types and start-up venture types are inherently better positioned for
the application of lean start-up principles.
Half of the respondents have previously engaged with lean start-up principles in
practical application and while researching venture start-up literature.
Entrepreneurs can be very successful despite a lack of business education and general
business skills. However, the ‘hands-on’ practical approach to venture start-up
suggested by lean principles cannot substitute for hardcore business skills that
prospective entrepreneurs might need in order to scale the venture in future.
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However, this research is by no means conclusive and there remains scope for further
examination of the topic. The following limitations have been identified.
Owing to time constraints and methodology only five respondents were used to gather
data on the practices of South Africa start-up ventures.
The convenience sampling method, used to identify viable respondents, limits the data
to a very specific geographical location. This limits the researcher’s ability to
extrapolate conclusions to the entire population.
The selection of the most prominent findings and the generation of the emerging
codes were based purely on the researcher’s interpretation of the data. Therefore, the
analysis is vulnerable to researcher bias.
Even with such limitations, the researcher contributed to this under-researched topic. Start-
up phases of new business ventures are innovative by nature and innovation remains a very
challenging arena for research and analysis. Consequently, there are ample opportunities for
further research into this field.
SECTION 8: FURTHER RESEARCH RECOMMENDATIONS
Owing to geographic constraints of the convenient sampling method, a comparative study
with entrepreneurs in other regions of South Africa would add value and reliability to the
conclusions reached in this study.
Even though the study was not concerned with exploring the relationship between level of
transferability and start-up venture type, the researcher noticed that some venture start-ups
and their industries are inherently more suitable for lean practices. The researcher notes that
the lean start-up principles originate in the information and technology industry. Over the
last decade, as a result of reduced cost of telecommunication and expansion of the internet,
users became accessible and affordable in terms of entry barriers. Further studies are
recommended to identify the industries and the types of South African ventures for which the
application of lean start-up principles could be most appropriate. Such findings would be a
positive move towards defining industry-specific and type-specific heuristics for the
application of lean start-up principles.
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One of the major findings in this research was the lack of general business skills experienced
by the majority of respondents. While the lean start-up principles propose a dynamic hands-
on approach to venture start-up, there is merit for basic business planning and more
importantly general business education to acquire the much needed administration skills. The
researcher notes that the origins of the lean start-up principles are in the technology industry
in first world countries, which are associated with higher levels of basic education and
business administration skills. These and other business environment differences might
impact on the applicability of lean start-up methodology. Further studies into the relationship
between lean start-up methodology and basic business education levels of practitioners will
be valuable to application of lean principles.
The build-measure-learn feedback loop encourages entrepreneurs to iterate through
hypothesis testing. Ries (2011) pointed out that the fundamental action applied in this
process is pivoting of strategy or persevering with the current strategy. While this research is
not orientated towards discovery of the full complement of the conditions that underlie this
fundamental decision, it recognizes the need for further investigation into what ‘pivot or
persevere’ constitutes. The lean start-up principles as described in Ries (2011) are very
vague as to the conditions and merits for the application of this principle in particular. There
are no practical guidelines on the pivot or persevere process. Further studies to ‘unpack’ the
meaning of pivot or persevere for the practitioner will add value to the applicability of this
principle.
SECTION 9: IMPLICATIONS FOR ENTREPRENEURS IN SOUTH AFRICA
South African entrepreneurs have applied some of the lean start-up principles in their
ventures with great success. Further to this, the South African business environment lends
itself particularly well to the application of lean start-up principles. The researcher
summarizes the following implications of this study for practitioners and entrepreneurs
starting new ventures in South Africa.
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The conflict in the literature between the planning vs. discovering orientation has been
analysed and discussed. This might leave the practitioner undecided on the matter of
business plan creation for start-up ventures. The researcher believes that the essence of the
matter is less about the decision to write a business plan or not and more about the underlying
intention. Whatever planning the entrepreneur embarks on during the initial phases, the
intention of the start-up business model should always be dynamic discovery of the viable
strategy as opposed to meticulous execution according to an intuitive preconceived plan.
