The lean startup method: Early‐stage teams and hypothesis‐based probing of business ideas

Abstract

AbstractResearch SummaryWe examine a learning‐by‐doing methodology for iteration of early‐stage business ideas known as the “lean startup.” The purpose of this article is to lay out and test the key assumptions of the method, examining one particularly relevant boundary condition: the composition of the startup team. Using unique and detailed longitudinal data on 152 NSF‐supported lean‐startup (I‐Corps) teams, we find that the key components of the method—hypothesis formulation, probing, and business idea convergence—link up as expected. We also find that team composition is an important boundary condition: business‐educated (MBA) members resist the use of the method, but appreciate its value ex post. Formal training in learning‐by‐thinking methods thus appears to limit the spread of learning‐by‐doing methods. In this way, business theory constrains business practice.Managerial SummaryLean startup methodology has rapidly become one of the most common and trusted innovation and entrepreneurship methods by corporations, startup accelerators, and policymakers. Unfortunately, it has largely been portrayed as a one‐size‐fits‐all solution—its key assumptions subject to little rigorous empirical testing, and the possibility of critical boundary conditions ignored. Our empirical testing supports the key assumptions of the method, but points to business education of team members as a critical boundary condition. Specifically, MBAs resist the use of the method despite being in a strong position to leverage it. Results from a post hoc analysis we conducted also suggest that more engagement with the method relates to higher performance of the firm in the 18‐month period following the lean startup intervention.