Examining the Lean Startup Methodology

Zenon Nowak

Submitted in partial fulfilment of requirements for the Bachelor of Business (Honours) Wexford Campus Institute of Technology, Carlow

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Acknowledgments

I would like to dedicate this thesis to my mother Bronislawa Krafczyk who has inspired and encourage me through my life long education process. A sincere thank you, I love you

I would also like to acknowledge my supervisor and lecturer Tomas Dwayer for his endless and invaluable encouragement and support while completing my dissertation.

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Abstract
Title of the Thesis Examining the Lean Startup Methodology. The Main Objectives 1) How efficient is the Business Model Canvas for planning and developing a Business Model and how does it compare with the traditional Business Plan? 2) How efficient is the lean startup methodology of conducting small experiments to validate the business assumptions of the new start-ups? 3) How effective is the lean startup methodology of conducting experiments to validate the business assumptions of new start-ups? Literature The Lean Start is new methodology introduced by Silicon Valley entrepreneurs. Today, Lean Startup have many followers and multiple of research was conducted by many researchers as Steve Blank, Eric Ries or Ash Maurya. Methodology In order to answer the research objectives, personal semi-structured interviews were conducted with; Darren Heaphy, the product manager from Scurri Web Service, Claudio Perrone a lean-agile management consultant and Tom Banville, the CEO of Wexford County Enterprise Board. The use of qualitative data to explore research topic has support (Tull & Hawkins, 1993) .
Conclusions

The conclusion highlight there are many common patterns between the respondents regarding Business Model Canvas efficiency. It is a great tool for planning the business but there are some limitations that need to be considered such as influence of the environment which in business exists or details of company financial data etc. The involvement of customers in new business development is a fundamental principle of Lean Startup Methodology and there is as much risk in development in "stealth mode" as in the more open Lean approach. Interviewees argue that, the collection of valid data may be an issue but well-designed experiments are key to reduce bias. Finally, the Lean Startup methodology increases the odds for business success by the elimination of risk through validation of hypothesis and assumptions and assist business to not focus on development of products that nobody wants. However, the Minimum Vitae Product (MVP) and all experiments need to well-designed in order to collect true feedback from customers. Recommendations The author would recommend to use of the Lean Canvas as the replacement of Business Model Canvas in early days of startup. Also, the experiments, assumptions and MVP needs to be well designed to show true and fair view of researched issue. The author is recommend to use Lean Startup methodology to reduce risk in new business ventures.

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Table of Contents
DECLARATION ......................................................................................... 1 Acknowledgments ..................................................................................... 2 Abstract ..................................................................................................... 3 Table of Figures ..................................................................................... 7 List of Tables ......................................................................................... 7 Chapter 1 Introduction ............................................................................ 9 1.1 1.2 1.3 Problem Statement ..................................................................... 9 Rationale for research................................................................. 9 The Structure of the Thesis ....................................................... 11

Chapter 2 - The Research Context .......................................................... 14 2.1 2.2 2.2.1 2.2.2 2.2.3 2.2.4 2.3 2.4 Introduction ............................................................................... 14 Scurri ........................................................................................ 14 Early days of Scurri................................................................ 14 Scurri Technology and Global Competition ........................... 16 Scurri team ............................................................................ 17 Scurri - go to market strategy. ............................................... 18 Entrepreneurship in Ireland ....................................................... 19 Conclusion ................................................................................ 22

Chapter 3 - Literature Review.................................................................. 24 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Lean Manufacturing The Origin of Lean Startup .................... 24 What Is Lean Startup ................................................................ 26 Business Model Canvas ........................................................... 29 Customer Development ............................................................ 33 Minimum Vitae Product ............................................................. 35 Criticism of Lean Startup ........................................................... 37 Conclusion ................................................................................ 38

Chapter 4 Methodology ........................................................................ 40 4.1 4.2 4.3 Aim of Research ....................................................................... 40 Research methods .................................................................... 41 Data Analysis ............................................................................ 44

5|Page 4.4 4.5 4.6 Details of interviewees .............................................................. 45 Limitations ................................................................................. 46 Conclusion ................................................................................ 47

Chapter 5 - Findings ................................................................................ 49 5.1 5.2 5.3 5.4 5.5 5.6 Introduction to findings .............................................................. 49 Profile of respondents ............................................................... 49 Research question 1 ................................................................. 51 Research question 2 ................................................................. 54 Research question 3 ................................................................. 57 Conclusion ................................................................................ 58

Chapter 6 - Analysis ................................................................................ 61 6.1 6.2 6.3 6.4 6.5 Introduction to Analysis ............................................................. 61 Research Question 1 ................................................................ 61 Research Question 2 ................................................................ 64 Research Question 3 ................................................................ 67 Conclusion ................................................................................ 69

Chapter 7- Conclusions and Recommendations ..................................... 71 7.1 7.2 7.3 7.4 Introduction ............................................................................... 71 Research Question 1 ................................................................ 71 Research Question 2 ................................................................ 73 Research Question 3 ................................................................ 74

References .............................................................................................. 76 Appendices ............................................................................................. 81 Appendix 1 ........................................................................................... 82 List of interviews questions ................................................................. 82 Appendix 2 ........................................................................................... 85 In-Depth Interview with Claudio Perrone.............................................. 85 Research Question 1 ........................................................................... 86 Research Question 2 ........................................................................... 92 Research Question 3 ........................................................................... 97 Appendix 2 ......................................................................................... 100 In-Depth Interview with Darren Heaphy ............................................. 100

6|Page Research Question 1 ......................................................................... 101 Research Question 2 ......................................................................... 105 Research Question 3 ......................................................................... 108 Appendix 3 ......................................................................................... 111 Interview with Tom Banville ............................................................... 111 Appendix 4 ......................................................................................... 118 Interview with Darren Heaphy - Data Reduction ................................ 118 Appendix 5 ......................................................................................... 123 Interview with Claudio Perrone - Data Reduction .............................. 123 Appendix 6 ......................................................................................... 128 Interviews Context Data Display ........................................................ 128

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Table of Figures
Figure 1 Lit Motors ................................................................................. 10 Figure 2- The Lean Startup Loop ........................................................... 27 Figure 3 - The Business Model Canvas .................................................. 30 Figure 4 Customer Development Process .............................................. 33 Figure 5 - Scurri Business Model Canvas .............................................. 51

List of Tables
Table 1 Interview with Darren Heaphy Data Reduction .............................. 119 Table 2 Interview with Claudio Perrone Data Reduction ............................. 124 Table 3 Data Display........................................................................................ 129

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Chapter 1

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Chapter 1 Introduction
1.1 Problem Statement

The Lean Startup approach proposes early interaction with customers, collecting feedback in the early stage of development and allowing customers to be more involved in the development process. Sometime businesses already know that a plan is not right and there is a need to change the business strategy but this can be very time consuming process. To implement the new concepts into a business model, often a plan needs to be re-written. The author believes traditional business planning methods limit the flexibility of the companies for dynamic change.

When starting a business, everyone wants to reduce the initial costs and reduce the risks related with the startup. The central question of this thesis asks is the Lean startup a solution to reduce uncertainty and improve success odds?

1.2

Rationale for research

The Lean Startup approach proposes early interaction with customers, collecting feedback in the early stage of development and allowing customers to be more involved in the development process. Sometime businesses already know that a plan is not right and there is a need to change the strategy but this is a very time consuming process. To implement the new concepts into a business model, often a plan needs to be re-written. I personal believe traditional business planning methods limit the flexibility of the companies for dynamic change.

10 | P a g e When starting a business, everyone want to reduce the initial costs and reduce the risks related with startup. Is the Lean startup a solution to reduce uncertainty and improve success odds?

Lean startup, while still in its infancy as an entrepreneurial approach, has been proven successful for companies including Dropbox and Lit Motors. Dropbox CEO Drew Houston stated that, the lean startup approach helped in in the process of the development of Dropbox in the early days. After implementing the lean startup principles, the company started iterating their product much faster in order to test the business assumptions and discover the need of Dropbox customers. Dropbox went from 100,000 registered users to over 4 million, just in 15 months of time (Ries, 2013). Lit Motors is an example of successful implementation of the Lean Startup methodology in the automotive industry. Danny Kim, the founder of Lit Motors, used the lean startup principles to prototype the Model-T of the 21st century, the concept of a merger between the motorcycle and car. Danny Kim argues that the Lean Startup concept of the

Figure 1 Lit Motors (Motal, 2011)

11 | P a g e Minimum Vitae Product helped in a big way with de-risking the concept and supported the quick development of a product that satisfied the customers (Ries, 2013).

Today The Lean Startup methodology have many followers across the globe. There are multiple startups that are successfully implement the new entrepreneurial methodology practices into their business models.

1.3

The Structure of the Thesis

Chapter 2 - The Research Context The purpose of this chapter is to present the entrepreneurship climate in Ireland and to present one of successful Irish startup that practically use the Lean Startup methodology in business development Scurri Web Service.

Chapter 3 - Literature Review The purpose of this chapter is to present literature related to Lean Startup.

Chapter 4 - Methodology The purpose of this chapter is to outline the research methodology. The author will present the aims of the research, the research method and the limitations.

Chapter 5 - Findings This chapter will present and discuss the research findings from the interviews conducted.

12 | P a g e Chapter 6 - Analysis This chapter will provide analyse of the research questions findings. The structure of that chapter will discuss each of the research objectives findings and how it links into existing literature.

Chapter 7 - Conclusions/recommendations The main purpose of this chapter is to provide the conclusions and recommendations on the findings and analysis of the research objectives presented in chapters five and six.

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Chapter 2

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Chapter 2 - The Research Context

2.1 Introduction

The purpose of this chapter is to present the context of the research project by providing an outline of Scurri.com and to present the entrepreneurship climate in Ireland.

2.2

Scurri

Scurri is an Irish technological startup, with headquarters in Duncannon. Scurri technology optimises the customer delivery experience, allowing merchants to effectively deliver on brand promises and drive customer loyalty.

2.2.1 Early days of Scurri

You really need to find a problem that is worth solving

Rory OConnor, CEO of Scurri

(yhponline.com, 2013)

Scurri Web Service was founded in 2010 by Rory OConnor. The initial idea of the business came when Rory was trying to order online a new set of alloys for his car. Second hand alloys are relatively cheap in comparison to brand new ones but after searching for a delivery supplier the total cost grew above the cost of the new wheels.

15 | P a g e That was the beginning of a new startup vision, the online company that connects delivery companies, e-commerce and their customers (yhponline.com, 2013).

The initial Idea was based on creating a website that would allow customers to pick from multiple choice of transport companies, an option that is best suited to the customer. Connecting through the Scurri software, the transport service companies will quote the price for each order based on their own pricing policy. In the first year of business the company focused on searching for the correct business model to deliver a new product. Scurri conducted multiple of experiments to test the business model hypothesis but most of them failed. It was a very difficult period for the startup because of limited amount of resources available. (yhponline.com, 2013).

The initial concept of Scurri business model was rapidly changing. The website traffic metrics indicated a big interest in the product however the Scurri team noticed that the time needed for the customer service was not acceptable and it would be a huge problem after scaling the product. Scurri needed to pivot the business model and look for an alternative solution (yhponline.com, 2013).

Scurri is given great support from Enterprise Ireland by participating in iGAP accelerator programme. The Scurri team was trained on how to use the Lean Startup methodology to increase the odds for success in a difficult software development market. The training was provided by the author of Lean Startup movement, Eric Ries, and also Sean Ellis the founder of Dropbox and Eventbrite (Fitzpatrick, 2012).

16 | P a g e Finally, Scurri spot an opportunity to provide a service for e-commerce merchants offering a platform that effectively manages high volumes of online orders by choosing the best delivery service, according to business-customers requirements.

The Scurri team discovered that the improved performance in the area of delivery had an effect on reducing the amount of the online cart abandonment (yhponline.com, 2013) and significantly increased customer satisfaction in their online shopping experience. The concept of Scurri software was to match the best suitable delivery service for each order by using business rules set by online retailers and allow to manage the delivery process in the most cost-efficient way. After validation of the new business model Scurri was ready to raise more funds. They used multiple of government grants and raised additional funds from private investors (Kennedy, 2014).

2.2.2

Scurri Technology and Global Competition

In the delivery management software market we can distinguish few companies that are in direct competition to Scurri with similar offer and already a well-established brand name. In the United States, the market leader position has ShipStation and the United Kingdom market is dominated by Metapack that is focused on large and medium size businesses. Scurris market strategy is to focus on delivering a maximum quality service and a careful analysis of competitive products with a aim to find aspects where Scurri could add extra value and differentiate from competition. As a result, Scurri found the first early adopters of new the software from dissatisfied customers of competition that were able to risk the transfer of part of the orders to the

17 | P a g e new platform. After analysing the feedback from these customers, Scurri quickly found the value proposition that would be a good alternative for competition products.

From technological perspective, using the cloud computing and python development language in the Scurri platform greatly increased the speed of software performance in comparison to already existing products.

2.2.3

Scurri team

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

Chief Executive Officer Rory OConnor - Prior to founding Scurri he performed various roles in Waterford Wedgwood, spending time in various sales, marketing and strategic project roles. Rory subsequently worked as a change management consultant with clients such as Heineken, Intel, Ogilvy and Siemens and as a project manager with AOL broadband. Rory has a number of business qualification including holding an MBA from Henley Management College.

