How Applying the Lean Start-up Methodology can Affect Business Model Innovation

Abstract

Start-ups often apply entrepreneurial approaches like the Lean Start-up Method (LSM) and Business Model Innovation (BMI). LSM emphasises experimentation during product development and testing in close interactions with potential customers to get first-hand feedback. Lessons learned are implemented so that improved product variants go through further feedback loops and so on. Products are developed by rapidly getting closer to what customers really want. BMI focuses on altering existing or developing new business models to enable differentiation from competitors. Typical elements of business models include target customer segments, value propositions, value chains and revenue mechanisms. BMI is assumed to take place when at least two of these elements are innovated in conjunction. Going beyond typical product or process innovation in isolation, BMI suggests to holistically consider interdependencies within the entire business model. The need for a better understanding on connections between LSM and BMI is expressed in the literature and this work’s goal is to contribute to this discussion. More specifically, this work seeks to address the question of how the application of LSM can affect BMI. In search of answers, business plans of 25 finalist start-ups in the 2022 edition of an annual innovation competition in Switzerland are reviewed. While the evidence on the connection between LSM and BMI is not entirely convincing, reviewed business plans reveal insights into LSM-related factors at play that can support business model changes and trigger BMI.