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LEAN START-UP PRINCIPLES:

EXPLORING TRANSFERABILITY TO THE SOUTH AFRICAN CONTEXT

A Research Report

presented to

The Graduate School of Business

University of Cape Town

In partial fulfilment

of the requirements for the

Masters of Business Administration Degree

by

Waldo Noordermeer

December 2013

Supervised by: Trevor Williams

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MBA Research Report 2013

i

PLAGIARISM DECLARATION

I know that plagiarism is wrong. Plagiarism is to use another’s work and pretend that it is

one’s own.

I have used a recognized convention for citation and referencing. Each significant

contribution and quotation from the works of other people has been attributed, cited and

referenced.

I certify that this submission is my own work.

I have not allowed and will not allow anyone to copy this essay with the intention of passing

it off as his or her own work.

Waldo Noordermeer

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ABSTRACT

This thesis focuses on a qualitative exploratory study of the constructs of lean start-ups, and the

transferability of the lean start-up principles to the South African context.

To this end, the study firstly reviews literature on the fields of study related to lean start-up ventures

and lean start-up principles. Secondly, it explores the current business practices of South African

entrepreneurs. The researcher encouraged the entrepreneurs to respond with accounts which were

strictly based on current or past practices, without ‘leading’ the respondents with any lean start-up

concepts or theory. Lastly, by commenting on the divergent and convergent aspects of the theoretical

lean start-up principles and the observed South African practices, the researcher concludes with

comments on the level of transferability of the lean start-up principles to the South African

practitioner.

Key Words:

Start-up, Entrepreneur, Innovation, Change, Strategy, Lean start-up, product development

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Table of Contents

PLAGIARISM DECLARATION ............................................................................................... i

ABSTRACT ............................................................................................................................... ii

Key Words: ................................................................................................................................ ii

Acknowledgements .................................................................................................................. vii

Research Title ............................................................................................................................ 1

SECTION 1: INTRODUCTION ............................................................................................... 1

1.1 Purpose of the Study ........................................................................................................ 1

1.2 Context of the Study ........................................................................................................ 1

1.3 Research Problem Statement ........................................................................................... 4

1.4 Significance of the Study ................................................................................................. 5

1.5 Limitations of the Study................................................................................................... 5

1.6 Assumptions ..................................................................................................................... 6

SECTION 2: LITERATURE REVIEW .................................................................................... 6

2.1 Introduction ...................................................................................................................... 6

2.2 Background Discussion ................................................................................................... 7

2.2.1 Capabilities of the Firm ............................................................................................ 7

2.2.2 Start-up Firms and Complexity ............................................................................... 10

Table 1: Decision Making Models based on the Cynefin Model .................................... 13

2.2.3 Start-up Firms and Dominant Design Theory ......................................................... 13

2.2.4 Start-up Firms and Innovation ................................................................................ 15

2.2.5 Start-up Firms and Strategy .................................................................................... 18

2.2.6 Start-up Firms and Growth Orientation .................................................................. 19

2.3 Literature Relevance, Discussion and Reflection .......................................................... 21

SECTION 3: RESEARCH METHODOLOGY....................................................................... 24

3.1 Research Approach ........................................................................................................ 24

3.1.1 Advantages of Qualitative Research ....................................................................... 25

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3.1.2 Disadvantages of Qualitative Research .................................................................. 25

3.2 Research Design............................................................................................................. 25

3.2.1 The Scope of the Study ........................................................................................... 25

3.2.2 Data Generation ...................................................................................................... 26

3.3 Population and Sampling ............................................................................................... 27

3.3.1 Population ............................................................................................................... 27

3.3.2 Sampling ................................................................................................................. 27

3.4 The Research Instrument ............................................................................................... 27

3.5 Data Collection .............................................................................................................. 28

3.5.1 Data Gathering Sequence ........................................................................................ 28

3.6 Data Analysis Techniques .............................................................................................. 29

3.7 Limitations of the Analysis ............................................................................................ 29

3.8 Validity and Reliability .................................................................................................. 29

3.8.1 Validity ................................................................................................................... 29

Table 2: Validity and Reliability ...................................................................................... 30

3.8.2 Reliability ................................................................................................................ 30

3.9 Informed Consent and Research Ethics ......................................................................... 31

SECTION 4: RESEARCH PLAN ........................................................................................... 32

Table 3: Research Plan..................................................................................................... 32

SECTION 5: RESEARCH FINDINGS ................................................................................... 33

Table 4: Emerging Codes..................................................................................................... 33

5.1 Community Focused ...................................................................................................... 33

5.1.1 Strong Customer Relations ..................................................................................... 34

5.1.2 Meaningful Customer Feedback ............................................................................. 34

5.1.3 Collaborative Product Development ....................................................................... 35

5.1.4 Building Partnership ............................................................................................... 35

5.2 Start-up Strategy ............................................................................................................ 36

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5.2.1 Growth Orientation ................................................................................................. 36

5.2.2 Planning .................................................................................................................. 37

5.2.3 Clarity and Focus .................................................................................................... 37

5.2.4 Scaling..................................................................................................................... 38

5.3 Learning Approach ........................................................................................................ 38

5.3.1 Past Mistakes .......................................................................................................... 38

5.3.2 Lack of Initial Business Knowledge ....................................................................... 39

5.3.3 Continuous Learning ............................................................................................... 39

5.4 Attitude towards Change ................................................................................................ 40

5.4.1 Adaptability............................................................................................................. 40

5.4.2 Innovative Ability ................................................................................................... 41

5.4.3 Revision of Goals Period ........................................................................................ 41

5.4.4 Speed of Change ..................................................................................................... 42

5.5 Characteristics of the South African Entrepreneur ........................................................ 42

5.5.1 Driven by Passion ................................................................................................... 43

5.5.2 Time Constraints ..................................................................................................... 43

5.5.3 Inherent Optimism .................................................................................................. 43

5.5.4 Past Experience and Current Skillset ...................................................................... 44

5.6 Applied Lean Practices .................................................................................................. 44

5.6.1 Design Constraints .................................................................................................. 45

5.6.2 Financial Constraints .............................................................................................. 45

5.6.3 Human Resource Constraints .................................................................................. 45

SECTION 6: ANALYSIS AND DISCUSSION...................................................................... 46

SECTION 7: RESEARCH CONCLUSIONS .......................................................................... 51

SECTION 8: FURTHER RESEARCH RECOMMENDATIONS .......................................... 53

SECTION 9: IMPLICATIONS FOR ENTREPRENEURS IN SOUTH AFRICA ................. 54

REFERENCES ........................................................................................................................ 56

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APPENDICES ......................................................................................................................... 65

Appendix A: Differences between lean and traditional start-ups .................................... 65

Appendix B: The Research Instrument ............................................................................ 66

Appendix C: Consistency Matrix..................................................................................... 67

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Acknowledgements

Foremost, I would like to express my sincere gratitude to my supervisor Trevor Williams for his

support, wisdom and guidance during the research process. Working with him has been my privilege

and pleasure.

A special thanks to Mary Lister for assistance in the library. Without her friendly guidance and words

of encouragement this institution would have been a lesser place.

I also want to acknowledge Heidi le Sueur and Kate Hunter for giving me direction during the early

stages of this project.

Lastly, I thank all my fellow students for the shared memories during 2013. In particular, I extend a

word of gratitude to Johnny Appleseed my seminar room comrade and confidant.

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Research Title

Lean start-up principles: Exploring transferability to the South African Context

SECTION 1: INTRODUCTION

1.1 Purpose of the Study

This is an exploratory research report that aims to understand the level of transferability of

the lean start-up principles to the South African entrepreneur. The incentive to determine the

level of transferability of these principles to the South African entrepreneur lies in: (1) the

benefits that lean start-up principles offer entrepreneurs, especially in resource-stricken

environments, (2) the high failure rates of South African start-up ventures and (3) the

simplicity of teaching and applying the lean start-up principles (Ries, 2011). Business

schools around the world have started teaching the lean start-up methodology (Ries, 2011). If

the lean start-up principles proved to be transferable to the South African entrepreneurs, then

there is a strong argument for South African education institutions to adjust their syllabus

accordingly.

1.2 Context of the Study

Start-up

Based on the work of Blank (2006), Ries (2011), argued that “A startup is a human institution

designed to create a new product or service under conditions of extreme uncertainty” (Ries,

2011, pp. 27).

Lean

With the turn of the new century a group of scholars (Ries, 2011; Furr and Ahlstrom, 2011;

Blank 2006) built on existing entrepreneurship literature and established what they claimed

was new methodology called ‘lean start-ups’. Ries studied the lean manufacturing ideas,

originating in the Toyota Production System in Japan, and started applying them to his

entrepreneurial experiments. From these experiments, Ries formulated a set of principles that

addresses some of the needs of start-up ventures. Ries (2011) believed customer

development should happen faster so he added agile practices to the customer development

process and called it ‘lean start-ups’. There are a number of characteristics that define lean

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start-ups. For a summary of the key differences between lean and traditional start-ups refer to

Appendix A. For more background information, please refer to Dennis (2006) in the

references section for further reading on the topic of lean.

Agile

Agile development is a method used, particularly in software development, to increase

productivity in projects by increasing the speed of iterations within the product development

processes (Ries, 2011).

Build-Measure-Learn Feedback Loop

In this study, the concept of iterations, used in the new product development process, will be

based on the Build-Measure-Learn feedback loop illustrated in figure 1. According to Ries,

“The fundamental activity of a startup is to turn ideas into products, measure how customers

respond, and then learn whether to pivot or persevere. To pivot is to change strategy by

testing a new hypothesis of what the customer or market wants. All successful startup

processes should be geared to accelerate that feedback loop (Ries, 2011, p.18).”

Figure 1: The Build-Measure-Learn Feedback Loop. Source: Adapted from Ries (2011)

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Lean start-up Principles

The foremost principles emerging from current lean start-up literature (Blank, 2006; Ries,

2011; Furr and Ahlstrom, 2011) are summarized below.

PRINCIPLE 1: Get out of the building

To execute step one and two of the build-measure-learn feedback loop, entrepreneurs need to

involve customers. Owing to the levels of complexity and uncertainty, and the nature of

innovation associated with creating a start-up business, intuition and theory can get you only

so far (Ries 2011). Knowledge about the true needs of the customers is limited at the start of

the new product development process. During the start-up creation process, entrepreneurs

need to: interact with the customer as soon as possible; leave the guess work behind; and get

to know what is important for the customer (Ries, 2011).

PRINCIPLE 2: Minimum Viable Product also Service

Entrepreneurs need to offer the customer a prototype called the minimum viable product, in

order to get valuable feedback from customer interaction. “The MVP is that version of the

product or service that enables a full turn of the Build-Measure-Learn loop with a minimum

amount of effort and the least amount of development time (Ries, 2011, p.77).” Often the

best feedback on new products happens when customers comment on the features and

benefits of products. The features in the early versions of products could be reduced to

include only the most important aspects that clearly show how the needs of the customer will

be solved (Furr and Ahlstrom, 2011).

PRINCIPLE 3: Pivoting

The first two lean start-up principles facilitate continuous learning, as the entrepreneur

validates both the customer’s needs and the developing solution to those needs. When

feedback from the customer shows that the strategy proved to be incorrect, the entrepreneur

needs to pivot the strategy by starting a new iteration with an improved proposed solution.

Ries (2011, p. 149) defines a pivot as a “course correction designed to test a new fundamental

hypothesis about the product, strategy, and engine of growth.”

PRINCIPLE 4: Iterate Rapidly

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To iterate, in the context of the Build-Measure-Learn feedback loop, means to complete a full

circuit from an initial idea to an improved idea. Start-ups should increase the speed with

which they iterate through the Build-Measure-Learn feedback loop. The benefits of fast

iterations are that strategy could be proved wrong fast and cheaply, in order to move on and

test a new hypothesis. The iterations through the feedback loop, in the new product

development process, produce “continuous innovation” as new features are applied to solve

evolving customer needs (Ries, 2011, p. 14). Entrepreneurs can learn from their mistakes

through iterative experiments (Harper, 1999). Entrepreneurs can manage inherent uncertainty

more effectively (Sull, 2004) by following Harper’s (1999) three-step decision-making

process: (1) formulate a working hypothesis based on specified assumptions, (2) acquire the

resources needed to test the assumptions without over-spending (Sull, 2004) and (3) design

and run experiments in the market. These assumptions concerning strategy can be tested in a

sequence of repeated iterations (Ries, 2011).

This study will focus particularly on the first two phases of the lean start-up methodology

where the entrepreneur is looking to identify valid customer needs and valid solutions to

those needs. During primary data collection in this research, the constructs of the lean start-

up principles will be tested during interviews with practitioners, entrepreneurs and business

owners managing start-ups in South Africa.

The lean start-up methodology is based on an eclectic combination of concepts borrowed

from various fields of study and tailored to the specific needs of the entrepreneur involved in

new business creation. The principles address the importance of reevaluation and

modification of the ways the entrepreneur engages with what Christensen (1997) calls

‘previously nonexistent’ markets, where time-honored methods fail to deliver results.

Essentially, the lean start-up principles are the idea that, in current times, markets emerge in

new and different ways and that the entrepreneurial approach to new business creation should

adapt to these trends.