The Product Manager - Darren Heaphy, was previously working in AOL Broadband and TalkTalk where he held the role of head of consumer operational communications. Darren graduated from WIT where he holds a BA in IT and a higher Diploma in Business Management.

18 | P a g e Chief Technological Officer Sonya Hogan. She previously worked with Baush and Lomb, TSSG in WIT and with another successful start-up Muzu.tv. Sonya graduated from WIT where she earned her BA and Masters in Software Development.

Customer Support Manager Pamela Keane. Pamela worked within the hospitality industry where she set up and managed a hotel and gained much of her customer service experience. Pamela maintains most of office duties such as customer service, preparing legal and revising agreements and managing the company cash. Pamela graduated from Law School.

Development team - The initial development of the product was outsourced to the external development company. By using the agile development and Lean Startup practices there was ongoing communication on daily basis with outsourced developers and every week Scurri was able to deploy next parts of the product features.

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

2.2.4

Scurri - go to market strategy.

Today, Scurri has few customers on board and by adding additional functionality to the platform they constantly introduce new customers together with quickly growing volume of process orders. The management strategy is to focus now mostly on implementing new curriers service to the platform and scaling of the product

19 | P a g e worldwide with the main focus on the UK market. Scurri opened an office in Google campus in London. Rory OConnor cited in siliconrepublic.com said:

Delivery remains a huge priority for both customers and merchants, ecommerce is accelerating and customers now expect Amazon-level service as standard Our technology gives growing online merchants the power to fulfil this need quickly and affordably. As one of the first purpose built cloud-based solutions in Europe Scurri has found a better way to serve the market, reducing the cost and resource draining complexity of current shipping solutions (Kennedy, 2014). Because of the aspiration to become global player on the delivery management software and willing to entry in 2014 to the United States market, Scurri wants to establish a representative office in Silicon Valley, California.

2.3

Entrepreneurship in Ireland

In the recent years Ireland entrepreneurs needed to challenge the effects of the last recession that enforce many entrepreneurs to finish business operations due to negative changes in the global business environment. Recession is a difficult time for many businesses that need to challenge verification of their business models in very difficult macro environment.

The last CPA Entrepreneurship Report (McCall, 2013) indicate that the climate for entrepreneurship in Ireland starts to improve due to reduced cost of doing the business, lower prices of labours and materials that lowered barriers to entry or opportunities in new technologies such as cloud computing. Tom Banville from Wexford County Enterprise Board, who conducted an interview with the author (transcript from interview could be found in appendix 3), noted that the recession forces many people

20 | P a g e to start thinking about developing their own business because of the consequences of losing their jobs and the difficult employment market. Tom stated that:

the majority of people who are attending the start to run business programme at the moment are unemployed people who are looking for other options, you know, rather than looking to get a job they are looking to start their own business so I think the recessions has created necessity entrepreneurs, new people who have lost their jobs or been made redundant and who feel there are not opportunitys for them in terms of employment so they are looking at self-employment as an option

Enterprise Ireland offers lots of support and assistance for Irish entrepreneurs, they offer multiple of workshops, trainings, grants and giving advice to people that want to start their business. Unfortunately, there is a small percentage of start-ups that survive the first three years of business operations. Tom also explain: there will be people that would want to start the business or just about to start the business or thinking about starting the business in the future once they will find out the information. So, out of that 300, my guess would be that, maybe 30% would go on to actually start the business. And then if you will look out of that 30%, year later maybe half are still in business and maybe two, three years later it would be half of that again would be still in business. It is risky, starting the business is: I always say it is easy to start the business but it is hard to keep it going.

Despite of the unfavourable environment some entrepreneurs recognise that this is the best moment to enter the market because of low barriers to entry and lower competition. Start-ups which are able to survive challenges in difficult time of economic downturn may become very successful after global economy will recover because of the business models that was created in that difficult time for some entrepreneurs. In opinion of Laura Erskine from MumterprenurClub.ie cited in CPA Entrepreneurship Report (McCall, 2013), the difficult environment is the best moment to establish a new business. Laura stating that:

21 | P a g e Recessionary or difficult economic times are the ideal time to establish a new business. In the last year alone, I have seen more small businesses than ever set up and even more importantly, they are all helping in supporting one another to succeed

(McCall, 2013)

Comparing to data from time before recession, in year 2007 almost half Irish population 46% saw business opportunities in their local area. In recent years these numbers fell down to 26%. In terms of early-stage entrepreneurs Ireland achieved 14 position in Europe with 6% of population that was involved in starting new business ventures (McCabe, 2013).

In global entrepreneurship the researcher found the two common trends: increasing number of female entrepreneurs and increasing influence of globalisation. In Ireland entrepreneurship is still mostly dominated by men starting up business. Irish female entrepreneurs represent just third part of all self-employed or new start-ups. This is a common pattern in other European countries. In sense of globalisation, Ireland noted an increase in new business customers base outside the country and almost a quarter of new ventures possess quarter of customers based internationally. Specific Ireland characteristic of small population and peripheral location contribute to the increase of that trend (McCabe, 2013).

Ireland offers great support for entrepreneurship. The Forbes magazine ranked Ireland as The best place for business stating that Ireland has a very high level of direct foreign investment, very attractive tax system, a good investors protection and also personal freedom (Badenhausen, 2013).

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2.4

Conclusion

Irish entrepreneurs need to challenge increasing global competition and sometimes operate in a very difficult economic environment. The use of Lean Start-up methodology may help to increase the chances of start-ups to survive on the market. The next chapter will outline the available literature that was previously published about The Lean Start-up methodology.

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Chapter 3

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Chapter 3 - Literature Review

The purpose of this chapter is to present information which has previously been presented by a mixture of authors and researchers. All of the material used was collected from journals, online resources and various publications. The information is specifically relevant to core elements of the Lean Startup methodology.

3.1

Lean Manufacturing The Origin of Lean Startup

The origins of Lean, which is one of the core elements of the Lean Startup, comes the from Japanese manufacturing industry, introduced by Toyota known as Toyota Production System & Just-In-Time (JIT) (Slack, et al., 2010).

The term Lean was introduced for the first time by John Kafcik (1988) in an article, Triumph of the Lean Production System published in Sloan Management Review. The lean approach quickly gained many followers who continued their research on the Japanese production system. James Womack et al., (1990) published a bestseller about the lean production system called The machine that changed the world. The authors describe one of the characteristics of lean as a process of waste elimination by operation management; focusing on product quality, supply chain efficiency and the continuous improvement of processes in manufacturing and engineering, known as Kaizen.

Masaaki Imai cited in Slack et al. (2010) notes that Kaizen is not only the improvement of the work environment but it is also the improvement in our personal

25 | P a g e lives, both the home and social life. Kaizen includes the involvement of everyone in the process, managers and workers alike. Masaaki Imai also points out the importance of commitment and self-discipline order to maintain everyday improvement. Masaaki suggests that the implementation of Kaizen should begin at the top level of management, who show the employee guidance, commitment and determination, passing the values of Kaizen to the lower level management and finally to the line staff employees. Kaizen means improvement, both in everyone and everywhere (KAIZEN963, 2013).

Philip Atkinson (2010) suggests that the implementation of Lean cannot be successful in an organisation where the culture opposes it. Lean requires such a high degree of cross functional working that any culture which counter acts this will fail. He argues that the organisational culture can evolve and could become the driver of organisational change.

Taiichi Ohno (1988) formally known as father of lean due to his commitment in development from early years, wrote in his book, Toyota Production System: Beyond Large-Scale Production, and described all of his personal life experiences in relation to the Toyota Production System and supply chain management (JIT) Just-In-Time, which is also a very important part of Lean Manufacturing.

Womack et al. (2006) published an important book about Lean Manufacturing Lean Thinking, where we can read about the importance of the Lean Culture and implications of the main concepts of lean with specific manufacturing examples of the concepts in action in a variety of industries. The authors also explain in that

26 | P a g e publication the importance of producing small batches in the Lean Manufacturing production process, arguing that, this will have an effect on the identification and resolution of problems in relation to quality if they arise as with small batches it is much quicker to reconfigure the small machines to the production demand.

3.2

What Is Lean Startup

The term Lean Startup was first introduced by Eric Ries (2008) on his personal entrepreneurial blog - Startup Lesson Learned. Ries explained that term Lean Startup derives from a connotation of Lean, in the sense of low-burn by using available open source software and iterative development, the minimising of waste in startup operations. Ries also argues that Lean startup is an application of Lean Thinking, defined by Womack et al. (2006) in their book Lean Thinking

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

1. Entrepreneurs are everywhere Eric Ries (2011, p. 8) suggests that you dont need to work in a garage to be a startup. A Startup has nothing to do with the size of the company, sector of the economy, or industry but is the specific stage and place that a company has whilst in their early business development searching for product-market fit. Ries describes startup as ...a human institution designed to deliver a new product or service under conditions of extreme uncertainty (Ries, 2010) .

27 | P a g e 2. Entrepreneurship is management - A startup is an institution, not just a product, so it requires management, a new kind of management specifically geared to its context (Ries, 2011, p. 8).

3. Validate Learning - Startups exist not to make money or to serve customers. They exist in order to learn how to build a sustainable business. This learning can be validated scientifically, by running experiments that allow us to test each element of our vision (Ries, 2009), (Ries, 2008) (Ries, 2011, p. 8).

Figure 2- The Lean Startup Loop (Ries, 2011) Build Measure Learn (known as Lean Startup Cycle/Loop) - The fundamental activity of a startup is to turn ideas into products, measure how customers respond, learn about your customers behaviour and needs. After analysing the metrics, entrepreneurs need to make decisions on whether to pivot (change direction) or persevere. All successful startup processes should be geared to accelerate this feedback loop (Ries, 2012), (Ries, 2008), (Croll & Yoskovitz, 2013) (Ries, 2011, p. 9)

28 | P a g e 4. Innovation Accounting - To improve entrepreneurial outcomes, and to hold entrepreneurs accountable, we need to focus on the boring stuff: how to measure progress, how to setup milestones, how to prioritize work. This requires a new kind of accounting, specific to the startups (Ries, 2011, p. 9).

Womack et al. (2006), notes that, in Lean Manufacturing the indicator of efficiency is the improvement of value-creating activities such as waste elimination and focusing on building the highest quality of products. Eric Ries (2013) stated that, the Lean startup adapted this idea into the context of entrepreneurship and this is why efficiency and progress are measured, not on the quality of products, but by validated learning. Ries argues that if 9 out of 10 startups fail the only one outcome from these business startup failures is the lesson to be learned from failure. For this reason the focus of lean startup is on the reduction of time needed in order to learn more about our assumptions using a scientific method of testing Lean Startup Loop. The author also points out, the life time of a startup is related with access to funding and cash burning. If startups reduce time needed to pivot, the odds for success will immediately increase.

Because the startup often builds products which nobody wants, the purpose of Lean Startup is to figure out what is the right product to build. This is carried out by engaging customers whilst in the development process and including their feedback into the product development process from the early stage of the startup (Blank, 2013) (Ries, 2008).

29 | P a g e Lean Startup leading researchers argue that the startup is not about the successful execution of the Business Plan, that leads no nowhere, but the startup is about searching for a problem worth solving and product market fit through validate learning (Ries, 2008) (Blank, 2013) (Maurya, 2012).

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

Use of Cloud computing and Open Source software to minimise operation costs. Application of the practice of agile software development. Application of customer-development process.

In an article Why the Lean Start-up Changes Everything, published in Harvard Business Review, Steve Blank (2013) stated that the time startups spend operating in stealth mode is not efficient. The dot.com bubble gives the evidence showing how important it is have involvement with customers whilst in the development process to avoid building products that no one wants.

3.3

Business Model Canvas

As stated previously, a very important factor for startups is searching for problems that are worth solving, searching for product-market fit and the creation of new business models which could make the enterprise successful on the market.

30 | P a g e Alexander Osterwalder (2004) found a new way of approaching the business model planning process which would eliminate the necessity of writing time consuming business plans and is much more flexible regarding change, innovation and also to test business assumptions. Osterwalder wrote The Business Model Ontology A Proposition in a Design Science Approach, where he introduced for the first time the concept of Business Model Canvas, a tool used as a replacement for the traditional business plan which very quickly gained many followers. Business Model Canvas offers powerful, simple tested tools for understanding, designing, reworking, and implementing business models. Osterwalder distinguished nine blocks on the Canvas that contain a series of hypothesis which need to be tested and by analysing the outcomes of these tests will help in business model prototyping.

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

Many entrepreneurs and business researchers quickly adapted the new idea into new business development processes. Steve Blank, author of Customer Development concept, stated at Stanford University Entrepreneurship Corner, the Business Model Canvas is an excellent tool in the Customer Development process due to its

31 | P a g e transparency, flexibility and ease of use when entrepreneurs need to test their business hypothesis (econer, 2012).

Steve Blank (2012) also noted that the Business Model Canvas could be used to test business assumptions before their implementation and in the book The Startup Owner's Manual Blanks explains how we can use the scientific approach while testing our business model assumptions.