This will ensure a responsive business, ready to move naturally from initial strategy towards
viable strategy and ultimately to the point where this viable strategy can be scaled. Feedback
from the participants in this study highlighted the importance of strategic clarity and focus,
despite the need for perpetual adaptability and change on a tactical level. Consistency, clarity
and focus in terms of business identity on a vision and mission statement level is a subtle but
clear distinction from continuous change and constant innovativeness that is called for on a
tactical level. With this in mind, it is clear that the traditional business plan development
process is a helpful structured framework for entrepreneurs to define, communicate and
establish business identity. Clear corporate identity will assist the practitioner during
imminent focus and clarity related challenges in the future.
The difference between current aptitude and future required skills, outside preferred behavior,
has been analysed and discussed. This might leave the practitioner in a situation where life
style and personal preferences must be weighed against the future requirements of a
successful venture. Whatever tactic the practitioner applies to bridge this skills gap, the
findings seem to suggest that it is more about partnering with individuals that already possess
the skills that are required and less about endeavoring to acquire skills that are outside the
practitioners’ field of interest. To this end, practitioners can benefit most from techniques
like outsourcing to ensure that high levels of personal motivation are maintained and that the
venture remains true to its core business function.
Considering the rate of change in business environments today, the researcher believes that
the focus on continuous learning for start-up venture entrepreneurs is more about ensuring
dynamic capabilities of the venture and less about developing specific individual expertise in
a specific area. Specific skills and heuristics of past application might become obsolete in the
near future. Dynamic capabilities would serve the venture well in terms of adapting to the
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ever-changing need of customers and markets. Practitioners should explore the impact that
this orientation towards dynamic capability of the venture would have on strategic decision-
making regarding revision periods, performance indicators, capital expenditure and asset
ownership. Dynamic capabilities are all about the configuration of resources in the pursuit of
longevity of the venture and not about an individual resource itself.
While specific expertise in a particular area might become obsolete with change, general
business knowledge and skills are more lasting. In fact, respondents reported daily
challenges as a result of general business knowledge deficit. Despite many years of
experience as practitioners, the majority of respondents confirmed a need for general business
knowledge and skills. The data suggests that higher levels of business skills would have
translated into more success in their start-up ventures. The need for general business
education and business skills is implied for prospective practitioners.
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APPENDICES
Appendix A: Differences between lean and traditional start-ups
Function Lean Start-up Traditional Start-up
Business
Model Risk
search for a repeatable and scalable
business model; less risky; invest after
viable strategy emerged
execute against a business model,
more risky, invest upfront
Planning Cycle experimentation; failing fast; expected
failing; fix by iterating on ideas and
pivoting away from ones that don’t
work; agile development; nimbleness
and speed.
elaborate planning; failing equals
failure; exception; fix by firing
executives; year-long
development cycles; execute
according to predetermined plan
Design
Orientation
customer feedback; continuous learning,
testing hypothesis; pivoting
intuitive isolated planning;
execute premeditated plan; follow
plan rigidly
New Product
Development
get minimum viable product to
customer; iterative design; gathering
customer feedback; get out of the office
and test hypothesis
big design up front; use product
manager; prepare offering for
market following a linear; step-
by-step plan
Design
Objective
develop product iteratively and
incrementally; constant feedback
unveil finished product; cadenced
unveilings
Intellectual
Property
co-creation with customer; customer
feedback matters more
secrecy matters more; presuppose
knowledge of the customer
Strategy business model; hypothesis driven business plan; implementation
driven
Engineering agile development; build the product
iteratively and incrementally
fully specify the product before
building it
Organization customer and agile development teams
hire for learning, nimbleness and speed
departments by function;
hire for experience and ability to
execute
Source: (Blank, 2006; Furr and Ahlstrom, 2011; Ries, 2011; Christensen, 1997)
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Appendix B: The Research Instrument
Guiding questions for the semi-structured interviews:
Pri
nci
ple
s
Lit
eratu
re
Con
stru
cts
Rel
ate
d
En
trep
ren
eur
Con
stru
ct 20 Interview Questions related to the research topic:
“To what extent are the evolving insights into lean start-up principles
transferable to the South African entrepreneur?”