1.3 Research Problem Statement

“To what extent are the evolving insights into lean start-up principles transferable to the

South African entrepreneur?”

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1.4 Significance of the Study

The importance of new ventures to an economy in terms of tax proceeds, research and

development, job creation, exports and innovation have been well documented (Christensen,

1997; Schumpeter, 1934). While entrepreneurship and technological innovation have been

identified as key factors boosting national economies (Crosby, 2000), the majority of the

business start-ups that provide these factors to the economy usually fail within the first few

years of existence. Recent studies confirm that, regardless of the best intentions of

governments to create a business-friendly environment, a considerable proportion of start-ups

fail to become successful even in developed nations like the United States of America

(Shane, 2008).

The high failure rates of start-up initiatives have been the focus of numerous studies in recent

years, exploring some of the key characteristics and antecedents of start-up success (Ensley,

Hmiellski, & Peers, 2006; Barron & Hannan, 2002; Brinchmann, Grichnik & Kapsa 2010).

More recently, the body of lean start-up research has emphasized the importance of

developing start-ups by following a more practical and streamlined approach to product

development through continuous improvement of initial strategy and continuous learning

with role-players such as suppliers and end users (Blank, 2006; Furr and Ahlstrom, 2011;

Ries, 2011). Entrepreneurs can develop their human capital by consulting experts (Chrisman

and McMullan, 2004), independent strategic partners (Zahra, Neubaum and Huse, 2000), and

social networks (Ruef, 2002), thereby enhancing creative action and innovation.

This study explored the nature of the South African start-up ventures and the extent to which

these ventures could apply and have in practice applied lean principles in order to innovate in

the face of limited resources and high uncertainty.

1.5 Limitations of the Study

The sample size, sampling method and the number of entrepreneurs from whom data will be

sourced is a limiting factor to this study. Nevertheless, with the thoughtful selection of the

group of respondents and interviewees, meaningful insight will be gained.

Owing to the qualitative nature of this study, it is possible that the findings of this study will

not be applicable to and valid in situations with a different context. Further research with a

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larger sample size and a more representative sampling method would be recommended to

improve validity.

A further possible limitation on the validity of the findings in the study is researcher bias.

The researcher’s background, world views and ideology could be imposed on the findings

and interviewees.

The challenges in terms of inconsistency of interview responses are another limiting factor in

terms of data collection using the semi-structured interview approach. For further detailed

reference to limiting factors refer to the Validity section below.

1.6 Assumptions

The researcher assumes that the interviewees are truthful and that the information provided in

the interviews is accurate. The risk of this assumption will be mitigated to an extent through

the extensive review of articles on the subject matter. The researcher will be able to identify

to some degree apparent inaccuracies in responses.

SECTION 2: LITERATURE REVIEW

2.1 Introduction

Ideas in this document are communicated in both past and future tense. This approach shows

the researcher’s intent to communicate in terms of the planned research approach but also

reflection on the process as the research unfolds. In particular, the future tense is retained,

from the original research proposal, to a significant extent in sections 1 through 4 in order to

show what was initially intended and to facilitate comparison with what was found during the

research.

The lean start-up principles were developed and published very recently. The researcher had

to take a broad approach to the literature review, in order to expand on the four lean start-up

principles summarized in section 1.2. As a result, the literature review became a substantial

part of this document. However, with the benefit of hindsight, the researcher reviews and

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reflects on the relevance of the different concepts in the concluding paragraph of the literature

review section.

A comprehensive understanding of the lean start-up principles is fundamental to this study

and to understanding the approach to the literature. With this in mind, the researcher

developed and summarized the constructs of the lean start-up principles in section 1.2 before

the literature review section was discussed. Although parts of the information in the context

section could have been part of the literature section, the researcher intended to encourage the

reader to a full understanding of the principles and the origins of the principles before delving

into past literature supporting these principles.

The literature review focused on 7 concepts related to business studies and start-up literature.

Start-up ventures are multifaceted, inherently uncertain and extremely complex and therefore

the concepts underlying the start-up literature are numerous. These concepts include

resource-based view of the firm; capabilities of the firm; uncertainty; complexity; dominant

design theory; innovation and lean start-up principles. The purpose of the literature review is

to provide the researcher with a foundation of knowledge on the existing literature on the

concepts underlying the research problem. This knowledge would be the starting point for

the interview process and is therefore done wholly before the interview process begins. It

will assist the researcher to better identify existing and potential application of lean principles

in the South African ventures under study.

2.2 Background Discussion

2.2.1 Capabilities of the Firm

Resource-Based View of the firm

Various theories and frameworks have been employed to understand how businesses achieve

and maintain competitive advantage over time. The resource-based view of the firm (Penrose

1959; Nelson, 1991; Peteraf, 1993; Schumpeter, 1934; Wernerfelt, 1984) focuses on strategic

organization of resources within the firm relative to the external structure of competitors and

“To what extent are the evolving insights into lean start-up principles transferable to the

South African entrepreneur?”

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market conditions (Prahalad and Hamel, 1990). Researchers theorized that firms with

resources that have valuable, rare, inimitable and nonsubstitutable (VRIN) attributes are best

positioned to stay competitive over time. With these resource characteristics firms are

uniquely positioned to deliver unrivalled products and services, but only if the resources of

those firms are dedicated to the right activities (Conner and Prahalad, 1996; Nelson, 1991;

Wernerfelt, 1995; Barney, 1991). The expertise necessary to determine the activities of the

resources are defined in strategic management, managerial decision making and

entrepreneurship literature (Wernerfelt, 1995).

Dynamic Capabilities of the Firm

Recently, the resource-based view of the firm has been updated to include the importance of

dynamic capabilities, the ability to reconfigure resources in ever-changing markets (Teece,

Pisano, and Shuen, 1997). The challenge for business owners is to remain competitive in

markets known for rapid and unexpected change. Dynamic capabilities are operational and

strategic routines, by which firms reconfigure resources (obtain, retire, combine and

recombine) in order to generate strategies that provide sustained competitive advantage

(Grant, 1996) in response to environmental change (Zollo and Winter, 2002). The somewhat

vague terminologies of dynamic capability theory have at times been criticized as being

recursive and nonoperational (Mosakowski and McKelvey 1997). However, these

capabilities have very practical application. One example is new product development

routines, where managers combine pre-existing skills and knowledge and current resources to

develop new revenue streams. Other practical dynamic capabilities include strategic

decision-making, resource-allocation and procurement of resources (Eisenhardt and Martin,

2000).

Dynamic Capability of Start-up firms

The dynamic capabilities of start-up firms, which have fewer resources, are bound to differ

from those of established companies. Start-up firms are often forced to resort to

‘bootstrapping’ activities, owing to limited availability of resources (Brush, 2008). More

than just financial constraint, bootstrapping techniques includes the use of various creative

means to make do with currently available resources: this is referred to as bricolage. It

includes borrowing resources, temporary hiring of human resources, shared office space and

acquiring knowledge, skills and support from family and friends (Sequeira, Mueller, and

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McGhee, 2007). Bricolage, as described by Lévi-Strauss (1967), is the skill entrepreneurs

apply to envisage available resources that are often disregarded by established firms (Baker

and Nelson 2005), in the process of learning how to solve new problems and capitalize on

new opportunities in creative ways (Easterby-Smith and Prieto, 2008). While in agreement

with the dynamic capability theory, some believe this type of creative learning process to be

fundamental to advancing dynamic capability (Zahra, Sapienza, and Davidsson, 2006), while

others believe learning itself is a key dynamic capability (Bowman and Ambrosini, 2003).

Entrepreneurs apply high levels of social skills to access networks which provide the

necessary technical and functional knowledge (Holt and Macpherson, 2010).

Systematic Combinative Capabilities

Zander and Zander (2005) introduced a further development of dynamic capabilities by

adding the important role of privileged information of customers and their needs to the

resource-based view of the firm. While other studies confirmed network embeddedness as an

important contributor to start-up performance (Adler and Kwon, 2002), Zander and Zander

emphasized the importance of accessing information about customers in a broad social

network. The systematic combinative capabilities of firms (Zander and Zander, 2005), are

based upon a method of building continuous relationships and procedures to detect emerging

needs of the current customer (Ruekert and Walker, 1987), to continuously adapt skills,

resource-base and human capital through utilization of ties in both internal and external

networks (Danneels, 2003), and finally to exploit both old and new skills and resources in a

continuous process of adaptation (Helfat and Eisenhardt, 2004).

Dynamic capability theory defines not only the importance of resource management but also

that of knowledge management by sustained customer relationship management. With the

knowledge of the customer needs, dynamic capabilities of start-up firms create opportunities

or market positions, superior to those of the competitors in the market, for which an

economic rent could be charged (Foss, Klein, Kor, and Mahoney, 2008). More importantly,

for start-ups dynamic capability proves to be less about ownership of resources and more

about activities and processes (Ambrosini and Bowman, 2009), which offer growth

opportunity despite resource scarcity (Baker and Nelson, 2005) in current rapidly changing

business environments (Wu, 2007), by using social networks to access information on

emerging needs (Zander and Zander, 2005).

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2.2.2 Start-up Firms and Complexity

High Levels of Uncertainty: Planning vs. Discovery

The ability to handle high levels of uncertainty effectively is an important skill for

entrepreneurs looking to start a new venture (Sull, 2004). One way practitioners and scholars

deal with high levels of uncertainty is to question the validity of traditional planning practices

associated with new venture creation. While previous studies confirm that business plans

have intrinsic value (Shane and Delmar, 2004) and form part of the process of attracting

financing (Karlsson and Honig, 2009; Gruber, 2007), some scholars contend strongly that the

time start-up business owners spend on the creation of business plans could be spent much

more effectively, in a more dynamic fashion, on building the business and on customer

relations (Bhide, 2000; Brinckmann, Grichnik, & Kapsa, 2010). Some opponents of the

‘hands-on get out of the office’ approach go as far as to say start-up business owners must

write a business plan before interacting with the customer (Shane and Delmar, 2004), while

similar studies found that planning upfront can impact positively on new venture survival rate

(Gartner and Liao, 2005). However, comprehensive business plans may not have the same

value for start-ups as they do for well-established corporations. Some new-venture scholars,

growing increasingly skeptical of business plans, argue that investors need to see momentum

in implementation as well as a plan of action (Gumpert, 2003B).

Gumpert, (2003B) argued that start-ups seldom engage in theoretical research and

development of new ideas owing to limited time and cash. In fact he argues that the arena of

the typical start-up and the way entrepreneurs operate is almost not researchable, owing to the

fact that entrepreneurs generally explore essentially new ideas in a niche market place with

high levels of uncertainty.

Businesses and especially new ventures and start-ups have characteristics of complex

adaptive systems. As a system, the business world is a set of sub-parts that interconnect to

form the whole. As a system it has emergent properties that cannot be predicted. More

importantly, analysis of complexity is not possible without running the system. Therefore,

entrepreneurs must take action in the process of testing initial hypotheses. To study an

intrusion in the system the entrepreneur must first intrude.

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Using the Cynefin framework, Snowden and Boone (2007), explained how entrepreneurs and

start-ups can function on the edge of chaos (Kuhn, 2009) by implementing applicable

practical methods to deal with either ordered or complex realms. According to Snowden and

Boone, (2007) most managers are unable to identify the particular domain they function in

and are unaware of how to function within that particular domain.

The Cynefin Framework

Snowden and Boone, (2007) created a framework to help managers decide on an appropriate

course of action. Contrary to a traditional ‘one size fits all’ approach of management theory,

Snowden and Boone argued that managers should tailor their approach, the way they think,

analyze and act, to fit the level of complexity they operate in. The model helps managers

determine appropriate choices according to the underlying context of managerial situations.

Snowden and Boone explained four unique decision-making models categorized in domains

distinguished by different levels of complexity and cause and effect relationships.

Simple Ordered Domain

In the simple domain, there are predictable self-evident relationships between cause and

effect. It is the domain of previously established algorithms on which business decisions are

based and exploited without rethinking their validity. Methods to solve problems are

repeatable. The decision making model is Sense – Categorise – Respond. Managers can

apply best practice. Managers who spend considerable time in this domain, a bureaucratic or

process-driven environment, will tend to interpret all problems as a failure of process. A very

limited amount of entrepreneurial activity takes place in the simple order domain. To

function in this domain co-ordination can be used (Snowden and Boone, 2007).

Complicated Ordered domain

In the complicated domain, there are relationships between cause and effect, because it is still

an ordered system, but the relationships are not self-evident. Methods used to solve problems

in this domain are analytical and require expertise in order to identify solutions. The decision

making model is Sense – Analyze – Respond. Managers can analyze or call in experts to get

to good practice. Good, as opposed to best, because there is more than one solution to

problems in a complicated domain. Depending on the level of expertise there could be

several different good solutions which could all be legitimate in addressing the problem. The

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social aspect of conflict between choosing one solution and enforcing one of the many

solutions could upset role-players in this environment. According to the knowledge and

awareness matrix, managers apply principles based on things they know that they do not

know. Experts tend to interpret all problems as a lack of appropriate time to analyze the

situation to come up with a solution. However, market conditions and technological change

have driven significant portion of business to resemble unordered systems. In fact the need to

innovate necessitates the shift into a less ordered system. To function in this domain co-

operation is necessary (Snowden and Boone, 2007).