Alexander Osterwalder (2010) also published an article on his personal blog that summarising the fit of Business Model prototyping, customer development process and social entrepreneurship. Osterwalder believes that a business model should consist of three phases:

Designing a starting model Iteratively adapting your starting model in response to market feedback (Customer Development process)

Scaling it when you nailed it

Osterwalder suggests that all three phases can be supported by the use of the Customer Development process and Business Model Canvas in order to map and discuss the business model, suggesting using Canvas as a tool in the testing process then, scaling the Business Model once business assumptions have been scientifically proved.

32 | P a g e Eric Ries (2011) found the Business Model Canvas to be a very valuable tool for every startup and included the concept as a core element of the Lean Startup methodology. Ries found that the Business Model tool fit very well with the LeanStartup-Cycle (build-measure-learn) and it is very well designed for use as a tool with the purpose of measuring metrics from our business experiments. Ash Maurya (2012) noted that the use of the Business Model Canvas is better in comparison to the traditional Business Plan in three important ways:

Speed Business Plans are a very time consuming process which usually take a few months and it is difficult to adjust when changes have a significant impact on business models. In compression, writing multiple Business Model Canvas, will take no more than one afternoon.

Concise The Business Model Canvas is very concise as the words used need to be very specific and entrepreneurs have 30 seconds to grab the attention of potential investors and just 8 seconds to grab the attention of customers which visit your website.

Portable Single page Business Model Canvas is much easier to share with everybody and, in effect more people have a chance to read all of it. Also, as mentioned before, it is much quicker to update and introduce changes.

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3.4

Customer Development

Customer Development methodology was described for the first time by Steve Blank (2013) in his publication The Four Steps to the Epiphany in 2005. Blanks outlined his views regarding entrepreneurship practices and the process of searching for market fit between products and market argues that no business plan survives the first contact with customers. The author describes startups as temporary organisations with the purpose of searching for repeatable and scalable business models and also points out that startups are not a smaller version of companies as the size of the business is irrelevant.

Steve Blank (2013) explain that the startups are not about execution of the plan but searching for scalable business model. The founders should go outside the buildings and talk to their customers to test their business hypothesis and start search for the facts behind their guesses.

Figure 4 Customer Development Process (Blank, 2013)

34 | P a g e Steve Blanks (2013) puts the startup life-time in four phases; discovery,

validation, creation and finally the creation of the company. If our business hypothesis is not validated, it is time for pivot and Blanks suggests using the Alexander Osterwalder Business Model Canvas tool to play around with business models until the desired product-market fit is archived. After customer validation is achieved, the next step customer creation, is the time when we finally heavily invest in marketing the product. The Last stage of the Customer Development process is Company Creation, the time when the Startup becomes a company which knows their customers.

Pivot in Lean Startup was introduced by Eric Ries (2010) in the book Startup Lesson Learned. Ries explain Pivot as the moment when the startup needs to change direction after previous validation of hypothesis that proved untrue. For the startup, Pivot means that we are learn something about our customers and Ries argues that startups should pivot in the shortest possible time in order to reduce costs related with the learning process and speed up learning regarding the customers. If a company pivots too late this will have a significant effect on capital resources that are usually very limited at this stage of the startup.

Steve Blanks explain Pivot as a change of one or more Business Model Canvas components and also argue that the pivot cycle time matter, because startup is mostly go from failure to failure and by reducing time between them we increasing our odds for the success (LeanStartupCircleLA, 2012).

A decade on from his first publication, Steve Blanks on speech at UCLA Anderson School of Management, updated his Customer Development concept with new

35 | P a g e aspects. Blanks explained how over the last decade todays market has changed; products can now be divided into products we can touch and virtual products. He also distinguished six different types of startups and suggests they all should be treated in a different manner and each type of startup will require different entrepreneurship skills. Blanks suggests that startups which are owned by big corporations that know the customers of their existing markets, will differ much in comparison to small enterprises that need to discover their customers first. In big corporations, managers know the changes and their actions will be more about the execution of the plan. In the small startups, everything is unknown and you need to search for the business model first (LeanStartupCircleLA, 2012).

3.5

Minimum Vitae Product

To avoid building products that nobody wants, Eric Ries (2009) suggests the use of the Minimum Vitae Product (MVP) minimum version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort. Through involving the customers in the early process of development, entrepreneurs reduce the risks and speed up the learning process. The main purpose of MVP is to collect the metrics from our early adopters.

Ash Maurya (2012) points out the importance of baseline metrics which are used in our experiments and points out they need to be chosen and measured carefully. Metrics will help us to identify the problems around the product, where things go wrong, but they will not tell you why it is going wrong. To get an answer to the

36 | P a g e reasons for failure we need to talk with the customers again. Maurya distinguish three stages in startup:

Problem/Solution fit first stage of the startup when entrepreneurs search for problems that are worth solving by talking with the customers and using observation techniques. At that stage the identification of product features which are most important to customers can be ascertained which gives the knowledge regarding features of Minimum Vitae Product that will be used in the next stage of the development process.

Product/Market fit The stage of testing the product and analysing the metrics. Product/Market fit is a process of optimisation of the product to best market performance. In internet space the metrics used could be: sing up rate, activation rate or rate of getting paid.

Scale of the product Last stage of product development where, based on the outcome of MVP experiments, we know how to build the product which satisfies the needs of customers with a small risk of failure.

Lean Analytics publication focuses on how to analyse the metrics which are used in experiments. The authors argue that not all the metrics are relevant and suggest, in each case the importance of metrics are different and entrepreneurs should focus only on the most important, defining them as One Metrics That Matter (Croll & Yoskovitz, 2013).

37 | P a g e Eric Ries (2011) suggests, the collected metrics are the base for the engine of growth. The use of the Minimum Vitae Product and by analysing of our experimental outcome, we can decide when the product is ready to proceed to the next stage of development and how quickly the product will evolve in the market.

3.6

Criticism of Lean Startup

There is some criticisms regarding the Lean Startup. Sasmito Adibowo (2013) suggests that entrepreneurs should not have blind trust on it. Adibowo argues that the use of the MVP in online space (landing page) could not guarantee that you are talking to your target customers caused by the fact they cannot locate the website, you want them to reach. Also, collecting customer feedback based on e-mails, could be misleading as people sometimes have no trust in providing their email addresses in fear of the spam that is often the result of giving e-mail addresses to untrusted sources.

John Finneran (2013) argues that the Minimum Vitae Product has some limitations, he note that customers are not interested in the companys learning process but only want reliable software which consistently delivers value. Finneran also critics the concept of testing the product with early adopters, arguing that the customers are not interested in the Lean Startup adventure, they just want reasonably priced software that does to the job.

Jared White (2013) critics the Lean Startup methodology based on the experience of Steve Jobs and the history of Apple. The author suggests that the failures of Steve Jobs never made him drop the ideas but always pushed him to try harder until he

38 | P a g e reached the desired target. White suggested that the metrics from MVP do not always give the true view of the situation and could be misleading and as a result this could cause you to pivot your good ideas in other directions which you should not follow.

3.7

Conclusion

Lean

Startup

methodology changes

hundred

years

of

research

in

entrepreneurship into science, based on validated learning in startup management. The importance of the Lean Startup movement is growing every day.

Tom Eisenman, a professor in the Entrepreneurial Management Unit in Harvard Business School introduced new MBA courses called Launching Technology Ventures which focus on the Lean Startup Methodology. Eisenman argues that the Lean Startup is easier to apply in the field of web-based startups than that of clean tech or biotech fields (Nobel, 2011).

Eric Ries (2013) argue that the Lean startup is not only about technological startups but it can be applied into various industries. Many researchers and entrepreneurs commit to the development of the new entrepreneurship methodology and we can read different Lean Startup stories on Eric Ries entrepreneurial blog Startup Lesson Learned.

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Chapter 4

40 | P a g e

Chapter 4 Methodology
The purpose of this chapter is to outline the research methodology. The author will present the aims of the research, the research method and the limitations.

4.1

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

of using Business Model Canvas as a tool for developing the business model and how is that compare with traditional approach of business planning. Also the examination of efficiency and effectiveness of the Lean Startup principle of use of the experiments as a tool for validation of a business hypothesis/assumptions.

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

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

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

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

41 | P a g e

The result of the research may be of some benefit in the future where entrepreneurs consider using the Lean Startup approach when creating new business ventures.

4.2

Research methods

This section will outline the advantage and limitations of primary and secondary methods of data collection.

Secondary research

Secondary data are data that were developed for some purpose other than helping to solve the problem in hand.

(Tull & Hawkins, 1993)

Before conducting primary research, the secondary research should be conducted in order to gain a deeper insight into the research topic. Secondary data are data collected by another person for reasons other than our research objectives and could be used to support our primary data collected.

There are a number of advantages of secondary data. They are relatively inexpensive and much less time consuming in comparison to primary data collection. Secondary data may be gathered from multiple sources such as; Central Statistics Office, online journals articles or college databases.

42 | P a g e The limitations of secondary data research are that it is not always sufficient to answer the research objectives that the research is seeking to answer and therefore primary research is required in order to pursue specific research objectives.

The revision of the secondary data regarding the Lean Startup Methodology which was conducted by other researchers can be found in the Literature review section.

Primary research

Primary data are originated by the researcher for the specific purpose of addressing the problem at hand.

(Shukla, 2007)

Primary research is research that is conducted by the author to answer research objectives. Primary research is conducted after researching secondary sources of data and having recognition in the chosen topic. There are two types of data that could be collected by the researcher to answer specific research objectives.

Qualitative or Quantitative

The type of data that is collected by the researcher depends on the nature of the topic being researched. Descriptive and Casual research focuses on quantitative type of data that is used to examine areas of study that is already well known and is based on mathematics, statistics and probability theory. (Domegan & Fleming, 2007)

43 | P a g e Exploratory research is the only way to generate the Qualitative data. Qualitative data could be defined as a data open for interpretation; it includes gaining an insight into peoples opinions and attitudes or to research their expectations or impressions. Qualitative data is often called soft data and does not provide statistical answers (Domegan & Fleming, 2007).

Qualitative research is predominantly a diagnostic tool to find out what the issues are and what respondents feel about them.

(Domegan & Fleming, 2007)

For the purpose of the dissertation and to answer the research objectives, the author chose qualitative data type as the objectives are to research the opinions and attitudes relating with the practical use of Lean Startup Methodology. Interviews

In-Depth interviews are a very good method to collect Qualitative type of data. They typically take around 40 minutes. The Interviewer does not have a prepared prespecified set of questions but has the freedom to create the questions whilst conducting the interview. This type of Interview gives the researcher a chance to get a greater insight into the answers and allows for the development of best answers for purpose of the study. There is a risk that the interviewer will affect the answers during the interviews and there is a need to carefully conduct the interview in such a way that the interviewee will feel free to reply without giving directions (Tull & Hawkins, 1993).

44 | P a g e The Interview could also be conducted in a semi-structured way. The researcher will have prepared a set of questions but, if there is a need to expand on the answers the interviewer will create another question that will support the answer that he is looking for.

4.3

Data Analysis

To analyse the qualitative data, the author applied three step framework approach of Miles and Huberman (1984). The three step are:

Interim Data reduction post data collection reduction method - Data collected from interviews was analysed and the answers context reduced as per table 1 & 2 in the appendix 4 & 5.

Data Display Descriptive Matrices After reduction of interview data, the summary of the answers context will be displayed in the table 3 in the appendix 6 section. This method will help the researcher with future analysis and conclusion of findings.

Conclusion-Drawing and Verification. After the stage of analysing existing patterns in the researched topic, the researcher will draft the conclusion by analysing the difference in data sets.

See appendix section for evidence of data analysis. The next section will provide detailed description of interviews conducted for purpose of that dissertation.

45 | P a g e

4.4

Details of interviewees

In order to answer the research objectives, the author choose the personal semistructured interview method due to the exploratory and qualitative type of research questions. Semi-structures interviews will give the author a good insight into practical use of the Lean Startup Methodology and it will also assure researcher to feel free of creating new questions if the answer dont meet the objectives.

Personal interviews are used to gather from responded informations about them motivations, beliefs, attitudes and feeling in the researched areas. The main advantage of interviews is the ability to uncover more complete answers to the research questions during the survey research. (Domegan & Fleming, 2007)

Three personal interviews will be conducted to answer the research questions objectives. To obtain a high quality of answers from the different perspectives, the interviews will include an interview with the Lean Startup business coach, product manager of Irish Lean startup practitioners Scurri and entrepreneurship expert from Wexford county Enterprise Board. All interviews will be scheduled by appointment.

Claudio Perrone - The interview with Claudio Perrone, lean-agile management consultant will be conducted through Skype video call. The interview will take place on 12th April 2014 which has been prearranged with the interviewee. A set of twelve structured questions will provide answers to all three research objectives.

46 | P a g e Darren Heaphy- The interview will be conducted with Scurris product manager Darren Heaphy. The interview will be conducted face to face at Scurri Headquarters on 17th April 2014 in Duncannon. A set of twelve structured questions will provide answers to all three research objectives.

Tom Banville The interview will be conducted with the Chief Executive Officer of Wexford County Enterprise Board, Tom Banville. The interview will be conducted face to face at Enterprise Ireland Wexford Office after a previous appointment. A set of twelve structured questions will provide answers to all three research objectives.