Get
ou
t of
the
bu
ild
ing
Cu
stom
er O
rien
tati
on
Idea
Cre
ati
on
Please tell me about your start-up business; what it is, and how it
started?
How did you come up with the idea?
Are your start-up products / services solving customers’ needs?
How do you know what your customers’ needs are?
Have you seen how your customers use your products / services?
Have you asked your customers what they think about the features
and benefits of your products / services?
On a day-to-day basis, how much time do you spend with the people
that you sell your products / services to?
What have been your most successful products / services in the past?
Why do you think those products / services were so successful?
Piv
oti
ng
Pro
du
ct D
evel
op
men
t
Ch
an
gin
g t
he
idea
Can you tell me about a time that you made the biggest change or
adjustment to your products / services?
Why do you think it was a successful change?
Did you use your customers to help you determine what to change of
your products / services?
In your view, what has been the most successful ways in which you
got this important information from your customer in the past?
How do you plan to get customer information and customer feedback
in the future?
Iter
ate
Rap
idly
Inn
ovati
on
Sp
eed
Sp
eed
of
Ch
an
ged
Can you tell me about a time when you made the fastest change
or improvement in your products / services in the past?
Why did you think that change was necessary?
How long did it take to implement that change?
How did you come to know that change was necessary?
Do you think you can improve the speed at which you change your
products / services in the future?
Do you think it is necessary to change often in order to improve your
start-up business or the products / services?
Do you think your customers’ needs for products / services will
change in the future?
How will you be able to know exactly when and how these customer
needs change?
Source of Lean Start-up Principles Terminology: (Ries, 2011)
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Appendix C: Consistency Matrix
Problem “To what extent are the evolving insights into lean start-up principles transferable to the South African entrepreneur?”
Sub-
problem
Transferable in terms of
customer orientation
Transferable in terms of
new product development
Transferable in terms of
innovative product change
Literature
Review Furr and Ahlstrom (2011)
Franke, Von Hippel, and Schreier
(2006)
Hauser and Clausing (1988)
Jansen (2004)
Von Hippel (2001)
Bogers, Afuah & Bastian (2010)
Christensen (1997)
Ries (2011)
Nelson (1991)
Bhide (2000)
Blank (2006)
Chesbrough and Prencipe
(2008)
Iansiti (1995)
Enkel, Gassmann and Chesbrough
(2009)
Lynskey (2004)
Ries (2011)
Katz and Luecke (2003)
Bamford, Dean and Douglas (2004)
Lauren and Salter (2006)
Piller and Walcher (2006)
Source of
data
Please tell me about your start-up
business; what it is, and how it started?
How did you come up with the idea? Are
your start-up products solving customers’
needs? How do you know what your
customers’ needs are? Have you seen how
your customers use your products? Have
you asked your customers what they think
about the features and benefits of your
products? On a day-to-day basis, how
much time do you spend with the people
that you sell your products to? What have
been your most successful products in the
past? Why do think those products were
so successful?
Can you tell me about a time that you
made the biggest change or
adjustment to your products /
services? Why do you think it was a
successful change? Did you use your
customers to help you determine what
to change of your products / services?
In your view, what has been the most
successful ways in which you got this
important information from your
customer in the past? How do you
plan to get customer information and
customer feedback in the future?
Can you tell me about a time when you made
the fastest change or improvement in your
products / services in the past? Why did you
think that change was necessary? How long
did it take to implement that change? How did
you come to know that change was necessary?
Do you think you can improve the speed at
which you change your products / services in
the future? Do you think it is necessary to
change often in order to improve your start-up
business or the products / services? Do you
think your customers’ needs for products /
services will change in the future? How will
you be able to know exactly when and how
these customer needs change?
Data
Type
Semi-structured Interviews
Open Ended Questions
Semi-structured Interviews
Open Ended Questions
Semi-structured Interviews
Open Ended Questions
Analysis Manual Interpretation of Codes Manual Interpretation of Codes Manual Interpretation of Codes