Complex domain

In the complex domain, the relationships between cause and effect are only obvious in

hindsight. Methods to solve problems are based on the principle of experiments. During

these experiments managers probe the situations in order to sense whether a solution might

emerge. The result is emerging practice, new, different and unique in comparison with

currently known practices. Emergent outcomes are not necessarily relevant for future

application because of the fact that the nature of the system is dynamic. The decision making

model is Probe – Sense – Respond. According to the knowledge and awareness matrix,

managers apply principles based on things they do not know that they do not know. Those

with experience working in this domain of unknowns will often react to emergencies by

getting together various role-players from various backgrounds in an attempt to solve the

problem collectively. To function in this domain collaboration is necessary between various

role-players (Snowden and Boone, 2007).

Chaotic domain

In the chaotic domain, no relationship between cause and effect exists; not even in hindsight

can patterns emerge in obvious ways. Managers entering this domain on purpose do it for

innovation purposes; those who enter by accident must stabilize the position quickly. The

decision making model is Act – Sense – Respond (Snowden and Boone, 2007).

Lessons from the Complex Domain

Start-up firms actively looking for new markets will have to function in the complex domain.

It is clear from the decision making model that theory and intuition can bring you only so far.

Entrepreneurs and innovators need to base efforts on practical experiments in a world of

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complexity and uncertainty. The Cynefin Framework proposes specific decision making

models for each domain. The different decision-making models are relevant to this study

owing to significant similarity to the Build-Measure-Learn feedback loop proposed in the

lean start-up methodology. There is a striking similarity to Build-Measure-Learn, especially

for the complex domain decision making model, which proposes Probe-Sense-Respond.

Table 1: Decision Making Models based on the Cynefin Model

LEVEL OF COMPLEXITY DECISION MAKING

MODEL

MANAGEMENT

STRATEGY

Simple Ordered

Domain Sense-Categorise-Respond

Simple Intuitive Co-

ordination

Complicated Ordered

Domain Sense-Analyze-Respond Strategic Co-operation

Complex

Domain Probe-Sense-Respond

Wide-ranging

Collaboration

Chaotic

Domain Act-Sense-Respond

Pure Innovation

Purposes Only

Source: Adapted from Snowden and Boone (2007)

2.2.3 Start-up Firms and Dominant Design Theory

Start-up firms should be concerned with the implications of the design path in their industry,

because of their unique position in the market, specific innovative role and competitive

advantage over incumbent firms. Dominant design is concerned with the design paths that a

specific industry follows that shifts the terms of competition in that industry (Utterback and

Suarez,1993). According to the model of technological change, a technological breakthrough

triggers a process of technical variation and selection, followed by the creation of dominant

design as the technology gets established and is a critical process in the progression of an

industry (Anderson & Tushman, 1990). Design paths, in dominant design theory (Utterback

and Abernathy, 1975), are influenced by both technology factors and market factors (Clark,

1985).

Technology Change

In their studies of process and product innovation, Abernathy and Utterback established that

technology change is cyclical (Utterback and Abernathy, 1975) and emphasized that the

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process is complex as it requires input from heterogeneous role-players (Bijker and Law,

1992) before it is accepted as the market standard (Utterback and Abernathy, 1975). Most

importantly, Anderson and Tushmen (1990) argued that any progress toward dominant design

reduces uncertainty and therefore changes the very nature of innovation in the industry. In

the quest to beat the opposition, companies may be influenced by competitor strategies and

adapt or change pursued strategies, making strategy an emerging phenomenon parallel to the

dominant design process. Furthermore, this emergence is associated with restriction of

differentiation of products (Bijker and Law, 1992), because of standardization, production

economies and the formation of effective competition on the basis of product specification

and price (Utterback and Abernathy, 1975). Harvard business School professor and author,

Clayton Christensen, an expert on disruptive change and innovation, argued that dominant

design formation reduces the market penetration opportunity for small or entrant firms. He

argues that start-up firms would normally avoid competing with incumbent firms and rather

compete in post-dominant design niche markets in which innovation rates are already reduced

(Christensen, 1997). Opposing this view, Bamford et al (2004) argued that one of the

competitive factors of start-up firms is the ability to adapt resources and approaches faster

than incumbent firms (Bamford, Dean and Douglas, 2004). While incumbent firms might be

more adaptable to technology change, start-up firms are increasingly more responsive to

changes in the market.

Market Change

Start-up firms are associated with permanent fluidity owing to constant ‘bottom-up’ (Jansen,

2004) approaches to change in both social systems and operational procedures (Tsoukas and

Chia, 2002). Christensen, in his work on innovation management, contributed with the

theory of disruptive innovation, describing how well-established firms can fail because of

previous successes, as current competitive advantage becomes obsolete during unexpected

market change. According to Christensen (1997), disruptive innovation refers to the change

that is caused through changing application of current technology. Interestingly, Christensen

noted that the majority of disruptive innovation is caused not by technology change but

change in the application of existing technology. His theory differentiates between sustaining

technology, a process which companies use to improve a product that has an established role

in the market, and disruptive technology, a process which companies use to create or change

a market based on technology change. Established companies are more familiar with the

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process of competing in sustaining technology. Christensen (1997) argued that firms struggle

to identify and develop emerging potential disruptive innovation because of the inability to

analyze markets that are currently nonexistent. Start-up firms, owing to their experience in

probing, finding and serving markets that were previously nonexistent, are well positioned to

engage in disruptive innovation.

Another aspect that favors start-ups is path-dependency (David, 1985), a term used to

describe the notion of how past decisions limit future options. Start-up firms are not exposed

to strategic ‘lock-in’ by historic events to the same degree as established firms are. A further

benefit of start-ups in terms of design path and unforeseen market change is the absence of

institutional inertia, or resistance to change, in the culture of the start-up firm. To overcome

resistance to change, change-based momentum must be generated (Miller and Friesen 1980).

2.2.4 Start-up Firms and Innovation

Innovation is as old as time, even though the field of innovation acquired particular

importance only in the twentieth century when it started emerging as a separate field of

research in the 1960s. Before this date, innovation literature approaches were tied to multiple

individual academic disciplines isolated within management, sociology, organizational

science and business studies. After this date, professional associations were initiated to

synthesize insights from various fields and disciplines to ensure a more cross-disciplinary

approach to innovation (Fagerberg, Mowery and Nelson, 2006).

The central topic of the body of innovation studies is that of acquiring new knowledge

(Fagerberg, Mowery and Nelson, 2006). Cognitive science has shown that there is something

inherently human about the propensity to improve life by doing things in new ways. Today,

the pursuit of innovation is so intensely competitive that some even suggest the prescription

of cognitive enhancing drugs as a means to improve the innovative abilities of mankind

(Greely, 2008).

At this point, it is important to differentiate between creating a new idea (invention) and

commercialising a new idea (innovation). In the past, invention has been described as the

original discovery of a method to perform a new action, which normally goes together with

development, new application or new methodology (Mason, 1895), whereas innovation is the

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first commercialisation of an idea or invention (Schumpeter, 1934). For successful

commercialisation to take place, the innovator, whether an individual or a firm, requires a

mix of several other skills, capabilities and resources to capitalize on the potential offerings

of inventions. These offerings needs to be linked to consumer needs in order to create value

for that user group. The resource-based view of the firm can be used to improve

understanding of new product development performance (Verona, 1999). The processes that

firms use to acquire information on customer needs (so called ‘sticky information’) are often

demanding and costly (Von Hippel, 1998; Von Hippel, 2001). Start-ups capitalize on social

networking to acquire necessary customer information cheaper and more effectively than

larger firms. User innovation (Bogers, Afuah & Bastian, 2010) happens when intermediate

or end-users are central to the product development or enhancement processes rather than the

more traditional role-players like producers, suppliers or manufacturers.

Schumpeter, an innovation theorist, considered by some as the father of entrepreneurship,

noted the important role of the innovator, laying the groundwork for future entrepreneurial

studies. Further distinction has been made between improvement of production, which refers

to the process of innovation, and improvement of the product, which refers to the innovation

of a particular product (Schumpeter 1934 and Schmookler 1966). The fact that both

invention and innovation could happen in the context of product or process links the two

concepts so closely that clear distinction is often impossible (Fagerberg, Mowery, and

Nelson, 2006). For the purposes of this study, innovation from a business perspective could

be seen more widely as the amalgamation of knowledge in the process of introducing new,

original, relevant and valued products, services or processes (Katz and Luecke, 2003).

Difficulty to study innovation

The inability to understand and report on the inner workings of innovation and how it occurs

in the business world rendered the field under-reported in mainstream social science.

Schumpeter (1934) contributed with Mark I, the first of two theories in the field of

entrepreneurship, in which he articulate three main themes relevant to this study. The Mark I

theory explains (1) the fundamental uncertainty of innovation, (2) the need to process

information efficiently instead of over-analyzing all available data to find a so called

‘optimal’ solution and (3) the human tendency to resist change referred to as inertia.

Schumpeter added, overlooked in Mark I, the corporate dimension of innovation in Mark II,

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acknowledging the role of groups and teams in the process of innovation, laying the

groundwork for what would later become principles of ‘co-creation’ ((Lakhani, Jeppesen,

Lohse, and Panetta, 2008; Perkmann and Walsh, 2007; Gassmann, 2006; Franke, Von Hippel,

and Schreier, 2006) in the new product development process. Findings in more recent

innovation studies echoed Schumpeterian theories (Nelson and Rosenberg, 1993) and

acknowledged that there is still no single model to encapsulate innovation owing to the fact

that multiple bodies of knowledge are required to comprehend its intricacies (Kuhn, 1970),

and agreed that factors leading to successful innovation can vary dramatically between

industries (Pavitt, 1984). More recent approaches to expand on innovation literature followed

case-based empirical studies aimed at finding out how innovation occurs in firms. However,

success in the process of taking innovation patterns from the heuristical level to the algorithm

level still eludes scholars.

Open Innovation: New Product Development

The benefits of cooperation between companies are increasing as companies are expanding

their networks of innovation (Chesbough and Prencipe, 2008). Companies that manage

relationships with suppliers and customers closely grow their knowledge base continuously

and increase innovative ability (Lauren and Salter, 2006; Piller and Walcher, 2006). The two

separate processes of developing innovation and commercializing innovation can be

combined and expedited through the practice of co-creation within communities (Lakhani,

Jeppesen, Lohse, and Panetta, 2008), universities (Perkmann and Walsh, 2007), cohorts in

other industries (Gassmann, 2006) and the end users (Franke, Von Hippel, and Schreier,

2006) in the new product development process. The concept of open innovation implies the

use of more than just external sources such as competitors, customers and academic

institutions in the quest for intellectual property. Primarily it proposes change in the ways

intellectual property is handled and employed (West and Gallagher, 2006). In fact, firms that

do not collaborate or share intellectual property in some form could lose the ability to enter

into future exchange relationships (Koschatzky, 2001). To summarize, current information

technology brings the customer and the suppliers to the centre of new product development

(Chesbrough and Prencipe, 2008). Enkel, Gassmann and Chesbrough (2009) argued that

partners from other industries are a strong source of innovation, because innovation is in

essence just regrouping of current ideas and concepts in a new form (Enkel, Gassmann and

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Chesbrough, 2009). Openness to new ideas and eagerness to change are key skills and

knowledge necessary for innovation in start-ups (Lynskey, 2004).

New product development, as a core dynamic capability of firms, might be one of the most

important capabilities for firms (Nelson, 1991) and even more important for start-ups (Bhide,

2000). Bhide (2000) further noted that both entrepreneurship and innovation literature fail to

realize the importance of the new product development process in start-ups. Costly and time-

consuming redesign can be avoided by constantly involving customers and checking with

them as the product development process progresses (Hauser and Clausing, 1988). Start-up

firms operating in turbulent, unsettled markets should see responsiveness and flexibility as

key success factors in product development (Iansiti, 1995). Time to market is of great

importance in highly competitive environments. To save costs, companies need to reduce the

time to market of new products (Gupta and Wilemon, 1990). In a study on product

introduction, Schoonhoven, Eisenhardt, and Lyman (1990) defined lead-time to first

shipment of a new product as important for the following reasons: (1) to progress in the

process of becoming financially independent; (2) to gain market share before competitors

respond with similar products; (3) to start building visible brand and become legitimate in the

market place and (4) to maximize the likelihood of survival.

2.2.5 Start-up Firms and Strategy

According to Christensen (1997), disruptive change is caused less by technology change and

more by changes in application of existing technology; consequently start-up firms should

strategize to discover new applications instead of new technology. Start-ups firm owners and

entrepreneurs in general are often closer to the customer and therefore in a stronger position

to discover customer needs. Christensen (1997), argued that entrepreneurs and start-ups

should work with customers and end users to find future opportunities in a practical way,

saying: “Markets that do not exist cannot be analyzed: suppliers and customers must discover

them together” (Christensen, 1997, page 165). In this way Christensen proposed that strategy

for start-ups should be emergent rather than deliberate. The concept of emergent strategy and

action orientation in order to improve strategy continuously echoes organizational

management literature (Bijker and Law, 1992) and strategic management literature

(Mintzberg, 1987).