All interviews where recorded and the transcripts of the interviews are included in the appendixes section.

4.5

Limitations

There are certain limitations regarding this research and interview methods.

Time and cost to conduct Personal interviews, we need to take into consideration the costs in relation to travel and appointment time with interviewee. There is a risk of running into difficulties regarding the time availability of the interviewee and additional costs related with travel if we fail to meet the appointed person (Domegan & Fleming, 2007).

Interview Bias When conducting personal interviews, it is important to take into consideration the interview bias. The context of the questions could be wrongly

47 | P a g e understand by the interviewee or the answers could be influenced by certain factors such as lack of interviewee time, personal influence of interviewer or insufficient knowledge in order to be adequate to research objectives. Lack of Anonymity in personal interviews could also be a cause of interview bias. The interviewer may not be willing to answer the questions due to confidentiality or the sensitive nature of the questions (Tull & Hawkins, 1993).

4.6

Conclusion

This chapter outlines the type of research undertaken for purpose of this thesis. It explains the reasons for conducting the research and examines the primary methods which could be used to obtain answers for the research objectives. The limitations of the chosen Research Methodology are also examined. The next chapter will outline the findings of the research conducted.

48 | P a g e

Chapter 5

49 | P a g e

Chapter 5 - Findings
5.1 Introduction to findings

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

The structure of that chapter is as follows:

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

professional profiles of the interviewees.

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

objectives will be provided.

Conclusion of findings A conclusion of the research objective findings.

5.2

Profile of respondents

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

Claudio Perrone is a well-known lean-agile management consultant. Claudio advises and coaches companies which use the Lean Startup Methodology practically both in Ireland and globally. He helps teams and managers rapidly improve their performance. Lean, Agile consultant, startup strategist, award-winning speaker and entrepreneur, Claudio has played key roles in Lean & Agile transformations for global organisations as well as for some of the fastest-growing technology startups in the world. Claudio released a suite of

50 | P a g e innovative solutions around A3 Thinking, a Lean management approach to systematically solve problems, improve and mentor. Hundreds of companies worldwide use his Lean thinking tools including Toyota, Spotify, Honeywell, Carl Zeiss Microscopes, Nissan North America, McKinsey, Skype, BearingPoint, J.P. Morgan, and many others. In June 2013, Claudio was selected to become a Fellow of the Lean Systems Society, mainly with thanks to his contribution to revitalize and clarify the role of A3 Thinking as one of the most powerful points of contact between Lean, Systems Thinking, and the Scientific Method. The LSS further added that Claudio made A3 Thinking accessible to the point that it is a major force again for systems work. (Perrone, 2014)

Darren Heaphy is the product manager of Scurri. Scurri has the largest practical experience in Ireland regarding implementation of this new Entrepreneurship approach. Darren hast vast experience as a product manager and is responsible for new product development process in Scurri and graduated from WIT where he holds a BA in IT and a higher Diploma in Business Management. Prior to this position Darren worked for AOL and TalkTalk as head of consumer operational communications for both companies, managing a team of project managers delivering customer service solutions. (LinkedIn, 2014)

Tom Banville is Chief Executive Officer of Wexford County Enterprise Board. Tom has great experience regarding advising startups, new product development and creating new ventures. The author chose to

51 | P a g e interview Tom as he is an entrepreneurship expert of a government body which assists entrepreneurs with expanding their business locally and globally. (Wexford County Enterprise Board, 2014)

5.3

Research question 1

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

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

Figure 5 - Scurri Business Model Canvas (2013)

52 | P a g e The first finding to the research question was outlined by both Darren and Claudio state that, the Business model Canvas is a great tool to quickly draw the business model. It is both quick to draw the Business Model Canvas and it is also possible to draw a few versions in the one afternoon. Use of the BMC is very efficient which could save valuable time normally spent during the planning process.

The second finding to the research question was explained by Claudio and Darren, both recommend that the BMC should be updated and revised often so as not to become a dead paper which is no longer used. Scurri revises the Canvas on a weekly basis to ensure that the model is still valid as startups changes very quickly. The complete process involved in the update and revision of BMC take on average, around an hour. See figure 5 for Scurri Business Model Canvas.

With regard to the research question, the third finding shows that, should a situation arise where a business makes significant changes to the business model such as, adding new customer segments or new products, both respondents indicate that the original canvas could be used. Claudio states that the new components could be coded with colours or numbers. There could be a limitation in the transparency and convenience of use of BMC if there are too many different layers. Claudio and Darren recommend using the original canvas for planning but should you want to expand the business model with new customer target, it is recommended to draw a separate canvas. Due to the different needs of different customers, the value proposition could vary and sometimes that is the best way to do it.

53 | P a g e The fourth finding with respect to the research question, according to Claudio the Business Model Canvas is great tool to talk with the Investors. There is a common pattern indicating that there is some groups of investors that prefer/require more detailed information about the business, then, you will need to prepare a classical 3050 pages business plan. Darren states that, the Scurri investors were delighted with the use of the business model canvas and therefore do not require a detailed business plan. They were delighted but, there is a need for some financial calculations or information about our customer life time value and that is why Scurri used the Investor Memorandum, a short-light version of the business plan. Darren Heaphy explains this:

business model lends itself well to that kind of conversation. You can sit and if you are the investor, and said: Well, I show you my core components of my business model and here is what I done to validate that those components are correct. And the investors that you find, who brought into that process, they really like it. Because is systematic de-risking from the perspective.

In Claudios opinion, the BMC is a great tool to begin talks with investors in order to show what the business is about and to get their attention but, at some stage the full version of the business plan will most probably be demanded although it is not the most important thing that entrepreneurs need to focus on.

The last finding to first research question indicate, there are some limitations of BMC in comparison with the full version of the traditional Business Plan. Both Darren and Claudio indicate that, there are some limitations in describing some business aspects on the BMC. There is a common pattern regarding recommended replacement of the BMC at the early stages when starting the business and both of the respondents recommended use of the Lean Canvas as a replacement, (more information about lean

54 | P a g e canvas could be found in literature review chapter) as the company needs to focus on problem/solution fit before they are able to draw Business Model Canvas Components. Darren Heaphy from Scurri, also mentions the limitations of scope in describing the business environment. Darren argues that the business is shown in isolation on the canvas and does not involve environmental factors.

To summarise the findings of this research question, the author found that, there are many common patterns between the respondents regarding Business Model Canvas efficiency. It is a great tool for planning the business but there are some limitations that need to be considered carefully.

5.4

Research question 2

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

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

The first finding for second research question, the author found that, in Lean Startup methodology customers play a very important role. Both of the respondents, Darren and Claudio, indicate that involvement of the customers is fundamental. As the Lean Startup focuses on improvement during the learning process stage of business startup, customers insight will give necessary information in order to validate our assumption as soon as possible.

55 | P a g e With regards to the research question, the second finding shows that, in order to gain insight from customers regarding our product or service, Lean Startup uses the concept of Minimum Vitae Product. Claudio states that, customers could lie to you because of interview bias. He gives as the example asking your mom: If you went to you mam and you ask her, I have idea for a business, what you think? And your mom of course will say: its great idea! And that what is very often had whit customers, they will tell you, ohh its great idea. But they dont do it because... They want you to succeed in many ways.

Claudio also points out; there are some limitations which often arise during the interview process. The customers may be led by the interviewer and it is sometimes very difficult to understand the customer right. Claudio summarised MVP usability as a great tool to gain insight into customer behaviour and to know about their opinions more. Claudio gives as an example of his own experience with A3 Thinker Action Deck, a product which he himself created using Lean Startup principles. Claudios MVP that he used before the actual product was good enough to collect all relevant, important information and validate the product assumptions. All was done in a very short time, using a printer, paper and some glue. The purpose of MVP is to validate and learn as quickly as possible and he was able to get the required information successfully.

The third finding to that research question, Darren points out that the core purpose of the MVP is to achieve a solution for the problem that we are looking to solve. If MVP will not deliver a solution to the core problem it will cause dissatisfaction of our customers. Everything which makes your product beautiful but, does not necessary solve the problem, should not be part of the focus at the product assumption validation stage.

56 | P a g e The forth finding with respect to the research question, there is a common pattern between Claudio and Darren in the scope of lean startup experiment timing and collection of feedback. Darren and Claudio both state that it could be difficult at times to collect feedback in a specific period of time and it is sometimes difficult to recognise when we have sufficient data to validate the experiment assumption correctly.

The fifth finding to the research question indicates that, the duration of the experiment could vary from minutes to days or weeks. Both of the respondents indicate that timing of the experiment will depend on the assumption you would like to validate. Claudio recommends conducting smaller experiments, as they are easier to comply. He states that: experiment may last from few minutes to weeks but the problem sometimes is to collect feedback that they are actually depends from the others So the goal is always to shrink. If you can shrink it is better

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

In the last sixth finding to that research question, the author found that, the development of the business in stealth mode is not an issue from the perspective of competition. In Darrens opinion competition is inevitable and is a good indicator that the market is there and that the problem we are trying to solve is big enough. Claudio also argues that, the stealth mode is not applicable with Lean startup principles and it is not a risk for company, because data which is available to the public gives only a

57 | P a g e snapshot of company business progress and not the learning process which was conducted in order to get to that point.

To summarise the findings of this research question; the respondents indicate that the involvement of customers in new business development is as fundamental principle of Lean Startup Methodology and there is very much risk in development in "stealth mode". Both of the respondents also argue that, the collection of data may be an issue and, well designed experiments are key to reduce bias.

5.5

Research question 3

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

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

The first finding to the research question was outlined by Darren and Claudio, in both opinions the Lean Startup reduces waste in the company. Darren points out that the Lean methodology itself focuses on just in time, waste reduction etc. Both of the respondents indicated the same pattern, stating that, The Lean Startup definitely reduces the risk in business due to the process of validation business assumption and in that way saves on time and resources.

In second finding to that research question, Claudio and Darren also have the same opinion regarding misleading data from the MVP. They both argue that the reason of

58 | P a g e misleading data could be in wrong structure of experiment. Claudio also mentions there is a risk in MVP if its wrong constructed.

To summarise the findings of this research question; both of the respondents state that the Lean Startup increases the odds for business success by elimination of risk through validation of our hypothesis and not doing the wrong things. The Minimum Vitae Product and all experiments need to well-designed in order to collect true feedback from customers.

5.6

Conclusion

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

The findings from the first research objective indicate that, the Business Model Canvas is well applicable in the new business development planning process. It is great tool to get investors attention but there are some limitations that need to be taken into consideration.

The findings from second research objective indicate that, the involvement of customers in the new business development is essential to validate the business assumptions and it is not good practice to develop products in stealth mode. Also, the Lean Startup experiment could sometimes become a challenge to collect valid feedback.

59 | P a g e The findings from third research objectives indicate that, the Lean Startup practices reduce the risk and uncertainty in the business startup stage, but, it is important that Minimum Vitae Product and business experiments are well designed to collect valid data from customers.

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

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Chapter 6

61 | P a g e

Chapter 6 - Analysis
6.1 Introduction to Analysis

This chapter will provide an analysis of the findings to research questions. The chapter will discuss the findings to the questions in relation to the existing literature.

6.2

Research Question 1

The author found that, there are many common patterns in findings between respondents related with efficiency of the business model canvas and analysis of five findings to that research question will be provided.

Using the business model canvas as a tool for planning our business activities saves a lot of time in comparison to the traditional business planning approach. Claudio and Darren both state that, it is quick to draw multiple versions of the business model and it could be completed in one afternoon. Claudio argues that the business plan is not the first thing that entrepreneurs should focus on in the early stage of startups. Claudio and Daren also state that, the Business Model Canvas should be regularly revised to ensure that the Business Model is still valid. Steve Blank (2012) argues that, the business model should be validated first, before we move to writing a full business plan and until the business assumptions are validated, the business plan is just creative writing. Thus in the summary, the focus of the entrepreneurs in the early days of the startup, should be on searching for the product-market fit and the customer development, before entrepreneurs start writing a business plan. The right time for

62 | P a g e writing the full business plan, should take place after the validation of the business assumptions or when required by the investors or financial institutions.

Claudio and Darren both state that, the Business Model Canvas needs to be regularly revised as the business environment is changing quickly and revision of the components is necessary to assure they are still valid. Osterwalder (ecorner, 2012) recommends mapping and revising the business canvas components and also how the components influence and impact each other. Therefore, to assure that the business model canvas is updated and the components are still valid, it is recommended that the BMC needs to be revised systematically.

Darren and Claudio both state that, the introducing of a new target market or any additional product into the business model canvas, could sometimes require use of a separate board, as the needs of the new target market could be different and will require different canvas components. The separate canvas will help with clarity and keep transparency on the board. Claudio also states that, the same canvas can be used, but coded with numbers or different colours with the new components. Osterwalder (2010, p. 223) states that, the use of separate canvas is recommended if there are significant differences between new business model components. Sometimes changes in the business model will create conflict with other components and in this situation, the use of a separate independent canvas is necessary. Therefore, if the business model is not complicated and introducing new components will not be in conflict with other canvas sections, entrepreneurs could use one canvas and if required, code the new components to keep transparency on board. Otherwise, separate canvases should be created.

