Lean Startup and the Business Model: Experimentation Revisited

Abstract

Lean startup and the idea of a business model have become popular in the context of startup experimentation, innovation and strategy. In this paper we discuss and critique the assumptions behind lean startup, specifically how the approach conceives of hypothesis development and startup experimentation. While the scientific aspirations of the approach are to be applauded, we argue that the prescriptions suggested by lean startup feature challenges and unintended consequences. Lean startup's heavy emphasis on readily observable feedback and immediately validated learning undersells the entrepreneurial scientist's central task of composing a novel theory and hypotheses, prompting instead a search for value and validation only where it is easy to observe it. In short, we argue that lean startup inadvertently mis-specifies the nature of hypothesis development and promotes incremental experiments that, more often than not, only generate incremental value. Furthermore, the favored hypothesis-generating tool of lean startup—the business model canvas—lacks specificity in helping startups craft unique, firm-specific hypotheses and critical experiments for testing theories. After considering these challenges, we offer the outlines of an amended and alternative approach to startup science, innovation and experimentation.

Keywords: entrepreneurship, lean startup, business model, strategy, organizational economics, innovation, technology

JEL Classification: D2, D83, D84, L26, L1, L2, M1, M13