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The concept of planning through interaction echoes previous work on discovery orientation

and practice orientation in terms of planning and building a business (McGrath and

MacMillan, 2000). The notion of discovery-orientated practices complements Peter

Drucker’s observation about start-ups. He claimed that if “a new venture does succeed, more

often than not it is in a market other than the one it was originally intended to serve, with

products and services not quite those with which it had set out, bought in large part by

customers it did not even think of when it started, and used for a host of purposes besides the

ones for which the products were first designed (Drucker, 1985, p.185).”

The notion of pivoting strategy until a viable strategy has been reached resonates with

previous inquiry into the antecedents of success for well-established companies. In a study

involving successful American companies, Amar Bhide found that “93 percent of all

companies that ultimately become successful had to abandon their original strategy - because

the original plan proved not to be viable. In other words, successful companies do not

succeed because they have the right strategy at the beginning, but rather because they have

money left over after the original strategy fails, so that they can pivot and try another

approach. Most of those that fail, in contrast, spend all their money on their original strategy

- which is usually wrong” (Bhide, 2000, p. 107).

2.2.6 Start-up Firms and Growth Orientation

One of the most common reasons way start-ups fail is premature ‘scaling’ (Christensen,

2000). Any function that doesn’t relate to optimizing product/market fit is a scaling function

and should therefore be postponed until identification of the best business model with a

repeatable sales process (Furr and Ahlstrom, 2011).

For the purposes of the present study, categorizing the various financial sources for funding

startups is not important: what is important is the purpose of the funding. Christensen argued

that any capital investment in companies has one of two main purposes, profitability or

growth. For his theory he segregates start-ups into two categories, those who are still looking

for a viable strategy and those who have reached a viable strategy. Investors in companies

which have not yet reached viable strategy should be patient for growth and impatient for

profit (Christensen, 1997). Capital invested in companies which have reached viable strategy

should be patient for profit and impatient for growth (Christensen, 1997). Owing to the

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nature of start-ups and the search for a viable strategy during formation of new ventures, the

Christensen theory implies the priority of profitability above growth for start-up firms. Lean

start-up methodology echoes this notion.

Factors including technological and scientific uncertainty, lack of tangible assets, time to

market, and information asymmetry and lack of track record increase financial risk for

investors looking to invest in start-ups (Bozkaya and De La Potterie, 2008) and lead

entrepreneurs to resort to their own funds during formation and early development of the

venture. The question relevant to ‘bootstrapped’ start-up firms remains: is there a clear

relationship between innovation speed and level of funding?

Although the number of startups financially supported by venture capital is very small

(Bhide, 1992, Sahlman 1990), studies found that venture capital involvement speeds up the

time to market (eg. Hellman and Puri, 2000). Contrary to the findings of Hellman and Puri

(2000), other studies showed that time to market for startups with higher monthly expenditure

and more financial support is longer than that of those with lower monthly expenditure

(Schoonhoven, Eisenhardt, and Lyman 1990). While there could be other limitations that

could have caused the divergent findings, Schoonhoven et al argued that firms with more

financial resources are committed to more ambitious new product development projects that

take more time and are less disciplined because of less financial pressure. Interestingly,

neither of these studies controlled for the specific stage of development of the startup at

founding. This is a clear weakness in the validity of the findings. It is probable that there are

significant differences in time to market statistics of more established start-up firms.

Consequently, the effect of venture capital involvement for start-ups at similar stages of new

product development is understudied. Future studies in this area might pose an opportunity

for meaningful contribution to the field. Recent studies established no support for the

hypothesis that increased financial resource leads to decrease in time to market (Heirman and

Clarysse, 2007). They further showed that venture capital involvement diverts attention to

various other functions like customer relations, operations and procurement which dilute the

already limited resources allocated to product development. This phenomenon could explain

the contrary results to the Schoonhoven et al findings.

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The principle of postponement of funding, normally in the form of venture capital, until a

viable strategy has been found, is at the centre of the lean start-up methodology. Minimizing

business risk by avoiding premature scaling is one of the key differentiation factors between

lean and traditional start-up processes. According to Christensen, viable strategy comes over

time as the initial strategy of a company proves not to be viable. After subsequent iterations

to the strategy, at a point in time in the future, a viable strategy will be reached. While some

authors agree that capital provides safety in business environments with high levels of

uncertainty (Sahlman, 1999), others demonstrated that it can lead to needless spending which

leads to further costs (Sull, 2004). In the lean start-up methodology, an appropriate level of

funding can be defined as the smallest amount necessary to complete the next round of

experiments (Sull, 2004).

2.3 Literature Relevance, Discussion and Reflection

This study is not in any way a critique of the lean start-up principles, put forward by Ries

(2011), nor will it comment on relevance and application of the word lean used by Ries in

relation to its origin in the Toyota Production System in Japan. From here on, the researcher

accepts the term without further comment on origin and meaning. In this study the term

‘lean’ in the phrase ‘lean start-up principles’ will refer to an approach to venture start-ups that

challenges traditional methodology. For a better understanding of differences between

traditional and lean approaches to venture start-up in the context of this study, please refer to

Appendix A.

This study is an investigation into the transferability of the lean start-up principles to South

African ventures, with the focus on possible future application in practitioner education. A

literature review has been conducted to expand on the constructs underlying the lean start-up

principles. To this end, literature on the firm and the entrepreneur has been reviewed. A

comprehensive review, before the interviews were conducted, gave the researcher the needed

holistic view of the complex assembly of the various fields of study related to the lean start-

up principles. Reflecting on the literature review process, the researcher shares the following

observations after the findings from the South African entrepreneurs where reconciled with

the literature.

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Few concepts of the lean start-up principles, put forward by Ries (2011), are new to

the entrepreneurial body of literature. It was interesting to see how all the principles

could be complemented by academic demonstration based on work by previous

authors. In fact, the majority of the concepts on which the lean start-up principles are

based have been established and explained in the work of various previous scholars

and practitioners.

While the lean start-up principles have clear merit in the way that they facilitate a

better logic for venture creation in a world that experience ever-increasing speeds of

change, the level of applicability for different types of start-ups changes significantly.

The principles have been borrowed from the lean manufacturing ideas originally used

in the Toyota Production System. Over the last decade, lean manufacturing has been

implemented in the rest of the world with mixed results.

Owing to the evolution of general business practices, some of the time-honored

venture start-up methods have proven to be invalid in current times. Some

shortcomings of the traditional methods and business functions are eloquently solved

and addressed by the lean start-up methodology. The most prominent of these are:

business model risk, planning cycle, design orientation, new product development,

design objective, intellectual property, strategy, engineering and organization. For a

summary of the key functional differences between the lean and the traditional

approach refer to Appendix A.

The literature and the research confirmed the difference in new venture creation

approach between corporations and owner-manager entrepreneurs. The benefits that

lean methods hold for the owner-manager entrepreneur are remarkable, especially in

the current business environment. The researcher found the level of competitiveness

of the owner-manager entrepreneur very interesting. While there could be many

reasons for this change in balance of competitiveness between the corporation and the

small scale entrepreneur, some of the main reasons are changes in consumer behavior,

consumer awareness, customer proximity, the speed of change in the business

environment and availability of customer information. While these changes favor the

local entrepreneur, they pose major challenges to the big corporations with more

institutional inertia.

The research highlighted the importance of basic business education levels and the

lack of general business skills of the South African entrepreneur. Surprisingly, the

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literature did not highlight the important role that business education plays in the

venture start-up process. While there might be good reasons for the exclusion of the

specific fields of study that discuss aspects related to business education in this

particular study, the researcher clearly underestimated the impact of the general

business skills gap on start-up venture success.

The researcher further notes that the literature review could have been more

comprehensive, in terms of the purposes of this study, if it had included more

examination of the South African specific business environment and entrepreneurial

data. With a more in-depth understanding of the current start-up constraints for South

African entrepreneurs specifically, the researcher could have been in a position to

make more meaningful recommendations to practitioners. Owing to time constraints

and specific approach the literature review was limited to the more generic body of

knowledge on entrepreneurship and business studies.

The extensive attention given to complexity and uncertainty contributed to the

understanding of the need for better collaboration and the need for a pragmatic

approach to venture start-up verification. However, it was a difficult concept to verify

with respondents owing to the academic nature of the discussion and consequently it

did not feature in the semi-structured interview questions.

A substantial part of the literature review addresses the impact of financial support to

start-up ventures, in the form of venture capital. The research did not reflect the

importance of venture capital. It might be argued that aspects related to financial

support were not emphasized in the research instrument. The weak levels of venture

capital support, to entrepreneurs in the South African, might also have contributed to

the lack of respondent interaction with the topic.

Even with these limitations, the literature review captured the most prominent concepts of

previous scholars’ research and formed the foundation for exploration into transferability of

the lean start-up principles to the South African entrepreneur.

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SECTION 3: RESEARCH METHODOLOGY

3.1 Research Approach

This study aims to explore the degree to which evolving ‘lean start-up’ principles are

transferable to the South African entrepreneur. To this end, the researcher will enquire into

participants’ accounts of their own behavior and experience, observing subjective meaning

through examination of the language used in these accounts (Richards & Morse, 2007).

The researcher intends to use a qualitative research approach with data gathered from open-

ended questions in semi-structured interviews. This approach gives the participants the scope

to share beyond the restrictions associated with a more structured interview approach

(Aberbach & Rockman, 2002) and facilitates an emerging research process as the study’s

focus, design, measurement and interpretation can develop during the interview process

(Leedy & Ormrod, 2005).

Since the body of literature on lean start-up methodology is rather new and the application of

its principles uncertain in the South African context, the researcher considered the inductive

approach appropriate. The aim of the study is not to test previous findings (Terre Blanche &

Durrheim, 1998) but rather to identify data patterns (Taylor & Bogdan, 1998) in order to

formulate new understandings of the topic.

Entrepreneurs pursuing new markets by creating start-up firms draw from a wide variety of

skills and competencies specified in strategic management, managerial decision-making and

entrepreneurship literature (Wernerfelt, 1995). The high number of observations that need to

be interpreted in the interview process necessitates the adoption of a “grounded theory”

research strategy, which is a reverse of the traditional social science research. According to

the grounded theory method; researchers: (1) collect data in interviews, (2) identify key

points in the data by marking a series of codes, (3) group codes into logical concepts, (4)

group similar concepts into categories and (5) create theories and identify possible

explanations for the theories (Thornberg, 2012; Glaser & Strauss, 1967).

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3.1.1 Advantages of Qualitative Research

Qualitative research methods and the use of interviews offer the researcher insights not only

into relevant human behavior but also the reasoning behind the behavior (Gordon, 2011).

This depth of knowledge and the use of inductive reasoning offer the researcher the

opportunity to identify patterns, make inferences and create emerging theory (Leedy &

Ormrod, 2010). Eisenhardt (1989) concurred that the qualitative approach leads towards

empirically valid and consistent theory because it is so closely link to the evidence and also

likely to be consistent with future observation.

3.1.2 Disadvantages of Qualitative Research

However, the qualitative approach to research poses the danger that interviewee responses

could be influenced by the researcher (Leedy & Ormrod 2005). The researcher’s personal

values, previous experiences, knowledge on the subject matter and world views can cause

inherent subjectivity. The researcher will seek to be aware of and to ‘suspend’ personal

views and preconceived knowledge to avoid influencing participants’ responses.

Higgins, Power & Kohlberg, (1984) showed empirically how the researcher, using qualitative

research methods, could draw idiosyncratic conclusions inconsistent with the true

psychological meaning expressed by the interviewee. The researcher will endeavor to remain

neutral in the study and limit the challenges that the qualitative approach poses to the validity

of the emerging theory by seeking calculated objectivity during the study. The researcher

will carefully identify the relevant constructs during the data analysis process. For more

information on data generation validity refer to sampling in section 3.3.2.

3.2 Research Design

3.2.1 The Scope of the Study

The purpose of this study is to explore the degree to which evolving lean start-up principles

are transferable to the South African entrepreneur. In particular, the researcher wants to

understand whether the South African entrepreneur can benefit from the offerings of the lean-

startup principles emerging from literature.

A concise research question was constructed to convey the exact intent of the study. Owing

to the intersection of entrepreneurial literature with literature of several social sciences, the

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constructs of this study draw from various social sciences and will remain subject to

expansion as the qualitative study develops. The researcher studied literature on start-ups and

new venture creation and the following general constructs emerged:

Capabilities of the Firm

Complexity

Dominant Design Theory

Innovation

Strategy

Growth Orientation

3.2.2 Data Generation

The researcher will primarily use semi-structured interviews to gather the data. Interview

questions will be guided by the relevant constructs in the literature review. The Grounded

Theory research design will be adopted for this study. Other research design types have been

considered such as biography, phenomenology, ethnography and the case study approach.

The requirements for insight from a personal perspective and the need for understanding the

reason behind behavior indicated the grounded theory approach as most viable (Leedy and

Ormrod, 2005).

Advantages of Semi-structured interviews

‘Open-ended’ questions will facilitate a more natural flow of information between the

researcher and participants (Aberbach & Rockman, 2002). To this end, the researcher will,

with the explicit agreement of the interviewee, employ the use of audio recordings to capture

data during the interviews instead of taking notes while having the conversation.

Furthermore, with the intention of facilitating the interview in a relaxed conversational

manner, the researcher will not state the exact order of the interview questions in advance.