63 | P a g e Darren and Claudio note that, its very quick to adjust the changes on the business model canvas and does not require much work to apply changes in comparison to the business plan. Claudio argues that, at some stage of the startup, after entrepreneurs validate their business model, the investors could require more detailed information about business. Osterwalder (2010) recommends using the Business Model Canvas, as its a great tool to grab the attention of the investors before we move on to the full business planning. It can be argued, the Business Model Canvas, could save a lot of time in situations when entrepreneurs change their business model. The Business Model Canvas is more efficient for planning the business in comparison to the traditional business plan approach and its great as a tool to quickly explain to the investors how the business operates. Quite often, entrepreneurs have a limited time frame to capture the investors attention and the business model canvas is a perfect tool for doing so.

Claudio and Darren also recommend using the Lean Canvas in the very early stage of the startup. Ash Maurya (2012) suggests that, the Lean Canvas should be used when startups are in the stage of searching for problem-solution fit, arguing that, the problem that the company is focused on, needs to be worth solving. After entrepreneurs find the right problem, Maurya recommends replacement of lean canvas with the Business Model Canvas that focuses on product-market fit. It appears that the use of the Lean Canvas is recommended in the process of the Customer Discovery. The Lean Canvas focuses on searching for the right problem to solve and the solution to that problem before moving to the business model canvas which focuses on the product and market fit.

64 | P a g e Darren and Claudio both point out that there are some limitations that need to be taken into consideration such as details of the financial operations or the environment in which business exist. Alexander Osterwalder (2010) included environmental forces outside the business model canvas and recommends continuous mapping of the business model environment, arguing that a good understanding of the environment will help with evolution of the business model in correct directions. It is recommended that the business model canvas needs to included links to the environment because that is an essential aspect of the business to be able quickly react to environmental changes or spot the new opportunities and threats in business environment.

In the summary, the author found that, the use of the business model canvas could be very supportive for the purpose of planning and development of startup business model but there are some limitations that need to be taken in consideration such as the environment or financial details.

6.3

Research Question 2

In the summary, the author found four findings to the second research question. Claudio and Darren both indicate the same opinion about importance of the involvement of the customers in business development and careful design of the Lean Startup experiments. There are four findings to the research question that the author analysis in following section.

Perrone and Heaphy, both state that, the involvement of the customers in new product development as essential and it is not recommended to develop the product in

65 | P a g e the stealth mode. Eric Ries (2013) argue that, many startups fail because startups dont know their customer. Ries also argues, is doesnt matter if the plan was done in time and on budget, if we build something that nobody wants. The goal of the startup is to figure out, what is the right thing to build, a product that a customer wants and is able to pay for it. Steve Blank (2012) also suggest that, we need to go outside the building and talk with customers, to know better their needs and to figure out, what of their problems are worth to solve. To learn from the customers what is best solution to approach the solving of their problems. Thus it could be argued that, to avoid waste of the resources and avoid spending time on developing products that nobody wants, the engagement of the customers in business development has a very important role. The success of the startup much relies upon the source of finance and the time that is needed to find a business model that has a product-market fit. To increase the odds for success, the involvement of the customers play a very important role because that way entrepreneurs are able to learn much quicker and avoid surprise on the product launch.

The use of the Minimum Vitae Product to conduct experiments and test our business hypothesis is not free of risk. In Darrens opinion, its very important, that MVP solves the core of customers problem and if it doesnt, it may create dissatisfaction. Claudio also suggesting that, the customer may lie to you and it is very important that experiments are well designed. Eric Ries (2013) suggesting that, the MVP is the version of the product that enables to build-measure-learn loop is working and to do that with minimum amount of effort and time. Sometimes experiments will have negative results, but it doesnt mean that we focus on the wrong problem or fail, because the purpose of Lean Startup is to learn the fastest possible way. In the summary, there is always a large amount of uncertainty when businesses are looking

66 | P a g e for new market solutions for specific problems. The role of MVP is to reduce the cost and effort and to test those assumptions. The MVP needs to solve the core of the problem, measure the outcomes and redesign them if that is necessary, to improve the metrics. It is an excellent tool to learn more about the customers. If the outcomes are negative, that is a signal for business that is the time to consider a pivot of business to a different direction.

Darren and Claudio both state that sometimes there is a difficulty to do experiment in specified time frame. Claudio also argues that, sometimes there are problems with collecting the feedback from the experiments because they actually depend from the others people. Ries (2013) suggests that, sometimes the problem with collection the feedback could be related with the experiment design that needs to be improved. The author would suggest the lean startup experiments timing can be short in seconds or long like weeks or months. The problem with completing the experiments in time and the problem with collecting feedback may sometimes occur because of the wrong design of the experiment itself.

When development is not in the stealth mode is not a big risk. Darren argues that its not an issue from perspective of competition because if competition is there, that means there is also a market for a product. Claudio also states that open development is not an issue, because the information available to public is only a snapshot of the company and it is not translating the knowledge that is required to get there. Eric Ries (2013) and Steve Blank (2013) both argue that the time spent in stealth mode, is time away from the customers and that is not recommended. Ries (2013, p. 111) also argues that the stealth mode is not an issue from competition perspective and best way

67 | P a g e to challenge competition, is to learn faster than anyone else. In the summary of the above arguments, the operation in the stealth mode is not recommended with Lean Startup methodology and the risk of competition that is created, making challenge for the company to do everything better and learn faster.

In the summary, the use of the Lean Startup principles in the new business development treats the customer as an essential and most important ingredient of market research and the process of validation of the business assumption. Open development its not an issue. To assure the best results from Lean Startup experiments, the Minimum Vitae Product needs to solve the core of the problem and experiments that entrepreneurs want to carry out, needs to be well designed to avoid problems with feedback collection.

6.4

Research Question 3

In the summary the findings of the third research question, both Claudio and Darren state that, the Lean Startup methodology reduces the risk at the stage of the business startup, however, to assure the data that has been collected from the Lean Startup experiments are showing a true and fair view of the researched issue, the MVP needs to be well designed. There are two findings to the research question that the author analyses in following section.

Darren Heaphy states that the implementation of Lean Startup principles into the new startup development reduces the risk that is related with starting a new business venture. Lean Startup focuses on the validation of the assumption that entrepreneurs

68 | P a g e need to challenge when starting a new business. Darren also argues that the validation makes all the process slower but more efficient in the end. In Claudios opinion, the lean startup reduces the waste by not doing the wrong things. Eric Ries (2013), explains startups, as a human institution designed to create a new product or service under conditions of extreme uncertainty. Ries argues that, the most important factor in startups is to learn about the business and the customers. When startups fail in the market, that is always a lesson for entrepreneurs and in the end, entrepreneurs learn something from that failure. Using this approach, the principles of Lean Startup will reduce that uncertainty and the business is able to learn quicker and do it with minimum effort. When using this scientific method to validate the business hypothesis, in effect, could save lots of time and resources that are needed for startups to survive longer, until entrepreneurs validate their business model.

Darren and Claudio argue that Lean Startup experiments need to be designed well to avoid false outcomes in experiments and also the MVP needs to be well constructed. Also Eric Ries (2013) points out the importance of a well-designed experiment and argues that sometimes startups need to rely on the assumptions that are a leap-of-faith, until they correctly validate to be true or false. Ries also suggest that the use MVP as a baseline to the measurement and use of the innovative accounting that will support with future development of the MVP and help to achieve the startup learning millstones. Therefore, there is some risk attached, that experiments are designed wrong or the wrong metrics are used to measure the outcome from that experiments. It is impossible to reduce the risk completely or to have a guarantee that customers are giving true feedback, so entrepreneurs sometimes need to rely on their

69 | P a g e intuition that the business is going in a good direction and to not blind trust the data that has been collected.

The Lean Startup methodology focuses on the improvement of the learning process that startups challenge in the stage of validation of the business model components and therefore the use of the lean startup principles, could if effect save lot of time and resources that are often very limited. The Minimum Vitae Product supports the process very well but sometimes entrepreneurial intuition is necessary in interpretation of MVP metrics.

6.5

Conclusion

The next chapter will provide the author conclusions and recommendations that the author found through process of analysis of the above findings.

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Chapter 7

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Chapter 7- Conclusions and Recommendations

7.1 Introduction

The main purpose of this chapter is to provide the conclusions and recommendations on the findings and analysis of the research objectives presented in chapters five and six.

7.2

Research Question 1

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

In conclusion of the analysis of the findings, the author found that the business model canvas is a very efficient tool to develop a new or existing business model and to validate the assumptions/hypothesis included in that model. The main advantage of the BMC comparing to the business plan is to see how quickly entrepreneurs can create multiple different models. The BMC is a snapshot of the company, as its illustrated on one piece of paper; its an excellent way to visually describe elements of the business to the investors and to show how the business will deliver value to the customers. Also when entrepreneurs decide to change some components of the business model, it is very easy to adjust the changes on the canvas and it saves a lot of time in comparison to the business plan.

The business model canvas also has some limitations in comparison to the full business plan as full financial data or details of the environment in which the business

72 | P a g e exists and thats why sometimes the BMC is not enough for some of the investors and needs to be supported with the full business plan. BMC focuses on product market fit and it is recommended to use the Lean Canvas in the stage of looking for the right problem to solve.

Recommendations

Life time of start-up could be divided in three stages. The first stage is when the company is focused on finding the right problems that the business want to solve. At that stage of start-up author recommended to use of the Lean Canvas as the replacement of business model canvas because of the more suitable components of lean canvas that are focus on problem-solution fit first. The second stage, when the problem is well defined business model canvas will help to develop the best business model to deliver that solution to the target market. The author found that the Business Model Canvas is very efficient with quick creation of multiple variation of the business models in very short time and is very good to visualise the business concept to the investors. The author recommend that use of the business model canvas is a great tool that could in effect save much amount of time, help with validation of business assumptions and make business planning process much efficient at that stage of start-ups. After all of the business assumptions are validated the start-up is moving to the last stage which is growth that is the time when more information about the business may be required and to support the BMC the full Business Plan could be provided.

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7.3

Research Question 2

How efficient is the lean startup methodology of conducting small experiments to validate the business assumptions of the new startups?

In conclusion of the efficiency of the Lean Start methodology, the author found that the involvement of the customers in the product development is very big advantage of Lean Start-up practices, as customer feedback is very valuable knowledge in the start-up stage of the business. The involvement of the customers gives entrepreneurs a good understanding of their needs and behaviours. Involvement of customers and the use of the Minimum Vitae Product also helps with the validation of the business assumptions and development of business value proposition for that target market. When the business assumptions are wrong, the use the Lean start-up methodology can save a lot of time and resources by quick validation and pivot in a different direction. Development of business not in the stealth mode is argued as not being an issue from competition perspective because open development practice gives overall information about the business direction without learning details that are constantly archived with the process of searching for the product-market fit.

The author also found some limitations with the Lean Start-up approach. The findings from conducted interviews show that there is sometimes a problem with the collection of data from the experiments and completing the experiments in specified time frame. Sometimes the problems with conducting the experiment may be related with the design of the experiments or design of the MVP that is used for that purpose.

74 | P a g e The most important aspect of MVP is that we are learning about the market, and getting to the core of the problem that we want to solve.

Recommendations

After analysis of findings of that research question, the author will recommend to carefully design the experiments that Business want to comply to test the assumption, because the speed and collection will much deepness from design of that experiments. Also assumptions that we want to test need to be well considered before conducting experiments to test it because sometimes the answer could be very simple and effort to prove that not always is necessary.

The author also will recommend to remember about fact that people not always know what they want and their feedback from experiments not always represent true view about assumption that we are testing. Also interviews bias need to be taken in consideration when experiments are conducted.

7.4

Research Question 3

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

Lean Start-up methodology reduces the risk in creating new ventures by use of the scientific method to validate a business assumption. The focus of Lean Start-up is

75 | P a g e to make the learning process quicker and efficient with use of the minimal amount of time and resources.

The disadvantage of using Lean Start-up methodology is that the outcomes from experiments may not sometimes show the true results. The literature researchers and findings from interviews indicate that we can reduce that risk by shrinking the experiments to smaller parts and well design MVP and experiments itself.

Recommendations

The author found that the use of Lean Start-up principles are very effective in reducing the risk in the new ventures and recommend that the use of the Lean Start-up principles could in effect reduce the amount of uncertainty that entrepreneurs need to challenge. Use of the Lean Start-up methodology also provide great tool for validation of business assumptions and in effect that will reduce time and resources wasted by focusing on the wrong things.

The author also recommend that entrepreneurs should not always believe in the results from Minimum Vitae Product as there is a risk that wrong designed MVP may not show the true result as its not cover the core features of the product that need to be implement to solve the problem that business is focused on or it solves the right problem but is not to the right people.

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Appendices

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Appendix 1
List of interviews questions

83 | P a g e Research Question 1

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

1 2 3

How long take preparation of Business Model Canvas Is there any limitation in scope of describing the business activities? What is the perspective of Investors, Venture Capital; when presenting our business concept on one sheet of paper? Is that enough?

4 5 6

How quickly is to adjust changes on the Business Model Canvas? How often should the business model canvas be updated? If we extend our customer target or add additional products, will you use separate sheet of canvas or they can work together? Do you think there is a time in a companys growth that expanding to a full business plan is good idea or only when is absolutely required by an investor?

