Case Study Description of Hypothesis-Driven Entrepreneurship: The Lean Startup
Firms that follow a hypothesis-driven approach to evaluating entrepreneurial opportunity are called "lean startups." Entrepreneurs in these startups translate their vision into falsifiable business model hypotheses, then test the hypotheses using a series of "minimum viable products," each of which represents the smallest set of features/activities needed to rigorously validate a concept. Based on test feedback, entrepreneurs must then decide whether to persevere with their business model, "pivot" by changing some model elements, or abandon the startup. This note describes, step-by-step, how to follow the hypothesis-driven approach when evaluating entrepreneurial opportunity; explains how the approach mitigates cognitive biases that otherwise can contribute to poor decisions; and considers conditions that are best suited for lean startup methods.
Authors :: Thomas R. Eisenmann, Eric Ries, Sarah Dillard
Swot Analysis of "Hypothesis-Driven Entrepreneurship: The Lean Startup" written by Thomas R. Eisenmann, Eric Ries, Sarah Dillard includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hypothesis Lean facing as an external strategic factors. Some of the topics covered in Hypothesis-Driven Entrepreneurship: The Lean Startup case study are - Strategic Management Strategies, Market research, Project management and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Hypothesis-Driven Entrepreneurship: The Lean Startup casestudy better are - – increasing transportation and logistics costs, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, geopolitical disruptions, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing commodity prices, increasing energy prices, etc
Introduction to SWOT Analysis of Hypothesis-Driven Entrepreneurship: The Lean Startup
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hypothesis-Driven Entrepreneurship: The Lean Startup case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hypothesis Lean, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hypothesis Lean operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Hypothesis-Driven Entrepreneurship: The Lean Startup can be done for the following purposes –
1. Strategic planning using facts provided in Hypothesis-Driven Entrepreneurship: The Lean Startup case study
2. Improving business portfolio management of Hypothesis Lean
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hypothesis Lean
Strengths Hypothesis-Driven Entrepreneurship: The Lean Startup | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hypothesis Lean in Hypothesis-Driven Entrepreneurship: The Lean Startup Harvard Business Review case study are -
Organizational Resilience of Hypothesis Lean
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Hypothesis Lean does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Hypothesis Lean is one of the most innovative firm in sector. Manager in Hypothesis-Driven Entrepreneurship: The Lean Startup Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Hypothesis Lean has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Hypothesis Lean in the sector have low bargaining power. Hypothesis-Driven Entrepreneurship: The Lean Startup has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hypothesis Lean to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Hypothesis Lean has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hypothesis Lean to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Hypothesis Lean is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Thomas R. Eisenmann, Eric Ries, Sarah Dillard can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Highly skilled collaborators
– Hypothesis Lean has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Hypothesis-Driven Entrepreneurship: The Lean Startup HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Hypothesis Lean digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hypothesis Lean has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Training and development
– Hypothesis Lean has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Hypothesis-Driven Entrepreneurship: The Lean Startup Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Successful track record of launching new products
– Hypothesis Lean has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hypothesis Lean has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Effective Research and Development (R&D)
– Hypothesis Lean has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Hypothesis-Driven Entrepreneurship: The Lean Startup - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Hypothesis Lean is present in almost all the verticals within the industry. This has provided firm in Hypothesis-Driven Entrepreneurship: The Lean Startup case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses Hypothesis-Driven Entrepreneurship: The Lean Startup | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hypothesis-Driven Entrepreneurship: The Lean Startup are -
Increasing silos among functional specialists
– The organizational structure of Hypothesis Lean is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Hypothesis Lean needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hypothesis Lean to focus more on services rather than just following the product oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Hypothesis-Driven Entrepreneurship: The Lean Startup HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Hypothesis Lean has relatively successful track record of launching new products.
No frontier risks strategy
– After analyzing the HBR case study Hypothesis-Driven Entrepreneurship: The Lean Startup, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Hypothesis-Driven Entrepreneurship: The Lean Startup, is just above the industry average. Hypothesis Lean needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Products dominated business model
– Even though Hypothesis Lean has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Hypothesis-Driven Entrepreneurship: The Lean Startup should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study Hypothesis-Driven Entrepreneurship: The Lean Startup that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Hypothesis-Driven Entrepreneurship: The Lean Startup can leverage the sales team experience to cultivate customer relationships as Hypothesis Lean is planning to shift buying processes online.
Need for greater diversity
– Hypothesis Lean has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Capital Spending Reduction
– Even during the low interest decade, Hypothesis Lean has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Interest costs
– Compare to the competition, Hypothesis Lean has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Lack of clear differentiation of Hypothesis Lean products
– To increase the profitability and margins on the products, Hypothesis Lean needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Hypothesis Lean supply chain. Even after few cautionary changes mentioned in the HBR case study - Hypothesis-Driven Entrepreneurship: The Lean Startup, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hypothesis Lean vulnerable to further global disruptions in South East Asia.
Opportunities Hypothesis-Driven Entrepreneurship: The Lean Startup | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Hypothesis-Driven Entrepreneurship: The Lean Startup are -
Loyalty marketing
– Hypothesis Lean has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Better consumer reach
– The expansion of the 5G network will help Hypothesis Lean to increase its market reach. Hypothesis Lean will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Learning at scale
– Online learning technologies has now opened space for Hypothesis Lean to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hypothesis Lean can use these opportunities to build new business models that can help the communities that Hypothesis Lean operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hypothesis Lean can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Hypothesis Lean can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Hypothesis Lean can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Hypothesis Lean has opened avenues for new revenue streams for the organization in the industry. This can help Hypothesis Lean to build a more holistic ecosystem as suggested in the Hypothesis-Driven Entrepreneurship: The Lean Startup case study. Hypothesis Lean can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Hypothesis Lean can develop new processes and procedures in Innovation & Entrepreneurship industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Using analytics as competitive advantage
– Hypothesis Lean has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Hypothesis-Driven Entrepreneurship: The Lean Startup - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hypothesis Lean to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Hypothesis Lean can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hypothesis Lean can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hypothesis Lean is facing challenges because of the dominance of functional experts in the organization. Hypothesis-Driven Entrepreneurship: The Lean Startup case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hypothesis Lean can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Hypothesis-Driven Entrepreneurship: The Lean Startup External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hypothesis-Driven Entrepreneurship: The Lean Startup are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Hypothesis Lean will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Stagnating economy with rate increase
– Hypothesis Lean can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Hypothesis Lean business can come under increasing regulations regarding data privacy, data security, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Hypothesis Lean in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Hypothesis-Driven Entrepreneurship: The Lean Startup, Hypothesis Lean may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Shortening product life cycle
– it is one of the major threat that Hypothesis Lean is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hypothesis Lean can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Hypothesis-Driven Entrepreneurship: The Lean Startup .
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hypothesis Lean can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Hypothesis Lean demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Hypothesis Lean needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Regulatory challenges
– Hypothesis Lean needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Innovation & Entrepreneurship industry regulations.
Weighted SWOT Analysis of Hypothesis-Driven Entrepreneurship: The Lean Startup Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Hypothesis-Driven Entrepreneurship: The Lean Startup needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Hypothesis-Driven Entrepreneurship: The Lean Startup is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Hypothesis-Driven Entrepreneurship: The Lean Startup is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Hypothesis-Driven Entrepreneurship: The Lean Startup is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Hypothesis Lean needs to make to build a sustainable competitive advantage.