The researcher will be able to explore new or evolving constructs at any point in time as the

interview progress, because the semi-structured approach enables flexibility in the course of

conversation (Eisenhardt, 1989).

Disadvantages of Semi-structured interviews

Paradoxically, the semi-structured interview approach, while beneficial for conversational

flow, unfortunately makes the process of data analysis somewhat more complicated, and

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time-consuming (Aberbach & Rockman, 2002). The researcher will have to spend

significantly more time after the interview to transcribe, sort and analyse the information

from the audio recordings.

More specifically, the researcher plans to use a digital audio recorder. While sound quality

and easy of storage of the recordings are benefits of a digital recorder, there are a few

disadvantages associated with digital recording of interview. The disadvantages include: (1)

the cost of digital recorder is higher than the cassette type, (2) there is a higher risk of

accidently deleting the files if it is digital and (3) the space available to store recordings is

limited (Bryman and Bell, 2007).

3.3 Population and Sampling

3.3.1 Population

The population for this study is entrepreneurs in South Africa. More specifically, the

population includes any small business owners or managers who have engaged in any

activities relating to formation and creation of start-ups.

3.3.2 Sampling

Sampling is a process of selecting relevant entities to be researched (Leedy & Ormrod, 2005).

The researcher has identified a group of entrepreneurs, some of them currently based at a

business incubator in Cape Town, as possible participants in the study. The sample type used

in this study is non-random convenience sampling because participants are: (1) accessible to

the researcher within the scope and time limitations of this study (Richards & Morse, 2007)

and (2) at liberty to share relevant information that will enrich the qualitative exploration

process of this study (Leedy & Ormrod, 2005). Leedy & Ormrod suggested that a sample

size of between 5 to 20 participants is acceptable for the purposes of this research approach.

3.4 The Research Instrument

One of the most important aspects of the research process and more specifically data

gathering process is the researcher’s ability to ask the right questions (Yin, 2009). The

researcher approached the creation of research questions in a systematic way to ensure

consistency in the research method. For this study, a questionnaire has been created based on

selected prominent ideas that emerged from the literature review (Lewis, Saunders &

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Thornhill, 2003). The emphasis of the literature review was determined by the prominent

constructs necessitated by the research question and sub questions. Owing to the nature of

semi-structured interviews the researcher will not necessarily: (1) use all the questions, (2)

follow the previously envisaged sequence of the questions or (3) limit the conversation to

only the existing set of questions in the questionnaire.

3.5 Data Collection

Secondary data have been gathered from literature prior to the interviews and could be

supplemented by text given to the researcher during interaction with participants. Primary

data will be collected during the interviews based on, but not limited to, the participants’

responses to questions in the questionnaire in Appendix B. The consistency matrix,

Appendix C, shows how semi-structured interview questions originate in the constructs of the

literature review and how these constructs link to the topic of the research.

One weakness of having only one researcher conducting the interview in a conversational

style is the inability to take proper field notes, created by writing down immediate

impressions during the interview. Eisenhardt (1989) posits that a team of researchers are

more effective as that allows for appropriate ‘management’ of conversation and reflecting on

impressions prompted during the interview. To compensate for this loss, the researcher plans

to verbalise impressions, as far as possible, to prompt an impression event on the recording

which could be recalled and analysed during the transcription of the data.

3.5.1 Data Gathering Sequence

The primary data will be analysed consecutively to enable the researcher to learn from the

interview experiences and to make adjustments to the approach to data gathering for future

interviews (Eisenhardt, 1989). The researcher may adjust the approach to facilitate:

conversation; the interview style; the method used to transcribe voice recording to text;

method of identification of ‘codes’ in the text; and the grouping of the codes into concepts.

This immediate analysis of the recordings will ensure that the researcher analyses

impressions and emerging themes while they are still vivid in memory.

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3.6 Data Analysis Techniques

Triangulation, the use of more than one data collection method, bolsters the validity of

findings (Eisenhardt, 1989). The researcher intends to use triangulation of primary and

secondary data sources to bolster the validity of the study by identifying overlapping

constructs as these emerge from the literature and from the interviews consecutively.

Section 3.2.1 summarised the general constructs that emerged from the literature. The

theoretical background provided by the literature review contributes to the researcher’s

ability to identify emerging constructs from the interviews.

Eisenhardt (1989) warned that there may not be a strong overlap of constructs between

primary and secondary data and that the relation should not affect the actions and thoughts of

the researcher at the onset of the interview phase. More recently, Thornberg (2012)

suggested that the literature review may be postponed until after the primary data have been

analysed in order to prevent unwanted influence as the interviews are conducted. Patton

(2002) suggested that there is a general misunderstanding that data that do not triangulate are

not relevant. Patton argued that these inconsistencies enrich the study with the potential to

unearth deeper meaning.

3.7 Limitations of the Analysis

The number of interviews used to gather primary data is identified as a limitation of this

study. The data collected from the interviews are the views of the participants and may not

be illustrative of the views of the population. The sampling method is identified as a further

limitation. Non-random convenience sampling does not remove location bias factors from

the data; therefore the views of the participants in this sample may not be representative of

the views of the population. Further research with a larger number of interviews and a more

representative sampling method would be recommended for future research.

3.8 Validity and Reliability

3.8.1 Validity

The researcher plans to ensure the internal and external validity of the findings with a focus

on credibility, dependability, transferability and confirmability throughout the research

process (Bryman & Bell, 2007).

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Table 2: Validity and Reliability

Validity & Reliability

Credibility

Procedures such as feedback, checking and confirmation of meaning

during the interview will ensure that the data gather reflects the participant

as intended meaning. Credibility likened to internal validity and refers to

repeatability of the findings from a researcher point of view.

Dependability

Due to the volume of data gathered during qualitative research,

dependability may become an issue. All records will be collected and

stored during the study. Dependability refers to research error in the

process of logistics, storage and validation of the numerous records,

documents and recordings associated with qualitative research.

Transferability

The semi-structured qualitative approach facilitates the collection of in-

depth accounts of participants; the abundance of information will give the

researcher the necessary perspective to evaluate transferability of the

findings. There is still a risk that the judgment is not accurate in

determining transferability. Essentially transferability is similar to

external validity. The question is whether the local findings based on the

sample are representative of society living outside the boundaries of the

geographical sampling zone.

Confirmability

The researcher is aware of the influence that personal values, mental

models and past experiences can have on behavior during the research

process. Researcher objectivity is the key here.

Source: Bryman & Bell, (2007, p. 395 - 399)

3.8.2 Reliability

Reliability is concerned with the ability to replicate the same findings if the research were

repeated (Yin, 2009). The responsibility of the researcher, in order to ensure reliability, is to

standardize the approach to data gathering by using premeditated questions in the

questionnaire and using reliable data gathering like voice recording. To ensure

confirmability, the researcher will not ‘lead’ in any way with information on, or principles of,

lean start-ups. Without prefacing the lean start-up principles during the interview process,

the respondents will be asked to report only on what they experienced during past venture

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start-up projects and what they are experiencing in current venture start-up projects. The list

of questions that will form the basis of the questionnaire used in this study is attached in

Appendix B.

3.9 Informed Consent and Research Ethics

The researcher commits to ensure that the study is conducted in an ethical manner, consistent

with the generally accepted conduct and integrity of academic research (O’Leary, 2004).

During the process of gathering data from primary sources the dignity of participants will be

ensured by careful consideration of world views, moral code and socio-economic

circumstances.

The researcher will ensure that the purpose of the study and the expected outcomes of the

study will be communicated to all participants before interviews are conducted. Participants

will be made aware of the fact that they participate on a voluntary anonymous basis and that

they have the right to withdraw from this study at any stage before the research project hand-

in date. The researcher will personally conduct all interviews and transcribe all voice

recordings. If confidentiality agreements are required by any participant the researcher will

assist the process.

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SECTION 4: RESEARCH PLAN

The researcher proposes the schedule in table 3, in order to deliver the Research Report by

the 9th of December 2013. As indicated below, approaching the interviewees and gaining

ethics approval will overlap early in September as the researcher plans to analyse data from

an interview immediately after the interview ended. Interviews will be scheduled according

to interviewee and researcher availability. The second round is scheduled to compensate for

possible data insufficiencies in the first round.

Table 3: Research Plan

DEADLINE PROPOSED DATE

Submit Proposal 6

September

Approach potential

Interviewees

Before 13

September TERM 4 BEGINS: 7 October

Gain ethics approval Before 13

September

Conduct first round

of Interviews 16 – 20 September

Analyse Data 16 September –

27 September

Conduct second

round of Interviews 7 – 11 October

Analyse Data

7 – 18 October

Write Report

21 October –

21 November

Submit Report for

Supervision

21

November

Improve as per

Instruction TERM 3 ENDS: 27 September

27 – 30

November

Final Treatment of

Report

2 – 5

December

Submit Final Report 9

December

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SECTION 5: RESEARCH FINDINGS

The 22 codes in table 4 were generated using the open coding process to summarize the key

aspects that came from the interview process. The table below provides a snapshot of the

codes and the emerging themes from the interviews. The emerging themes in the table below

were mentioned by all the respondents in all the interviews. These themes will be ‘unpacked’

in the following chapter to facilitate a deeper understanding of the difference between and the

similarities of current entrepreneurial practice in the light of the lean start-up principles.

Table 4: Emerging Codes and Family Codes

Strong Customer

Relations

Growth

Orientation Adaptability Driven by Passion

Meaningful

Customer

Feedback

Planning Past Mistakes Innovative

Ability Time Constraints

Design

Constraints

Collaborative

Product

Development

Clarity and

Focus

Lack of initial

Business

Knowledge

Revision of

Goals Period Inherent Optimism

Financial

Constraints

Building

Partnership Scaling

Continuous

Learning

Speed of

Change

Past Experience and

Current Skillset

Human

Resource

Constraints

COMMUNITY

FOCUSED

START-UP

STRATEGY

LEARNING

APPROACH

ATTITUDE

TOWARDS

CHANGE

CHARACTERISTICS

OF THE SOUTH

AFRICAN

ENTREPRENEUR

APPLIED

LEAN

PRACTICES

5.1 Community Focused

This ‘family code’ captures the community orientation of respondents. During reflection on

communication, product design and customer interaction the respondents’ approaches

towards key role-players were assessed. From a theoretical point of view, this section is

concerned with how South African entrepreneurs allow the customer to provide feedback as

an input for product and service design.

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Community Focused Percentage

Strong Customer Relations 100%

Meaningful Customer Feedback 80%

Collaborative Product Development 80%

Building Partnership 80%

5.1.1 Strong Customer Relations

All respondents had multiple reasons why relations with customers should be one of their

main concerns.

Respondent 2 said his company would not have entered the market if he did not successfully

build the human connection to customers, “You are lost without community.”

Respondent 1 noted that their business addresses the needs of customers by reconnecting to

the initial reason for starting to provide the service. Their service originates from real

customer needs, “I know the position our customers are in because I have been in their

position and I know how I solved that problem for myself. Then I started this venture to do it

for others.”

Respondent 4 has a personal preference to work with people instead of processes, “I like the

product but a big part of the product is also people. I like people and I like working with

people. But people could also be quite demanding and exhausting, but I have noticed,

without the human aspect I lose interest.”

Respondent 5 agreed to the importance of customer relations, “Constant customer interaction

is a huge aspect.”

Respondent 3 made customer complaints part of the performance indicators of the business,

“Being reliable is one of our main customer compliments in surveys.”

5.1.2 Meaningful Customer Feedback

Respondent 1 described some of the reasons customers ask for certain products to change or

for new products to be introduced, “There is an idea, or there is a need, there might be a ‘we

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should have something in the market’ or ‘our competitor has something in the market

already’ or ‘we require an improvement of one of our products’.”

Respondent 4 said they were ‘blind-sighted’ to some knowledge about the customer’s

interaction with their services, “We would never have realized our customers’ needs have

changed after the introduction of broadband in South Africa. Just to think, we were saved by

some person that was willing to complain and make a scene.”

5.1.3 Collaborative Product Development

Respondent 3 reported on how reliant he is on customers during redesign of his products,

“The biggest thing is that from the start to where we are now our client relations form part of

the key ethos of our business. Even when we started it has always been a conversation. Our

company and our growing brand are built on the fact that you join our family and that we

love having conversations with you. We grow, our clients grow, and we grow with our

clients. A lot of our products and product development comes out of that feedback cycle. A

lot of product development comes from feedback from our clients, telling us what is

functional and what is not.”

5.1.4 Building Partnership

Respondent 1 argued that times are changing and that the idea of community might go

beyond products and services, “Things are shifting, you need to build something and find

people who believe in what you do.”

Respondent 2 also believes his industry is going through a challenging time and that he

should differentiate his services, “The industry is going through a difficult time and everyone

is under a lot of strain. I keep customers happy with specific sales terms in which we charge

only for products that sell and I give them the freedom to return items which are not

moving.”