Research Question 2

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

8 9

Is it good practice to get involved customers from early time of development? Is it Minimum Vitae Product guarantee minimum usability to give fair results from our customers?

10 How quick is to conduct our experiments and how many of them fail? 11 Is it a risk to develop a product not in stealth mode but with open engagement of customers?

84 | P a g e Research Question 3

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

12. How the Lean Startup methodology could reduce waste in early stage of startup? 13. How big is the risk, that we will drop our good ideas because of wrong outputs from MVP?

Enterprise Ireland Questions

1) How long take preparation of the business plan? 2) How big are the changes from first version of business plan and company shape after verification by market their assumptions? 3) How many of that business plans/startups fails? 4) Do you think it is a good practice to get involved customers from early time of development? 5) Is it a risk to develop a product not in stealth mode but with open engagement of customers? 6) Do you have any experience with companies that are use the lean startup methodology? 7) Is there any changes after recession regarding starting a new ventures? 8) Waste of time and resources in the startups, any comments on that? 9) Validation of business assumptions in the new ventures, whats your opinion about it?

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Appendix 2
In-Depth Interview with Claudio Perrone

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

Question 1

Zenon: How long take preparation of Business Model Canvas. Claudio: So, with the group of people, when I facilitate a workshops, the initial draft takes about an hour. But here is the thing, right. There is not only one that you write, and I dont know is that clear. Typically, you write one model, but because is quick and it is one page only, you start actually creating the several variations. It could be different customers segments or the different business models, like in terms of different revenue models for example. You have a more options. So, very first one, takes about hour but you could consider to you may create three, four or even five different business model canvas. And then you start working with once that are most interesting, most valuable or they most promising. So, I personally try to build lets say five, and then select one or two that are the most promising. And I think thats the thing what you should doing.

Question 2

Zenon: Is there any limitation in scope of describing the business activities on Business Model Canvas? Claudio: Well, there is always some limits. Lets say it is nice summary, but there is time sometimes you will need more informations. So for example investors may ask for the life time value of the customers What if I have customer and how long I

87 | P a g e will have it. Plus actually personally, we talking about Business model canvas and I attempt to use for startups, I attempt to use Lean Canvas which is variation of Business Model Canvas. But effectively, even the Lean Canvas overcome some limitations of Business Model Canvas. The Business Model Canvas for example for certain models, as for say partners. One of the columns is the partners. But, in my experience . The partners its too early maybe. Depends from the model but a, it is that relevant right now? Lets focus on the problems.

Question 3

Zenon: What is the perspective of Investors, Venture Capital; when presenting our business concept on one sheet of paper? Is that enough? Claudio: No, generally it isnt but also consider it is transition period I guest. So, you have traditional investors, who are much more comfortable with the traditional 60 to 100 pages business plan. So, it really depends I guess. I think the business model canvas is good to start the conversation, to clarify really whats the business is, it can accelerate as well what a pitch could be, because you could do a pitch around the business canvas. But they are certain a big class of fansinvestors who are still will need more informations and they prefer full business plan.

Question 4 Answer included in different answer/question

Question 5

Zenon: How often should the business model canvas be updated?

88 | P a g e Claudio: Well, in the early days very often and when I say very often I mean at least weekly. And at some point you will converge to something thats works, I guest. So, you will normally still do the review on the weekly basis again but it will be not as relevant as it was before. One thing I do that I find useful is that is still clarifies to new arrivals for example, new recruits of people, its still good communication tool, I guess, to explain the model. So sometimes I do business model canvas with very established company, just to say what the model is, how do you make money? How does it work? So its a good commination tool. However, the big deal, the other experience is that they tend to become dead paper at some point, my experience is a lot of starts up dont use it anymore. It becomes dead you know its there on the wall but its forgotten about. But the thing is it drives the initial experiments and the initial strategy if you want, and then you cannot converge toward that and personally how we do it now with Scurri for example, there has been a gap and at some point there is a gap between the actual business model and the actions that are done by the company, which is why they use different tools to close that gap. Which is pretty much like to have an experiment board. so the canvas is initially is fine, it clarifies the model and it helps identify where are the riskiest assumption, so you can start the task but then by itself is not enough and you need to discontinue the experiment pretty much. And I think that, Ash Maurya talks in terms of Lean stack, I dont know you heard about it? So Ash Maurya who is the creator of the lean canvas, which is the modification of the business canvas also he create lately something thats he calls, the lean stack. And the effectively, it is, in some way based similarly but differently, but the goal is this same. Which is should to link, the lean canvas to the daily activities, and you know, it is something in between. All these kind of tracing of experiments and things like that. It could be very complicated. But I remember for example when Scurri got the technical business assessment, for the investment, it was recently enough. The assessors was very impressed. Because they said that, in many companies the business model is dead. You know what I mean, they dont focus on the daily activities, where we have to, very often focus on.

89 | P a g e Question 6

Zenon: If we extend our customer target or add additional products, will you use separate sheet of canvas or they can work together? Claudio: You can do it both ways, but very often it would be separate. If its a different customer target, so one way for example, how I would do it, when we have two segments, so lets say you have one canvas, okay, you have two aspects. One canvas is the customer, small size companies and medium size companies, ok. So they are two different segments, I would put #1 you know, some marker or maybe, write in different colors but when product is different, I would generally start with draft to identify, whats the segments are but usually I will draft separate different canvas.

Question 7

Zenon: Do you think there is a time in a companys growth that expanding to a full business plan is good idea or only when is absolutely required by an investor? Claudio: I suspect there is at some stage a moment when we need to provide more informations. Obviously I am not great fan of the business plan. Because I was seen to many where people could spend weeks if not months to develop it. And business plan, you know, we can take even example of table of content of last business plan which I was given to explain whats the business is. (Claudio send a Table of content from business plan)

So we have:

90 | P a g e Table of Contents Executive Summary...............................................................................................1 Who We Are..........................................................................................................1 What We Sell........................................................................................................1 Who We Sell To ...................................................................................................1 Financial Summary ............................................................................................2 Company..............................................................................................................4 Company Overview ............................................................................................4 Management Team..............................................................................................4 Peer-to-Peer........................................................................................................6 Peer-to-Peer in the UK.......................................................................................6 Competitors ........................................................................................................7 Markets ..............................................................................................................9 Market Overview................................................................................................9 Market Needs ...................................................................................................10 Target Markets UK...........................................................................................11 Strategy............................................................................................................12 Implementation................................................................................................12 Marketing Plan ...............................................................................................13 Milestones........................................................................................................21 Financial Plan................................................................................................ 22 Sales Forecast.................................................................................................22 Personnel Plan................................................................................................24 Budget.............................................................................................................25 Cash Flow Assumptions.................................................................................27 Loans and Investments...................................................................................28 Financial Statements ....................................................................................29 Profit and Loss Statement.............................................................................29 Balance Sheet.................................................................................................32 Cash Flow Statement ....................................................................................34 UK Financials ...............................................................................................37 Sales Forecast...............................................................................................37 Personnel Plan..............................................................................................39 Budget...........................................................................................................41 Profit and Loss Statement.............................................................................43 Appendix.......................................................................................................46 Financial Regulation....................................................................................56 Loans and Investments.................................................................................59 Cash Flow Statement ..................................................................................60 Balance Sheet..............................................................................................63

So we have executive summary, who we are, what we sell, who we sell to, financial summary, company overview .. Competitors, markets, the needs, strategy, financial You know, all of this. This is what call plausible lie. Its Plausible but its a lie. Because right now, you have absolutely no idea whats

91 | P a g e the business is. Each of the Title gives you page number, the guy spend weeks on this. So the question is Would the full business plan be required at any stage, chances are: probably throughout the life time of the company you will need to do it, but it is certainly not a first thing what I will focus on.

Zenon: Maybe more, when we find a product/market fit is a good time to start thinking about it? Claudio: Yeach, actually, lets put it this that way, specifically. Since you know the terms, right. So, at the beginning, like the company is looking for problem / solution fit and then product-market fit. Right? So, problem-solution, do we have right problem. Product-market fit will identify, is the segment actually buying. So thats your next stage is, growth. So you focus on growth, so you said Now with the investors, you should ideally just talk to the investors when you talking about the growth. Not before that. And the reason is the investors goal is always growth. And you goal is still try to find viable business model instead. So the goals are misaligned, there not the same, but once you actually identify, so maybe by doing business model canvas or the lean canvas, whatever and the goal are again, initial assumptions and you use that assumptions, you doing interviews, you write prototypes and stuff like that. Once you get productmarket fit and you want to expand then will be ideal time to talk to the investors. And maybe some aspects of business plan are certainty maybe useful because they explain to investors how you gone spend their money.

92 | P a g e

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

Question 8

Zenon: Is it good practice to get involved customers from early time of development? Claudio: Yes, I will say is fundamental. I went out of business because we havent done .ok. So for me is absolutely fundamental, it is always important? Im cannot kind of thing about examples where this may not be particularly useful ok, I will tell you when its not useful to have customers - when you have the monopoly. Okay, so that is the only problem. If you have a monopoly which is enforced by regulations or because maybe you are the only one in town, then forget about the customers. Go with your opinions, maybe another possibility is in very traditional and established market, I dont want to say it is not needed, but it is not as critical. Ok. Otherwise, your gone be eaten. Question 9

Zenon: Is it Minimum Vitae Product guarantee minimum usability to give fair results from our customers? Claudio: I think it is very easy to get deceived by the customer. Ok. So, secondly you have to do the MVP, very often you can do MVP without coding. So for example, I dont know you familiar (Claudio showing me The A3 Thinkers Action Desk in camera him own lean startup product, which Im familiar with). So, this are the card essentially. I did my MVP with glue and paper, I print it. I didnt print entire deck, I only created 10 cards I dont want do build entire deck, and I didnt know is that works. So I printed ten, on the printer and then I glued them,

93 | P a g e with some ridged surface, ok. To make them somewhat ridged, and I put them in the hands of the professional customer, like change agent. And the guy love this. He said: Alright, he said, ohh wow, and he gave me a lot of insight into about: you doing it on A3 thinking, you doing it on six sigma . we would buy lots of them, we would buy them for training. So there was lot of signals. And then I actually printed like the real deal, the real cards. Because I want to know how much it cost and how hard is to print the real thing. But again I dint build the entire deck, I only printed the ten cards as I did before. I put those of the hands of change agents, and that was in Boston, last year. And the first guy that I spoke to, said: wow, Claudio, how much does is cost to create and I said: it is not about the cost but about the value we need. So I said, I dont know, it is a prototype, about ten euro. I pay twenty And second guy said: if you give me that cards right now, I will give you 25 euro. Off course with the promise of giving him the rest whenever it is build. And the third guy said: I will pay double. Ok. So two things in terms off. I didnt even need to act get the price, it was obviously the MVP that works really well, now, and this is based on the Toyota methodology. Toyota placed three orders, with global, so far. This went live physically in September. So seams September, the chair of the global best practice in Toyota placed in three orders. For multiple decks. So obviously I made it, I sold to the once who actually invented that system and that is really useful to them and then, and then Spotify, General Electric, Nissan North America, You know, they all buying in steps. So, obviously, I use this kind of methodology to relay nail it. But the problem is, that customers, very often you are not that lucky, and customers lie to you. And it is very easy to get them wrong. I think actually MVP reduces, the bids, the risks, because you can look into behavior. So what I told you, it is not what I said but I gave it to them, observe what happens, and the behavior was very clear in one directions. Without the MVP, what you doing, you ask questions, doing Problems interviews and stuff like that. And here is the issue right, I would say, actually there is a great book called the mom pad, and saying that: If you went to you mam and you ask her, I have idea for a business, what you think? And your mom of course will say: its great idea! And that what is very often had whit customers, they will tell you, ohh its great idea. But they dont do it because.. They want you to succeed in many ways, right. So what you doing is, you focus

94 | P a g e instead on the problems, if they state this problem is high, we always have this problem. OK, when you last time have it specifically? Was it yesterday, was it today, was it last week? So essentially there is a lot of general statement that the customers said and its very difficult, because very often you lead the customers to give the answers that you expect. Anyway, so shortcut on that, Its reduces the risk of has been, its certain behaviors of what actually what they say, and how they actually behave using it, and we also get more insight, there are risks here.