Respondent 5 had a sympathetic rather than aggressive approach to debtors, even though he

has his own financial struggles. A sympathetic attitude during challenging times might be the

way to secure customers in the long run, “In the type of business I work I think cash flow is

key, the type of work that I do, you do the work now and then you only get paid after you

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carried all the expenses and the costs for a period of time. You only see the financial result

somewhere down the line; you still need the financial resources to carry yourself through

that. Chasing people up to pay is a tight-rope, because I can also understand where they are

coming from. They also wait for suppliers to pay them so that they can pay me. So it is a

whole chain of events and a lot of these customers work with government and the payments

don’t always happen according to deadline.”

Respondent 4 builds relationship with potential key partners proactively, “To further expand

our supply chain support groups we actively pursue hospitals and doctors and other outlets.

Also, we partner with key champions throughout South Africa.”

5.2 Start-up Strategy

This family code reveals the respondent’s alignment to strategic matters related to long-term

objectives, company size and future aspirations. From a theoretical point of view, this

section is concerned with how South African entrepreneurs get from an initial strategy to a

viable strategy, before the viable strategy is scaled.

Entrepreneurial Strategy Percentage

Growth Orientation 100%

Planning 80%

Clarity and Focus 80%

Scaling 80%

5.2.1 Growth Orientation

Respondent 3 had no real aspirations for serious growth in the beginning, “When we started

the business we started with organic growth in mind. We had an idea of what we wanted to

do and we just run with it.”

Respondent 1 has an established company with employees across South Africa, but also

reported on small beginnings with no aggressive growth in mind, “The development of my

business was very much an organic kind of approach. I suppose the fact that I am still in

business is an indication that it is not a particularly bad approach.”

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5.2.2 Planning

Respondent 1 acknowledged that his initial attempt at planning was ill-fated, “When we

started, the model was not right. We started with a business plan that was not based on

market research; it has all the best intention and vision but it had no business sense.”

Respondent 2 knew that a lack of knowledge held them back during the early days, “I think

we could have done with a little bit of research.”

5.2.3 Clarity and Focus

Respondent 2 reported on their unfortunate strategy to find solutions for anybody and nobody

in particular, “We tried a lot of things and one thing we realized is that we can’t be great at

everything.”

Respondent 4’s insight after building a financially successful service after many attempts

over the last 7 years, “This whole thing of multitasking is misleading. If you want to do a

proper job you have to focus on one thing at a time. Focus on one thing, do it phenomenally

well and grow from that.”

Respondent 5 reported on the common problem for creative entrepreneurs, who are

struggling with administration and a clear future strategy in their start-up ventures, “Clarity

and focus is real difficult and we’re still struggling with it. We are designers and the

problem with being a designer is that creativity is what feeds you. Designing is what you

want to spend your time doing, but that is very difficult because it also comes down to what

are you doing and what are you doing it for and what is your industry, so now we are talking

about product and product development and product sales and business and how it all stacks

together. So the problem that we have and what we found is clarity and focus. What are you

and what do you do?”

Respondent 3 commented on maybe overstretching themselves in the venture, “I think we

have two businesses and that is one too many; clarity and focus is currently big for us.”

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5.2.4 Scaling

Respondent 1 communicated a definite intention to growth far beyond current size, “In terms

of growth, scaling and going forward, you don’t put in the hard yards just to like stay the

same size. Our market is so small here. It is absolutely insignificant on a global scale. It is

business and we definitely want to scale in the long run. I think we can definitely scale

without losing our identity. We just need to define what scaling means for us and how much

bigger we should go, it is part of the journey. Scalability just means we need to build more

products and build the channel that it gets there. For me scalability is not as much on the

production side, it is more on the clarity of the message side. It’s tricky but we’re looking at

scaling in a disruptive way in the next three years.”

5.3 Learning Approach

This family code shows the respondents’ general attitude to aspects of learning. From a

theoretical point of view, this section is concerned with how South African entrepreneurs

engage in continuous learning as opposed to intuitive isolated planning.

Learning Approach Percentage

Past Mistakes 100%

Lack of Initial Business Knowledge 80%

Continuous Learning 80%

5.3.1 Past Mistakes

Respondent 2 reported on the importance of matching entrepreneur character, strengths and

preferences with the type of venture, “I picked an industry which was not suitable for my

personality. Sitting in front of a computer the whole day is not for me, you know, you live

and learn. It was quite an expensive exercise to change industries, but I am very happy with

what I am doing now. So I think it is almost like you try to figure out what you want to do

through a process of elimination, rather than having a set goal and moving towards that.

You know, this works, this doesn’t work. At the end of this year I would have been in

business for seven years and I feel a lot more mature as far as what the business is concerned

and what I did two or three years ago.” One interesting aspect might be how these

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preferences seem to change with time and maturity and the implications for longevity or the

lack thereof in a particular industry.

5.3.2 Lack of Initial Business Knowledge

Respondent 1 acknowledged his/her current lack of academic knowledge and practical

experience in business, “We’re not hardcore business people.”

Respondent 5 reported on his insecurity as an young entrepreneur because of a lack of

business knowledge, “One has to remember we’re doing something new and we don’t have

years of experience. So we kind of feel on the back foot in terms of confidence because of a

lack of personal track record.”

Respondent 2 commented after a few years of experience and learning practically, “I should

have equipped myself better with how a business actually works, the nuts and bolts of how a

business works, like, what are creditors and debtors, invoicing and proforma, you know, all

of those kinds of things. I didn’t do any business subjects at school. I think if you don’t have

the business understanding of how a business works, then you make it very difficult for

yourself and that is what I have done.”

Respondent 4 also reported a skills deficit and a possibility of unbalanced skills in the team,

“Our team was very good at being creative, but the business side is not one of our strong

points.”

5.3.3 Continuous Learning

Respondent 5 revealed his/her knowledge gained from past experience, revealing the reason

why continuous learning should be important for longevity in start-up ventures. “It was part

of our strategy in a saturated market. If you come into a market and you’re undifferentiated,

then nobody has an incentive to get to know who you are. You need a client base, but we held

onto that original strategy for far too long.”

Respondent 3 declared the need for more business knowledge, “I am still learning, I am not

nearly where I have to be in terms of the knowledge and the theory of how business works.”

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Respondent 2 summarised a very common theme of slacking in the areas where there is a

lack of interest, in this case, general business administration. Outsourcing these functions to

a certain extent in a practical learning environment where knowledge and insight can be

gained might be a prudent way to deal with these less exciting business functions. “We had a

fantastic session with a business coach to get ourselves ready for next year. But it was not

what any of us like doing. Which is a quick way to get in trouble but we caught it in time and

now we’re fired up for having it done properly next time.”

Respondent 1 reported on a full circle of acquiring new knowledge, taking the lesson onboard

and changing the business model accordingly. “We learned a lot about budgets. We only

recently learned that our advertising clients budget one year in advance. So if you don’t get

them to commit for advertising in the beginning of the year it is very difficult to get funding

for the last three quarters’ issues. We had to change our business model to encourage

advertisers to sign for advertising on an annual basis and not per issue.”

5.4 Attitude towards Change

This family code indicates the respondent’s general approach and ability to embrace

inevitable change. During reflection in the interview process, specific examples of internal as

well as external change experiences in the ventures have been deliberated. From a theoretical

point of view, this section is concerned with how South African entrepreneurs engage with

the iterative design process in which continuous adjustment is embraced instead of execution

according to a premeditated plan.

Attitude towards Change Percentage

Adaptability 100%

Innovative Ability 80%

Revision of Goals Period 80%

Speed of Change 80%

5.4.1 Adaptability

Respondent 4 had such a drive to bring a certain product/service to the market that he/she

showed willingness to switch from a for-profit to a not-for-profit venture. “When we first

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started we intended the business to be profitable, not an NGO. At the time we started the

magazine industry started dying and it was not good timing and its completely advertising-

based because we wanted it to be free. So that was somewhat challenging. We have since

recognized that it is more important for us to get the message out, and in order to make it

sustainable we need to find a way that is not only based on advertising. Our goal is to

spread the information in our magazine but we realised in order to be sustainable we will

have to make it profitable.” They started accepting corporate sponsorship to support the

business model in addition to the advertising income. They also built a relationship with the

department of health for more financial support. The relationship with the department of

health was a sensible one because they had the same goals and aspirations in a way.

Respondent 2 gave an example of a costly change in strategy, “Adaptability is huge. For

example, we had a studio; space next to the studio became available so we took more space

on. The rates were reasonable, so we made the call, it became our retail space. Then we

found that we were in the wrong retail environment, the space was not suited to us. So we

changed that, because certain products were not moving.”

5.4.2 Innovative Ability

Respondent 1 gave an example of how quick iteration of strategy and approach enabled them

to save the venture, “We started when the recession hit this industry specifically. All the

investors kept saying that their budget has been cut and that they are unable to support us.

But we still had to make ends meet. This financial pressure on the supply side caused us to

try a new strategy of acquiring sponsorships to fund our initiatives; it was something we

haven’t thought of before. So the dip in funding for this industry was a good learning curve

for us, it made us get creative and think outside the box, instead of going the original route.”

5.4.3 Revision of Goals Period

Respondent 5 argued that annual reviews are enough for their industry, “We review our

approach at year end.”

Respondent 1 observed that review period could be an important point on the agenda to

ensure innovation and change, “Don’t know why we review only annually, I guess that is

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when we make time for it. We have not been managing our business by financial reporting,

so there is no need to revise only when the accounts update the financial statements.”

5.4.4 Speed of Change

Respondent 1 acknowledges that he was cynical of employing more people and purposefully

postponed this important change for the venture. “One big change was I used to do

everything by myself and then it came to a point where I realised this is not sustainable.

There is a lot of work out there and I wouldn’t be able to do it all on my own. So for me to

take that step and employ someone else, it was quite a big step for me.”

Respondent 2 agreed that the venture could have benefitted from a more proactive marketing

media strategy, “We did not innovate fast enough.”

Respondent 5 reported on the importance of the timing of particular change in the venture,

“Then we started to understand pricing margins. We did not understand pricing models as

well as we should have, it cost us dearly. Even now we’re restructuring the business.”

Respondent 4 reported on imbalances in the venture owing to sudden demand for the services

and limited expertise to provide the service, “Our skills development was not fast enough.”

5.5 Characteristics of the South African Entrepreneur

This family code captures the human aspects of the respondents that might impact on

business model decisions and orientation towards lean start-up principles. The researcher

noted typical character traits in all the South African entrepreneurs interviewed. From a

theoretical point of view, this section is concerned with the South African entrepreneur’s

character, aptitude and preferences which might impact on the transferability of the lean start-

up principles in their ventures.

Characteristics of the SA Entrepreneur Percentage

Driven by Passion 100%

Time Constraints 80%

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Inherent Optimism 80%

Past Experience and Current Skillset 80%

5.5.1 Driven by Passion

Respondent 3 explained how he and his partner trained while working for someone else,

while building expertise to follow their own passion. Starting their own company provided

more ‘creative feedback’ on a more regular basis, “We practiced for a number of years and

we saw that it offers us a shorter creative life-cycle. It was a time that we wanted to do

something for ourselves on the one side and secondly we wanted to express our creativity in a

short life-cycle. The creative cycles in the industry we came from were too long.”

5.5.2 Time Constraints

Respondent 1 reported that time is a severe limiting factor for his/her moonlighting venture,

“I don’t have as much time as I would like to have. If I was able to work on my venture

fulltime we would skyrocket.”

Respondent 5 reflected on time management and his commitment to review goals more often

in order to save time. This respondent alluded to the fact that time constraints are a key

factor in his life and business venture, “I think you could do monthly evaluations of where

you are in terms of your goals and then make adjustments as far as that is concerned, but we

live such challenging lives you know, you can’t take too much on, you got to keep this very

simple. I think an important lesson for me, cause I take on too much, was to cut it down to

the basics and that’s it. I think that is a valuable way of organizing your business.”

5.5.3 Inherent Optimism

The researcher observed high levels of optimism bias in the majority of the respondents.

Respondent 1’s attitude and expectations for the future, “I think next year will most certainly

be better.”

Respondent 5’s believes that a certain initial strategy, which had to be adjusted in order to

become viable and sustainable, didn’t need any adjustment, “I still think it is a superb idea.”

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Respondent 4 voiced these words, after explaining how the current year was a major

challenge and how the following year might be better. The respondent could not explain the

logical basis for the statement, “We are sorted for next year.”

5.5.4 Past Experience and Current Skillset

Respondent 5 explained the key factor of their venture’s successes in terms of teamwork and

team skills, “Balance, have a team of people that has diverse skills and ability.”

Respondent 2 explained how their venture started as a combination of past experience and

acquired skills, “My involvement in this industry came from a combination of factors, my past

experience of going through that process myself, my interest in this industry and my passion

for the service. I was a freelance publisher for a number of years before I realised there is a

gap in the market in terms of people who publish their own books.”

Respondent 3 also mentioned that experience and skills, combined, lead to a more viable

strategy for the venture, “We have a mixture of skills in the team but my personal experience

also played a major role in identifying the niche market for the product.”

Respondent 2 gave more proof of how initial knowledge and past experience in a certain

industry might contribute positively to ventures start-up in that industry, “That’s why we

started this venture because we had done it professionally and we understood the industry.”

5.6 Applied Lean Practices

This family code summarizes the proof of applied lean practices in the business models of the

respondents. Without alluding to lean start-up principles during the interview process, the

researcher identified clear examples of lean practices in all the respondents’ business models

during operational and strategic reflections on the ventures and business models. From a

theoretical point of view, this section is concerned with how South African entrepreneurs

have successfully tried and tested lean start-up principles with positive results.