Question 10

Zenon: How quick is to conduct our experiments and how many of them fail? Claudio: So, it is really depends from the experiment and actually I am working with some sales tem in a company right now, applying lean startup with us. So it is not just an IT but the experiment may last from few minutes to weeks. So it is really depends from the experiment. And generally to meet the sweet point is when you can build and execute ideally in the space of the week. But very often will take much longer than that. Because the problem is not so much about creating the experiments. But the problem sometimes is to collect feedback, so, typically I have two stages in the experiment, the one is qualitative and the one is quantitative. So qualitative one, so I done for example for company I actually co-founded, we were doing some experiments so matching to have this kind of experiment board. I could probably give you cycle time of each experiment, the average cycle time. In generally we talking maybe about a week to develop it and release it. But then, the big question is, how long it would take to collect the information. So you could say, right now, you could say you have three people you need to talk to, right, to, three people you need to talk to. Make it estimate, How long actually take to do that, actually no, what you think the outcome would be. That you will have better understanding how the Lean startup is applied in segment of Ireland for example. So you doing the interviews to

95 | P a g e answer that questions, but these are actions, right. So pretty much you have an option and says you will meet this people, who I happen to know, who actually works in that field. Thats just the action, ok. Let me change it as th e lean startup experiment. So, the experiment is, that you need to have a thesis and maybe that a good enough for a reason. But generalized. You want to have better understanding maybe how to use lean startup. So before actual action was expectation. The expectation is you will have all this questions answer, and maybe you can expect to write them down, and feel them up in, then, after you doing the interviews, and you also expect that that your confidence about understanding of Lean startup blablabla is higher. And you expectation is that your professor will give you high marks if you do a good job. So, this is from there, is about your expectations. So the action is: you will do the interviews and you write the script pretty much the answers from the interview and submit them to you professor. Now we have two things, we have the actions and also the expectations. And the next thing is like when you are going to check, are the expectations matches the reality. So if you write down, thinking about experiments, about these things. The actions that you do but also the

expectations that you write prior that you actually do the action. Then the dates, the Trigger, that is, after five clients I will stop, or maybe a date. So you said, after 12 of March I expect to have interviewed three people, or five people. This is expectation. So, here is next thing. Learning is a gap between expectation and reality, ok. Some people looks on that is failure, or the experiment was fail because I was planned to interview five people and I only had interview three by that date, right. But that is not fair, that is learning. If you actually planned to have five, and you manage all the time to reach five, you did what you already knew. So think about that, this is actually the way how the lean startup works, rather just a interaction, which may be not be right, lets make the expectation first, then in order to fulfil that lets see what actions we can do. Or at least, start with the actions but certainly set the expectation before doing the actions. And now you have the scientific experiment. And some of them, you will have the quick informations immediately, that is, my confidence its higher blablabla, but there are other things, that they are actually depends from the others, That is your professor for example, so that could take now longer, but experiment is, the part of your expectations is replayings. So part of these are

96 | P a g e quantitative, I like it, you like it, yours partner likes it. And another are quantitative so its more like in numbers, and actually the quantitative, the measurable once, they take a little bit more of time. So thing in terms of

software, you release the feature, how do you know the feature is actually used? But you will know over a period of time, but you can call, you can pick up the phone and call the first customer that actually ask for it, and actually get feedback from them, that not a really quantitative is but is good enough, you know what I mean. So the goal is always to shrink. If you can shrink it is better. So, but it is a week versus a month versus... Its all irrelevant, if before you feedback was once per year, and then you have the feedback in month time is perfect and for others if you feedback .. Question 11

Zenon: Is it a risk to develop a product not in stealth mode but with open engagement of customers? Claudio: So, it is depends from the altitude. Some people do prefer the stealth mode, and if that is your altitude, the lean startup is definitely not for you. My personal experience is: that others dont give a deem what you doing. You can actually them idea to extract goal from there, they will just not do it. They will not spend a time doing it. Its not to say people are lazy, but maybe there are, and the other thing is the level of involvement that they have into your idea is not high so you definitely you wouldnt. So, that stealth mode could be . Personally I dont think so because whatever the snapshot people get, it is the snapshot, so will need a translation anyway, but its a snapshot where a company is been here. But they didnt pay the price for education to get there, in the first place. And where they are now, it is not place where they will be in few months.

97 | P a g e Claudio Freestyle: Lean Startup it is for me its a revelation, when I started first time learn about it. There is multiple interesting ways, hoe people are using it, there is certain difficulties, but people learning.

There is a little history there, because, I am consider as lean expert, but you know, the lean is something that started with Toyota. I dont know you have a chance to see one of my presentations, I did presentations like, one it is called a3 revolution, which is actually distinguish between agile, lean and lean startup. There is also new methodology coming called Lean Change. Something what I am doing now. Which is lean startup for the . Change. You know for example lean startup in enterprise. But you may consider two aspects

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

Question 12

Zenon: How the Lean Startup methodology could reduce waste in early stage of startup? Claudio: Because is enough enables you to do the right things, before doing them right. That is, like with the methodology like agile, lean production, you know the lean manufacturing, you learn to be operationally excellent, you learn how to do the things right, fairly operational well. But in Lean Startup, because you start with the assumptions, you assumptions may be wrong. Be realist of the new model that you can actually plug on top what you really do, it actually

98 | P a g e enables you to reduce waste by not doing the wrong things. I knew a business, you know, they become company of the year, they was operationally absolutely excellence. Doing agile, right focus Writing books and stuff like that, but he didnt save us, and the reason he didnt save us is that we couldnt do the right thing... but we didnt have the model to do the right thing, and this is what especially really helps us so by iterating to the customer, by iterating, starting with another very good point to make, there has been at some point some views in our industry. There have been at some point that came from a company called such at thirty seven signals, you know thirty seven signals? it came from Irubian rails, it its actually it the worst ... its actually softer, it needs to take sides, take your side, have a strong opinion and go with it, you cant be nice to everybody because if you try to be nice to every single customer, you essential being softer doesnt help anybody that well, but if you focus on a narrower segment, and you have strong opinions there, you take that aside and go for it, and thats really what the art of entrepreneurship is also really to have an opinion because you cant ask the customer what do they want, you know you cant ask them, you have to have your opinions, but what lean startup introduced is this idea that, it is good to have your opinions, you need to have your opinion, you need to test them, test them to their behaviors, you know what they are actually doing okay, so thats the way its really helps you to the right thing rather than.....

Question 13

Zenon: How big is the risk, that we will drop our good ideas because of wrong outputs from MVP? Claudio: you know the rest is the customer doesnt know what they want, you know, the big point is that they should use, and everybody will tell you, you should take this with a grain of salt, there is still a lot of instinct still, so the idea is that we deliberately find ways to, to articulate the reasons we are potential changing direction so we are trying to eliminate some of the buyer, but the buyers are

99 | P a g e still there so there are still a lot of things like that, now one thing that is real, that i have seen, if you use terminology like pivots, as a pride, like pivot every two weeks, every week, with pivot so many time, pivot means pretty much you are wrong and now you are changing direction, so in a very sarcastic way, once i said, if you pivot more often than parents change their babys nappy, pretty much you are dealing with shit. but it actually raises candles, taking pride in they pivoted so many times, in a way they want to show off they have a methodology and they can change directions if needed, that they are flexible and you can also consider the fact that you should pivot in early days because really you havent got a clue but then as you move forward you know there is still an opportunity to pivot but...... so anyway to illiterate the answer I gave before about the MVPS how big is the chance? Absolutely it is big but is it a reason not to do it? I dont think so you know there is very little you can do, actually put it in this way, the ideal hypothesis tests the ideal setting attached to hypothesis, the one you have and the opposite so you have one that balances the other one, like in many ways when you do scientific experiments, you will never know that you are right, you can only know if you are wrong effectively, and if ten people say its the wrong MVP or essentially what can you expect from that MPV and you have ten people in a row there is no statistical significance but it is a strong signal and this is the way you should look at it, is to look at it as signals, and the signal maybe that is the wrong MVP or maybe the wrong thing that you build but it may well also be that you just simply find the market fit, in a way, maybe in a sense you solved the problem just for the wrong people, you know what I mean, maybe its the kind of people you interviewing are not the right people for what you produce. Which is a good idea anyway so have maybe have interviews two weeks in a row asking a set of questions and then as you gain more understanding you change the questions not constantly but just change slightly or maybe lets change the survey or lets ask that part particularly, so lets say its still an art, so even in an scientific experiment you have to ideas.

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Appendix 2
In-Depth Interview with Darren Heaphy

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

Question 1

Zenon: How long take preparation of Business Model Canvas? Darren: Ohh, it is fast. We got a first cut in about half of hour. So we personally time boxed. The idea behind the business model canvas is, just very quickly, brainstorm what you can think the key components are of the business model or you assuming to be, and then come back to it, reviewed, revised, and test it. Right. So you dont spend too much time, setting it up, and making them you just brain dump And iterate on it. Zenon: So, we can say, in one afternoon, you could draft multiple versions of business model canvas? Darren: Yes, absolutely.

Question 2 Zenon: Is there any limitation in scope of describing the business activities on Business Model Canvas? Darren: Yes, well, kind of. The business model canvas shows the business in insolation and the key components of it. What doesnt show, if you apply it to existing

102 | P a g e business, its very good at showing, what you call value proposition is and how you gone executing that and your key resources and partnership and how that will be delivered. If you are startup and you need to yet to validate first the core of problem-solution fit of the business, the business model as per of this definition. It doesnt really lend itself well to that. Which is why Ash Maurya comes up with him version of it, which is problem-solution fit. So, with us, the problem-solution fit version of the canvas, the lean canvas was more appropriate on the beginning, where we were thinking Who have what problem and how we going to solve it? And then as we moved from problemsolution validation to product market-fit, we found the business model canvas more appropriate, because that said: Yes, we validate there is a problem, we know what we believe the solution meant to be and now we need to figure out how we going to scale that. Who do we need to do that, what are our partnerships. Zenon: So we can say, the Lean Canvas is better tool to use on beginning of the startup, when we are focus on problem-solution first? Darren: Yes, Exactly. The other limitation of the business model canvas is that, it shows business model in isolation and it doesnt show the environment which in the business exists. No business exists in the vacuum. So what you dont have but Alex Osterwalder mention that, he is the creator of the business model canvas. So, what is doesnt show is, the outside forces that influence the business model. So, what are our competitors doing, what law, legal, societal changes are coming, what are the trends on the market. Once, they influence the business model in some way. If you have the business model in isolation, on the piece of paper you dont have that influence components. Because the business model is very visual, and with it, you may have tone of vision, because you not stepping back from your business and looking on the market that is entirety. So, thats potential limitations.

103 | P a g e Question 3

Zenon: What is the perspective of Investors, Venture Capital, when presenting our business concept on one sheet of paper, is that enough? Darren: Yes and no. Deepens from the investor. So, we found the some investor are very fluffy and couldnt be bothered. So they just said: yeach, whatever, just do it. And the traditional investors wants the business plans. And sometimes, they want the business plans not to read them, really, if do they ever read them in fact the business plans are things investors makes you right and they never read. The idea was: by having business plan, they felt you thought about the business. So, some of the investors want the business plan, they felt you thought about the business. So, some investors wants the business plan. With the investors we got, we found the investors who brought into the process. Loved that we are using the business model to validate it, because the risk from the investors perspective they thought, fantastic. You doing the work now, to ensure us before we give you money, you know there is a market out there. Thats great. They want to see that. And the business model lends itself well to that kind of conversation. You can sit and if you are the investor, and said: Well, I show you my core components of my business model and here is what I done to validate that those components are correct. And the investors that you find, who brought into that process, they really like it. Because is systematic derisking from the perspective.

Question 4 & 5

Zenon: How quickly is to adjust the changes on the business model canvas? How often is the business model canvas updated??

104 | P a g e Darren: It is very fast, you can do it in minutes. I mean, with us, in the office, we white boarded, scrubbed a new lines. We validate it every week. We sit around the model, and just clarify on the beginning of our planning meetings, is the model still correct? Any insight that influences the business model. As we know there is a change of the business model, we will do it. So, it could be, our key partners turns out it could be this or unique value proposition changes to be more like this but it is not it changes in every period of time, just that, it does change . process, We are talking about that changes.

Question 6

Zenon: If we extend our customer target or add additional products, will you use separate sheet of canvas or they can work together? Darren: Potentially, if you add more customers segments, the risk across behind is, the needs of that customers are different from the needs of other customers or other way, for target those customers or the revenue model or any other components of the business is different for that segment. Then you need another canvas. Because now you diverging, and the argument there is, you should trying to focus on a particular segment. Again it is depends. If you have more established business, you may have broad range of segments that are attractive to your core business. So it is really deepens on. And in the startup phase, if you validating and you adding more segments and each segment have different needs. Problem-solutions or revenue models than then you may need different canvas, to particulate, the possible approaches that you can do.

105 | P a g e Question 7

Zenon Do you think there is a time in a companys growth that expanding to a full business plan is good idea or only when is absolutely required by an investor? Darren: No. The only reason why ever do that, is if, the investors that we need it demand it. Otherwise, we avoided. Because is just a total waste of time. Now, we have the investors memorandum which is like a light version of the business plan. That is need it. Because, they want know your financials, you costs etc... So then needed, but the business plan is initially 25 pages document, other like, no we never do it and is completely waste of time for us.

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

Question 8

Zenon Is it good practice to get involved customers from early time of development? Darren: Very much so. In fact, is bad practice to not get involved the customers. The challenge across is, making show the insight you getting from customers is indicative of those who you making target. So, for example, we have very small business using us product, the insight that we get from them, it is helpful, and its not necessary indicative of customers we targeting who have a bigger business, getting access to those bigger customers is a challenge but thats not to say you should not do it, it is essential that you do involve them.