Applied Lean Practices Percentage

Design Constraints 50%

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Financial Constraints 100%

Human Resource Constraints 80%

5.6.1 Design Constraints

Respondent 2 reported on successfully implemented lean practices in their start-up venture in

terms of design, “Taking our products to market and incubating it in a way we tried to

incorporate principles of the tech industry, lean start-up and the methods of Toyota. We have

tried to see how we can incorporate these principles in our design, like designing certain

panels that can be repeated throughout. Does it apply to us; does it work for us? We have

taken that on to put it through the test. We have seen savings in our material costs by going

leaner.”

5.6.2 Financial Constraints

Respondent 5 reported on successfully implemented lean practices in their start-up venture

brought about by financial pressures, “When we started out, our idea was superb, but not

sustainable. Our business model was built on the idea of posting magazines to customers but

postage costs were far too high. We followed this model for the first couple of issues and

then realized that we will have to switch to sending bulk copies to specific locations where

partners distribute it.”

Respondent 3 also reported on successfully implemented lean practices in their start-up

venture brought about by financial pressures, “When we started we made a number of foolish

mistakes. Our distribution was too expensive; we had to pursue key partnerships in order to

lower the costs associated with getting the product to the customer. Reducing the

distribution costs while earning the right amount of income, we realised that it (finances) can

balance out.”

5.6.3 Human Resource Constraints


brought about by limiting human resource for the business model, “We are lean in terms of

employees, we only employ on a non-permanent basis. All our team members have day jobs

as well. We also outsource production and other functions associated with high capital

expenditure and unnecessary assets, but we didn’t start this way.”

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brought about by limiting human resource for the business model, “Another one of our giant

learning curves was the way we started out as a non-lean business model. We were planning

to have all three of us on a permanent half-day basis/salary with an office and we would go

direct to the individual posting of the magazine. We now take it as lean as is humanly

possible and we do it on a non-permanent project basis. We all freelance and have other

steady income. We cover our expenses so that we don’t go into debt, but we are not making a

profit.”

SECTION 6: ANALYSIS AND DISCUSSION

The findings from the five South Africa respondents provided rich information that could

now be compared to the literature and the theoretical lean start-up principles. This

comparison between practices and the principles will expose divergent and convergent

aspects. The researcher will use the balance, between divergent and convergent aspects, as a

mechanism to assess the level of transferability. To this end, it is necessary to analyse the

main findings of the research.

The research revealed that South African entrepreneurs are both strategically and

operationally positioned for interaction with their community. Ries (2011) noted that

entrepreneurs need to: interact with the customer as soon as possible; leave the guess work

behind, and get to know what is important for the customer, especially during the start-up

creation process. All of the respondents showed clear examples of interaction with customers

and examples of how customers contributed to the knowledge with which they design

products and services. In terms of customer interaction, the South African entrepreneurial

practices seem to be convergent with the principles of lean practices.

Writing a business plan is a prudent way for entrepreneurs to systematically acquire:

knowledge of the industry, important information about the potential market for their

products and services and the position of current competitors in the market. While some

observers have shown that planning impacts positively on new ventures’ success rates

(Gartner and Liao, 2005), many others argue that entrepreneurs can spent their time better by

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interacting with customers dynamically in order to discover viable strategy over time (Bhide,

2000; Brinckmann, Grichnik, & Kapsa, 2010). The two schools of thought that emerged

since 2011 are planning versus discovering orientation. The traditional business plan

approach, if executed incorrectly in start-up ventures, could form part of what Ries referred to

as ‘guess work’. In fact, from the literature, it was clear that entrepreneurs deal with high

levels of uncertainty by questioning the validity of a premeditated business plan. Constant

change in technology, application of technology and customer needs further discourage the

planning methodology. The findings confirmed the same trend in South African

entrepreneurs. Only one respondent reported that they started with a very basic business

plan. All the other ventures had no business plan but rather business models that facilitated

the emergence of strategy through inputs of the end user. While the absence of a business

plan is not categorical proof that the venture is following lean start-up principles, it is

however an indication that the business model is geared towards discovering a repeatable and

scalable strategy dynamically as opposed to executing according to a preconceived intuitive

plan. In terms of strategy, the South African entrepreneurial practices seem to be convergent

with the principles of lean practices.

The fact that South African entrepreneurs have strong customer interaction has been

discussed. The next logical question is whether entrepreneurs act on the information they

receive from the customer. Do new venture entrepreneurs in South Africa have the ability to

learn continuously or do they have the tendency to execute to a premeditated plan? From the

literature it is clear that co-creation with the customer is the enabler for continuous learning

for the start-up entrepreneur (Blank, 2006; Furr and Ahlstrom, 2011; Ries, 2011). All

respondents revealed that they made strategic errors in the past and 80% gave clear examples

of embracing continuous learning on a regular basis. Respondent 1 noted, “We learned a lot

about budgets. We only recently learned that our advertising clients budget one year in

advance. So if you don’t get them to commit for advertising in the beginning of the year it is

very difficult to get funding for the last three quarters’ issues. We had to change our business

model to encourage advertisers to sign for advertising on an annual basis and not per issue.”

In terms of learning approach, the South African entrepreneurial practices seem to be

convergent with the principles of lean practices.

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While these and other learning experiences might be elementary and require only minor

operational adjustments, some challenges require entrepreneurs to acquire new skills, or

engage in activities that they are not naturally interested in. How do the South African

entrepreneurs respond to required learning, which is outside the boundaries of preferred

behavior? These learning experiences might be far more difficult in the short term. In fact,

in terms of life style choice, entrepreneurs often migrate away from these undesirable

requirements in order to pursue their specific passions. For example, respondent 2 reported,

“I picked an industry which was not suitable for my personality. Sitting in front of a

computer the whole day is not for me, you know, you live and learn. It was quite an

expensive exercise to change industries, but I am very happy with what I am doing now.”

Acquiring new skills is often a painful experience and entrepreneurs need to create change-

based momentum (Miller and Friesen 1980) to successfully bridge the skills gap. However,

this momentum is difficult to create, especially if the skills are outside the natural strengths or

interests of the entrepreneur. Respondent 4 reported, “Our team was very good at being

creative, but the business side is not one of our strong points.” Respondent 2 reported, “We

had a fantastic session with a business coach to get ourselves ready for next year. But it was

not what any of us like doing. Which is a quick way to get in trouble but we caught it in time

and now we’re fired up for having it done properly next time.” From these examples, the

researcher notes the skills gap that often exists between current aptitude or preferred behavior

and required learning. Starting new ventures in a complex resource-stricken environment

requires cross functional skills and some of these skills are often outside the practitioners’

preferred behavior and personal interests. The literature suggests that entrepreneurs normally

resort to high levels of social skills and network embeddedness (Adler and Kwon, 2002) to

bridge these gaps (Holt and Macpherson, 2010). Complexity theory suggests that

collaboration is a key component in complex business environment (Snowden and Boone,

2007) where multiple role-players engage to find solutions. Bricolage (Lévi-Strauss, 1967)

and bootstrapping techniques (Sequeira, Mueller, and McGhee, 2007) are often employed,

with great success, to creatively bridge the personal skills gap experienced by practitioners.

However, the findings exposed the fact that there are limitations to what skills individual

entrepreneurs prefer to acquire. If South African entrepreneurs refrain from building

partnerships or embracing consultation in order to compensate for this skill gap, they might

resort to execution according to premeditated plan. With this in mind, in terms of a learning

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approach concerning skills outside preferred behavior, the South African entrepreneurial

practices seem to be both convergent and divergent with the principles of lean practices.

As highlighted in the literature, owing to the innovative nature of discovering new markets

and specific customer needs, Christensen (1997) argued that suppliers of products and

services and their customers should discover new markets in close collaboration. This

implies that ventures implement emergent strategy and continuous change in order to adapt

perpetually. However, the importance of clarity and focus in terms of overarching venture

vision and mission cannot be over-stated. The research confirmed this argument with 80% of

the respondents declaring that clarity and focus are extremely important in their current

business activities. The majority of this 80% had clear examples of how past failure was

rooted in the lack of clarity and focus in their businesses. Respondent 2 reported, “We tried a

lot of things and one thing we realized is that we can’t be great at everything.” Respondent 4

reported, “This whole thing of multitasking is misleading. If you want to do a proper job you

have to focus on one thing at a time. Focus on one thing, do it phenomenally well and grow

from that.” Respondent 5 reported, “So the problem that we have and what we found is

clarity and focus. What are you and what do you do?” Respondent 3 reported, “I think we

have two businesses and that is one too many, clarity and focus is currently big for us.” A

word of caution for the misconception that continuous change means ‘nothing remains

constant’ is in order. While products, services, tactics, markets and customer needs might

change significantly over time; overarching strategy and company identity should be clear

and focused by the entrepreneur and the employees of the company. In terms of clarity and

focus, the findings from the South African entrepreneurial practices seemed to introduce an

area that necessitates divergent behavior on strategic and tactical level respectively. While

this idea or conflict in focus is not a new revelation, it still has powerful implications for

practitioners and practitioner education.

One clear shortcoming of the lean start-up principles and their application in a developing

country is the lack of inherent business skills of entrepreneurs. The lean start-up principles

originate in a first world country and were applied in the technology industry. The

importance of relevance of traditional business education should not be underestimated

during grassroots business level application of these principles. Respondent 1 acknowledged,

“We’re not hardcore business people.” Respondent 5 reported, “One has to remember

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we’re doing something new and we don’t have years of experience. So we kind of feel on the

back foot in terms of confidence because of a lack of personal track record.” Respondent 2

commented, “I should have equipped myself better with how a business actually works, the

nuts and bolts of how a business works, like, what are creditors and debtors, invoicing and

proforma, you know, all of those kinds of things. I didn’t do any business subjects at school.

I think if you don’t have the business understanding of how a business works, then you make

it very difficult for yourself and that is what I have done.” Respondent 4 also reported, “Our

team was very good at being creative, but the business side is not one of our strong points.”

In terms of general business skills deficiency, the South African entrepreneurial practices

seem to be divergent with the principles of lean practices.

A full iteration of the design, measure and learn feedback loop for products and services

should be accelerated in order to increase the speed of change and innovation in start-up

ventures. According to Ries, “The fundamental activity of a startup is to turn ideas into

products [or services], measure how customers respond, and then learn whether to pivot or

persevere. All successful startup processes should be geared to accelerate that feedback loop

(Ries, 2011, p.18).” The findings in this research suggest that South African practitioners are

very successful in achieving sufficient iteration speeds, especially if the longevity of a start-

up venture is at stake. All respondents could site examples of how they implemented timely

iterations successfully to improve the viability of the strategy of the venture. Respondent 5

reported, “When we started out, our idea was superb, but not sustainable. Our business

model was built on the idea of posting magazines to customers but postage costs were far too

high. We followed this model for the first couple of issues and then realized that we will have

to switch to sending bulk copies to specific locations where partners distribute it.”

Respondent 3 reported, “When we started we made a number of foolish mistakes. Our

distribution was too expensive; we had to pursue key partnerships in order to lower the costs

associated with getting the product to the customer.” Respondent 1 reported, “We also

outsource production and other functions associated with high capital expenditure and

unnecessary assets, but we didn’t start this way.” Respondent 4 reported, “Another one of

our giant learning curves was the way we started out as a non-lean business model. We now

take it as lean as is humanly possible and we do it on a non-permanent project basis.” In

terms of iteration speed, the South African entrepreneurial practices seem to be convergent

with the principles of lean practices. Financial constraint, as experienced by the majority of

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the respondents, facilitates faster venture innovation. An abundance of finances often leads

to overspending and less prudent strategies with fewer iterations (Sull 2004). Over time, with

high iteration speeds, ventures will achieve viable strategy as the initial strategy is improved

constantly (Christensen, 1997). In terms of iteration speed, the South African entrepreneurial

practices seem to be convergent with the principles of lean practices.

The literature is divided on the significance and benefit of early financial support for start-up

ventures. Some scholars argued that a resource-stricken business environment is good for

general business prudence and focus, in terms of moving from initial to viable strategy before

scaling viable strategy. Some demonstrated that an oversupply of financial resources

diverted the entrepreneur’s focus to inessential business functions and became

counterproductive and wasteful. Other studies found that ventures that had early financial

support were more likely to survive. The research failed to categorically confirm of refute

any of these previous findings in literature. However, the researcher observed that financial

pressure and the resource-stricken environment of the studied start-up ventures are the

foremost motivator for entrepreneurs to apply lean start-up principles in the ventures.

SECTION 7: RESEARCH CONCLUSIONS

The researcher embarked on assessing the level of transferability of lean start-up principles to

South African entrepreneurial ventures. At this time it might be valuable to consider the

merit on which transferability would be judged. The strongest indicator of transferability

would be findings that show current successful application of these principles in South

African start-up ventures.

To this end, phenomenological approach was adopted to explore current practices of start-up

businesses and the entrepreneurs behind these start-ups. Before the interview process started,

the constructs of start-up ventures were summarized in a broad literature review. Five South

African entrepreneurs were engaged for up to two semi-structured interviews each.

Strategies, operations and administration of the ventures during the critical start-up phases

were discussed at length without any preface, made by the researcher, concerning the lean

start-up principles. With this new-found knowledge about the inner workings of the start-up

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ventures in South Africa, the researcher coded the data from the interviews. The 22 sub-

codes that emerged were subsequently organized into 6 most prominent themes or family

codes. The family codes were: Community Focused, Start-up Strategy, Learning Approach,

Attitude towards Change, Characteristics of the Entrepreneur and Applied Lean Practices.

The conclusions were reached by comparing the collective response from South African start-

up entrepreneurs and the character of their start-up ventures with the theory and literature on

lean start-up principles.

In general, the research has highlighted strong convergence between the practices of

South African entrepreneurs and the principles of lean start-up. There are a number

of aspects that emerged from the theory that have been echoed in the findings. Based

on this strong convergence, it would be appropriate to assume that the principles of

lean start-up are transferable to the South African entrepreneur.

In terms of continuous learning, outside the boundaries of preferred behavior, there

are limitations to the skills entrepreneurs prefer to acquire. At that boundary, life

style choice and personal preference are weighed against the requirements necessary

to ensure longevity of the venture. To bridge this skills gap, while remaining true to

preferred behavior, entrepreneurs could resort to techniques like outsourcing

The majority of South African entrepreneurs function in complex resource-stricken

environments. These inherent constraints of the South African business environment

necessitate fast iterations of strategy as a means to longevity. As a result, the research

suggests that South African entrepreneurs are already accustomed to high iteration

speeds.

Certain industry types and start-up venture types are inherently better positioned for

the application of lean start-up principles.

Half of the respondents have previously engaged with lean start-up principles in

practical application and while researching venture start-up literature.

Entrepreneurs can be very successful despite a lack of business education and general

business skills. However, the ‘hands-on’ practical approach to venture start-up

suggested by lean principles cannot substitute for hardcore business skills that

prospective entrepreneurs might need in order to scale the venture in future.

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However, this research is by no means conclusive and there remains scope for further

examination of the topic. The following limitations have been identified.

Owing to time constraints and methodology only five respondents were used to gather

data on the practices of South Africa start-up ventures.

The convenience sampling method, used to identify viable respondents, limits the data

to a very specific geographical location. This limits the researcher’s ability to

extrapolate conclusions to the entire population.

The selection of the most prominent findings and the generation of the emerging

codes were based purely on the researcher’s interpretation of the data. Therefore, the

analysis is vulnerable to researcher bias.

Even with such limitations, the researcher contributed to this under-researched topic. Start-

up phases of new business ventures are innovative by nature and innovation remains a very

challenging arena for research and analysis. Consequently, there are ample opportunities for

further research into this field.

SECTION 8: FURTHER RESEARCH RECOMMENDATIONS

Owing to geographic constraints of the convenient sampling method, a comparative study

with entrepreneurs in other regions of South Africa would add value and reliability to the

conclusions reached in this study.

Even though the study was not concerned with exploring the relationship between level of

transferability and start-up venture type, the researcher noticed that some venture start-ups

and their industries are inherently more suitable for lean practices. The researcher notes that

the lean start-up principles originate in the information and technology industry. Over the

last decade, as a result of reduced cost of telecommunication and expansion of the internet,

users became accessible and affordable in terms of entry barriers. Further studies are

recommended to identify the industries and the types of South African ventures for which the

application of lean start-up principles could be most appropriate. Such findings would be a

positive move towards defining industry-specific and type-specific heuristics for the

application of lean start-up principles.

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One of the major findings in this research was the lack of general business skills experienced

by the majority of respondents. While the lean start-up principles propose a dynamic hands-

on approach to venture start-up, there is merit for basic business planning and more

importantly general business education to acquire the much needed administration skills. The

researcher notes that the origins of the lean start-up principles are in the technology industry

in first world countries, which are associated with higher levels of basic education and

business administration skills. These and other business environment differences might

impact on the applicability of lean start-up methodology. Further studies into the relationship

between lean start-up methodology and basic business education levels of practitioners will

be valuable to application of lean principles.

The build-measure-learn feedback loop encourages entrepreneurs to iterate through

hypothesis testing. Ries (2011) pointed out that the fundamental action applied in this

process is pivoting of strategy or persevering with the current strategy. While this research is

not orientated towards discovery of the full complement of the conditions that underlie this

fundamental decision, it recognizes the need for further investigation into what ‘pivot or

persevere’ constitutes. The lean start-up principles as described in Ries (2011) are very

vague as to the conditions and merits for the application of this principle in particular. There

are no practical guidelines on the pivot or persevere process. Further studies to ‘unpack’ the

meaning of pivot or persevere for the practitioner will add value to the applicability of this

principle.

SECTION 9: IMPLICATIONS FOR ENTREPRENEURS IN SOUTH AFRICA

South African entrepreneurs have applied some of the lean start-up principles in their

ventures with great success. Further to this, the South African business environment lends

itself particularly well to the application of lean start-up principles. The researcher

summarizes the following implications of this study for practitioners and entrepreneurs

starting new ventures in South Africa.

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The conflict in the literature between the planning vs. discovering orientation has been

analysed and discussed. This might leave the practitioner undecided on the matter of

business plan creation for start-up ventures. The researcher believes that the essence of the

matter is less about the decision to write a business plan or not and more about the underlying

intention. Whatever planning the entrepreneur embarks on during the initial phases, the

intention of the start-up business model should always be dynamic discovery of the viable

strategy as opposed to meticulous execution according to an intuitive preconceived plan.

This will ensure a responsive business, ready to move naturally from initial strategy towards

viable strategy and ultimately to the point where this viable strategy can be scaled. Feedback

from the participants in this study highlighted the importance of strategic clarity and focus,

despite the need for perpetual adaptability and change on a tactical level. Consistency, clarity

and focus in terms of business identity on a vision and mission statement level is a subtle but

clear distinction from continuous change and constant innovativeness that is called for on a

tactical level. With this in mind, it is clear that the traditional business plan development

process is a helpful structured framework for entrepreneurs to define, communicate and

establish business identity. Clear corporate identity will assist the practitioner during

imminent focus and clarity related challenges in the future.

The difference between current aptitude and future required skills, outside preferred behavior,

has been analysed and discussed. This might leave the practitioner in a situation where life

style and personal preferences must be weighed against the future requirements of a

successful venture. Whatever tactic the practitioner applies to bridge this skills gap, the

findings seem to suggest that it is more about partnering with individuals that already possess

the skills that are required and less about endeavoring to acquire skills that are outside the

practitioners’ field of interest. To this end, practitioners can benefit most from techniques

like outsourcing to ensure that high levels of personal motivation are maintained and that the

venture remains true to its core business function.

Considering the rate of change in business environments today, the researcher believes that

the focus on continuous learning for start-up venture entrepreneurs is more about ensuring

dynamic capabilities of the venture and less about developing specific individual expertise in

a specific area. Specific skills and heuristics of past application might become obsolete in the

near future. Dynamic capabilities would serve the venture well in terms of adapting to the

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ever-changing need of customers and markets. Practitioners should explore the impact that

this orientation towards dynamic capability of the venture would have on strategic decision-

making regarding revision periods, performance indicators, capital expenditure and asset

ownership. Dynamic capabilities are all about the configuration of resources in the pursuit of

longevity of the venture and not about an individual resource itself.

While specific expertise in a particular area might become obsolete with change, general

business knowledge and skills are more lasting. In fact, respondents reported daily

challenges as a result of general business knowledge deficit. Despite many years of

experience as practitioners, the majority of respondents confirmed a need for general business

knowledge and skills. The data suggests that higher levels of business skills would have

translated into more success in their start-up ventures. The need for general business

education and business skills is implied for prospective practitioners.

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APPENDICES

Appendix A: Differences between lean and traditional start-ups

Function Lean Start-up Traditional Start-up

Business

Model Risk

search for a repeatable and scalable

business model; less risky; invest after

viable strategy emerged

execute against a business model,

more risky, invest upfront

Planning Cycle experimentation; failing fast; expected

failing; fix by iterating on ideas and

pivoting away from ones that don’t

work; agile development; nimbleness

and speed.

elaborate planning; failing equals

failure; exception; fix by firing

executives; year-long

development cycles; execute

according to predetermined plan

Design

Orientation

customer feedback; continuous learning,

testing hypothesis; pivoting

intuitive isolated planning;

execute premeditated plan; follow

plan rigidly

New Product

Development

get minimum viable product to

customer; iterative design; gathering

customer feedback; get out of the office

and test hypothesis

big design up front; use product

manager; prepare offering for

market following a linear; step-

by-step plan

Design

Objective

develop product iteratively and

incrementally; constant feedback

unveil finished product; cadenced

unveilings

Intellectual

Property

co-creation with customer; customer

feedback matters more

secrecy matters more; presuppose

knowledge of the customer

Strategy business model; hypothesis driven business plan; implementation

driven

Engineering agile development; build the product

iteratively and incrementally

fully specify the product before

building it

Organization customer and agile development teams

hire for learning, nimbleness and speed

departments by function;

hire for experience and ability to

execute

Source: (Blank, 2006; Furr and Ahlstrom, 2011; Ries, 2011; Christensen, 1997)

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Appendix B: The Research Instrument

Guiding questions for the semi-structured interviews:

Pri

nci

ple

s

Lit

eratu

re

Con

stru

cts

Rel

ate

d

En

trep

ren

eur

Con

stru

ct 20 Interview Questions related to the research topic:

“To what extent are the evolving insights into lean start-up principles

transferable to the South African entrepreneur?”

Get

ou

t of

the

bu

ild

ing

Cu

stom

er O

rien

tati

on

Idea

Cre

ati

on

Please tell me about your start-up business; what it is, and how it

started?

How did you come up with the idea?

Are your start-up products / services solving customers’ needs?

How do you know what your customers’ needs are?

Have you seen how your customers use your products / services?

Have you asked your customers what they think about the features

and benefits of your products / services?

On a day-to-day basis, how much time do you spend with the people

that you sell your products / services to?

What have been your most successful products / services in the past?

Why do you think those products / services were so successful?

Piv

oti

ng

Pro

du

ct D

evel

op

men

t

Ch

an

gin

g t

he

idea

Can you tell me about a time that you made the biggest change or

adjustment to your products / services?

Why do you think it was a successful change?

Did you use your customers to help you determine what to change of

your products / services?

In your view, what has been the most successful ways in which you

got this important information from your customer in the past?

How do you plan to get customer information and customer feedback

in the future?

Iter

ate

Rap

idly

Inn

ovati

on

Sp

eed

Sp

eed

of

Ch

an

ged

Can you tell me about a time when you made the fastest change

or improvement in your products / services in the past?

Why did you think that change was necessary?

How long did it take to implement that change?

How did you come to know that change was necessary?

Do you think you can improve the speed at which you change your

products / services in the future?

Do you think it is necessary to change often in order to improve your

start-up business or the products / services?

Do you think your customers’ needs for products / services will

change in the future?

How will you be able to know exactly when and how these customer

needs change?

Source of Lean Start-up Principles Terminology: (Ries, 2011)

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Appendix C: Consistency Matrix

Problem “To what extent are the evolving insights into lean start-up principles transferable to the South African entrepreneur?”

Sub-

problem

Transferable in terms of

customer orientation


new product development


innovative product change

Literature

Review Furr and Ahlstrom (2011)

Franke, Von Hippel, and Schreier

(2006)

Hauser and Clausing (1988)

Jansen (2004)

Von Hippel (2001)

Bogers, Afuah & Bastian (2010)

Christensen (1997)

Ries (2011)

Nelson (1991)

Bhide (2000)

Blank (2006)

Chesbrough and Prencipe

(2008)

Iansiti (1995)

Enkel, Gassmann and Chesbrough

(2009)

Lynskey (2004)

Ries (2011)

Katz and Luecke (2003)

Bamford, Dean and Douglas (2004)

Lauren and Salter (2006)

Piller and Walcher (2006)

Source of

data

Please tell me about your start-up

business; what it is, and how it started?

How did you come up with the idea? Are

your start-up products solving customers’

needs? How do you know what your

customers’ needs are? Have you seen how

your customers use your products? Have

you asked your customers what they think

about the features and benefits of your

products? On a day-to-day basis, how

much time do you spend with the people

that you sell your products to? What have

been your most successful products in the

past? Why do think those products were

so successful?

Can you tell me about a time that you

made the biggest change or

adjustment to your products /

services? Why do you think it was a

successful change? Did you use your

customers to help you determine what

to change of your products / services?

In your view, what has been the most

successful ways in which you got this

important information from your

customer in the past? How do you

plan to get customer information and

customer feedback in the future?

Can you tell me about a time when you made

the fastest change or improvement in your

products / services in the past? Why did you

think that change was necessary? How long

did it take to implement that change? How did

you come to know that change was necessary?

Do you think you can improve the speed at

which you change your products / services in

the future? Do you think it is necessary to

change often in order to improve your start-up

business or the products / services? Do you

think your customers’ needs for products /

services will change in the future? How will

you be able to know exactly when and how

these customer needs change?

Data

Type

Semi-structured Interviews

Open Ended Questions





Analysis Manual Interpretation of Codes Manual Interpretation of Codes Manual Interpretation of Codes