106 | P a g e Question 9

Zenon: Is it Minimum Vitae Product guarantee minimum usability to give fair results from our customers? Darren: It is deepens from the type of insight that you want get done. If the aim of the MVP is nearly to discus with the customer in front of you, how we going archive the job to be done by your product but they not necessary using it, then is fine even if doesnt actually work, as long it is enough to facilitate and articulate you points, right. If in other hand, the MVP is a minimum product that you can build and give to the customers, to archive whatever jobs to get done, as long what you put in place is not prohibitive to them to archive the job to be done, then it is fine. As long, as it good enough that it doesnt cause dissatisfaction. Otherwise, you will gone fail to execute. Zenon: So, we can say its important to solve the problem and you doesnt need all additional features to get good insight? Darren: Exactly, but the core things that they have to be there, that if they were not be there they cause the dissatisfaction. The absence of them, will cause you, looking on the product and got: this is lot of crap, its really basic. They delighted as the stuff you build lay down when you put in, make it beautiful, sexy, slick, cool features, that you dont need necessary right now.

Question 10

Zenon: How quick is to conduct our experiments and how many of them fail?

107 | P a g e Darren: we try to, its hard to. Sometimes the experiments are more innate, right, so you know to validate assumption you making about something, what we should do, we try to do but its hard to do it is conduct experiments that are timely. You know that in the period of time, you have enough of insight to prove or disprove some assumptions or hypothesis you make. How often they failed is deepens on the assumptions you making and the type of the experiment you running. I mean, the fail experiment is a good thing, it challenges your assumption, it proves you to be wrong on the assumption that is not a bad thing, had you not tested it, you would have made a mistake.

Question 11

Zenon: Is it a risk to develop a product not in stealth mode but with open engagement of customers? You know, Scurri have own blog, lot of informations are public etc. Darren: There is a risk. In our example, we build the product with customers in mind, so we got customers that whom to validate the MVP and then build on it. The challenge those making sure you can make those commitments. So we build the product that was good enough for some customers. And whats happens. Other opportunities arrives, and you got a make sure you stay focused enough to continue to iterating for those customers that you have, or pulled back and give them back when you fell is good enough for them and its ready to been used. So, its not a risk, its a challenge to do that. It is a risk to build in stealth mode, because you can build the product and spend ages building it, and then you launch it and then it doesnt work for that type of customers you want that work for.

Zenon: What about competition and stealth mode?

108 | P a g e Darren: Competition will happen anyway. If you have competition, when you building your product thats a good thing, there is market validation there and a problem is big enough and others have found this same. And you dont want to be directed by the competition anyway. The only risk it causes if product is meant to be very disruptive you cant iterate into disruption openly you got to do with select group of the customers and then launch you very disruptive product .

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

Question 12

Zenon: How the Lean Startup methodology could reduce waste in early stage of startup? Darren: Lean startup reduces the risk as I see it, right. Lean, as in the principles of lean outside the lean startup, which someone in lean startup applies, reduces waste. So you got, the principles of Lean or lean manufacturing is all about, just in time production, reduction of waste, value mapping and so forth. Those principles some of which apply to the lean startup domain, absolutely reduce the waste. So, dont bother building a checkout page, if you value proposition is not right, dont bother building elements of the product that we are only be able to use when we have customers sign up first, then focus on other elements of the product. The lean startup de-risks, I think. Which is the way is reducing the waste in the future. Because if you dont apply the principles of lean startup, you building the product with any form of validation or scientific type of validation like lean startup. And then, at some point, you p product proven to be bad or wrong, it doesnt work and everything that you done thus is waste full.

109 | P a g e But even worse you may be even to late, right. So may have no more money, you scale too quickly, you hire to many people, you may have made all these assumptions about your business model which are now proven to be false. And everything that you build on the business is wrong, so you may even lose your business but its even worse than waste.

Zenon: It is big change from initial Scurri business model until now?

Darren: O yeach, hugely, massively. Yeach, its funny. I mean we integrated fundamentally on our business model couple of times, due to the process of lean startup helping us to validate the market, the customers, the needs and so forth. Had we not done that, we will would be plugin away and then original business model that doesnt work, I mean we will be bankrupt by now. So the lean startup works in that way, I guess in a way it reduces waste but conversely lean startup have taken a lots of effort, so its feels like youre going slower, you spending more time analyzing and validating before actually doing and its innate desire to go fast, while in the lean startup; slow down, take your time, get it right and then you go fast, test it. And it is difficult, like Rory is same and I am like the same, we want to do stuff and its feel likes the lean startup takes time. So, yeach, its reduce the waste and add more effort to business but is good effort that reduces that risk of the business may fail in the future.

Question 13 Zenon: How big is the risk, that we will drop our good ideas because of wrong outputs from MVP? Darren: And it is very good question and it is risky. Because I will phrase it even better, I will tell you what we did wrong actually, as the example. If your business model is a series of assumptions or hypothesis you making about the

110 | P a g e world and your business world exist in and you experiments means to validate those assumptions, If you havent structure this experiments properly then you may decide your assumptions are wrong, based on the output if experiments tell you something, when havent quite structure that right way, thats what happened with us. It took us to long to validate some assumptions we made, because of the learning and natural skill and progression that comes in to structure experiments a right way. Claudio really help us with that. That was: How do you know, you done enough, to figure out, your assumption was right or wrong. When do you know, it is enough to moving on And I think, everything is leap of faith. Your made every assumption you validating, invalidating it is leap of faith. You thinking, I dont know with any degree of statistical significance that is true but I have enough inside and enough of my own instinct to feel that the information telling me it is true. So, it is risky, I guess. You know, because humans are complex beings and qualitative and quantitative are two very different things, but further to that one of our early investors is very driven business . , he wants just to have things done. And sometimes, you thought that, you want to be very scientists about something that is very basic, his opinion was: look on the market, do what they doing better and launch. And thats only to do. .. Steve Blank talks about that, he saying: if you feels its wrong, the actual . You, instinctively, if you doing it, you feel like hmmmm.. I dont feel we doing the right thing, and probably you not. And what he said, Lean Startup is an approach, there is many approaches. And if you feel that it is right thing to do, and you acknowledge, there is a risk in doing it, do it. You know, dont wait. Just get out there and do it . If you think it is wrong, probably it is. So if you feel the Lean Startup is wrong for you, then probably you dont need to do lean startup, you just go and do it. And thats what one of our investors had. He felt, why we spend all time standing in front of white boards. Get outside, look at what your competitors are doing, and just do it better than then and that guarantee you will be well. And it is logical, you think: fair enough, that make sense.

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Appendix 3
Interview with Tom Banville

112 | P a g e Question 1

Zenon: How long take preparation of the business plan? Tom: For the typical business, you know, some entrepreneurs would be very focused on the business plan and realise how important it is and spend a lot of time on it. Maybe a number of weeks or months, possibly years. But, quite a few entrepreneurs just jump in and completely bypassed all business planning process. So, it is hard to tell there is a typical or an average time spend. But from our kind of side of things, we would recommending that, certainly a

number of weeks or months are spending on a business planning process. And it is not the process ever finishes, it is ongoing process . never just one business plan you got to continually evolve your business plan over time. But just taking our business program, like a ten week program, that we would recommending that business spend around 10 weeks working on the business plan. If I want answer to you, I would say: yeach, ten weeks will be a good time to understand, you know, researching, getting information, drafting the business model.

Question 2

Zenon: How big are the changes from first version of business plan and company shape after verification by market their assumptions? Tom: There is a saying that the business plan, there is one thing that would be right with the business plan, . Could be wrong. Because, you know, you well business plan it is what you hope is going too happened over the next year or two years, wherever. And it is never right, never 100% right. I mean, nobody can predict the future. You know, cost may be under estimated, sales may be overestimated, maybe the predictions, the assumptions that you made in terms of maybe sales or cost are wrong. If despite maybe your best kind of efforts to

113 | P a g e estimate or what the cost may be or sales may be. So it is a bit like trying to predict the future, so it is impossible to do. But I often seeing with successful businesss, that are going on to create jobs, create employment, whatever, is that they are start out with one particular idea, of this is what we going deliver in terms of the product and service. And they test the market with that, and here is a link to Lean Startup, they test the market and says, we dont want that or that is not exactly what we need or we want, so they maybe change a little bit or evolve a little bit and then come back to the market, here is another offering what do you think. Very often a business can kind of pivot, you know, from this is what we start with and it doesnt work, so we changed this and we changed again and again, until we find that what actually the customers wants the product market fit. Question 3

Zenon: How many of that business plans/startups fails? Tom: We have some kind of training programs, like, we attempt to start the business courses of average, on average there will be 15 people on that programs. So there will be 150 people who will attempt for 10 weeks . Business course, In the county Wexford over the year. But I say you could double that, in terms of people who are coming, so we could see 300 people looking for starting the business or looking for informations on starting the business with in the year.

Zenon: And how many of them survive, lets say initial stage of running the business? Tom: A small number. I mean, these will be people that would want to start the business or just about to start the business or thinking about starting the business in future once they will find out the informations. So, out of that 300, my guess would be that, maybe 30% would go on to actually start the business. And then if you will look out of that 30%, year later maybe half are still in

114 | P a g e business and maybe two, three years later it would be half of that again would be still in business. It is risky, starting the business is: I always say it is easy to start the business but it is hard to keep it going. Question 4

Zenon: Do you think it is a good practice to get involved customers from early time of development? Tom: Yes, I think so. I think very often, from my experience, now over twelve years working with startups and small businesses. If that they dont .. Go and talk to customers early, get it there, talk to them, meet them and you know, get feedback. And very good example of that now is the farmers markets. Where you have a lots of startup businesses, you know, interacting with customers and maybe they made a product, a food product, that they looking .. to sell to customers. There is interaction there from the start . Selling the product and the customers telling them: we like that or we dont like that. And they dont know, like repeat sales whether is working or not. If its not selling, it is not repeat selling. Customers telling them, we like it or we dont like it, we lik e it but the price is too high or we dont see a value or whatever. So, yeach, I mean absolutely, I be telling: any business, go and talk to customers straight away and get feedback, put the things out there, your offerings.

Question 5

Zenon: Is it a risk to develop a product not in stealth mode but with open engagement of customers? Tom: Yes, I would maybe certain advocating that and you know, often people coming here with the product ideas and new inventions particularly and they very, very secret about it. It is kind like, here is my invention but they afraid to share the

115 | P a g e information, and I always say: look it, I cant help you, unless you tell me what it is. And you got to have some sort of trust with somebody to be able to disclose what actually you want to do. And I often see that, the businesss that are very upfront about their offering and saying: this is what I am going to do, this is my product, this is my service, what you think? Otherwise, .. more successful. Because they getting, they listening, they getting their feedback from customers and they gets lot of different feedback from a lot of different kind of people, it could be a people like advisers like me or consultants or family, friends or strangers. Whoever, they getting them feedback and it is all go into making the product or service better. So, yeach. And that is one of principle of Lean Startup, engage with the customers.

Question 6

Zenon: Do you have any experience with companies that are use the lean startup methodology? Tom: Only one who I can think, who is very upfront about it is Scurri, Rory OConnor. . I heard a couple of people kind of mention about it but actually practicing it, only one what I can think of is Scurri. I dont think the principles are really out there with entrepreneurs. Certainly from my experience, here again the county Wexford , I dont hear .. People are talking about it.

Question 7

Zenon: Is there any changes after recession regarding starting a new ventures? Tom: Just referring back to our start to run business course which is I suppose is a good reference point I mean the majority of people who are attending the start to run business programme at the moment are unemployed people who are

116 | P a g e looking for other options, you know, rather than looking to get a job they are looking to start their own business so i think the recessions has created necessity entrepreneurs new people who have lost their jobs or been made redundant and who feel there are not opportunitys for them in terms of

employment so they are looking at self-employment as an option, there has always been a good demand for start to run business course in our county, but I think over the couple of years there has been an increased demand and from our prospective we have found it easier to fill the programs because there is lots of interest in starting their own business now whether that goes on to become start up business or not is another thing, maybe thirty percent might go on to start out of a hundred and fifty so theres is definitely an increased interest an increased expression of interest in terms of starting a business, but I think that is driven a lot by necessity if you cant get a job anywhere else, you know maybe I will create a job for myself, and thats what driving i suppose the increased demand for our services in general and for something like start to run business program.

Question 8

Zenon: Waste of time and resources in the startups, any comments on that? Tom: well i supposed there is two ways of looking at it, I mean is it time wasted if you have researched something and then you went out and once you have done your research and you feel that there is market there for a product or service and you go out to the customer and the customer says no and you got to come back again and start again maybe, yes you could look at it and think yeah it was a waste of time or you could say it was part of the research the process Im going through and then pivoting like i say then pivoting to another idea.

117 | P a g e Question 9

Zenon: Validation of business assumptions in the new ventures, whats your opinion about it? Tom: I would say the average entrepreneur somebody who was thinking of starting a business probably spends very little time doing the research the planning, whatever, they go out with a business idea and probably spend too long trying to prove that idea you know they really believe it and stick too long with it, rather than listening to what the customer is saying, we dont want your service, we dont like the product, we dont like the price or whatever is might be, they dont really take that on board, they keep pushing ahead rather than listening and getting the feedback and changing. I think most entrepreneurs jump in with the idea, and go head on and dont spend enough time, planning, researching.

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Appendix 4
Interview with Darren Heaphy - Data Reduction

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Appendix 5
Interview with Claudio Perrone - Data Reduction

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Appendix 6
Interviews Context Data Display

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