Changing and pivoting the business model in software startups

In a company, its business strategy and business model undergo changes throughout its life. These changes can be induced or forced externally or they can result from a deliberate strategy to improve the business performance and to achieve success. Certain changes can lead to a major change in the business model of the company (i.e., a pivot). Such change or innovation in the business model can occur in various of its dimensions. According to Osterwalder and Pigneur, there are four epicenters of change and innovation to be taken into consideration. In this manuscript, fifteen Portuguese software startups were studied using essentially semi-structured interviews to gather the information. The data was processed with a software application for qualitative data analysis. The main results are related to a dynamic process of evolution and change of the business model in software startups. In particular, we have identified that the changes in the business elements that support the production of the value proposition (left-hand side of the Business Model Canvas) affect the elements that explain the strategy of delivering the value proposition to customers (right-hand side of the Business Model Canvas).This work was supported by COMPETE: POCI-01-0145-FEDER-007043 and FCT Fundação para a Ciência e a Tecnologia within the Project Scope: UID/CEC/00319/2013

A dark side of pivoting? : the effect on employee motivation and commitment

Purpose – The thesis “A dark side of pivoting? – The effect on employee motivation and commitment” of Frederick Meiners aims to examine how pivoting, changes to the course of action - as a concept and part of the lean startup methodology influences employees’ motivation and commitment, and as such shining light on the current criticism about pivoting. Methodology/approach – Targeting startups that went through the process of pivoting, this thesis uses an online survey to ask employees and startup’s founders how they evaluate job related aspects of pivoting such as their motivation and commitment totaling in a sample of 50 respondents. Findings – The findings suggest that pivoting has an overall positive effect on motivation. In fact, since pivoting is usually triggered by a negative business situation and offers the possibility to do a turnaround, this increases motivation. However, when startups experience high number of pivots a darker side emerges. High numbers of pivots experienced by employees along with the effect of pivots on salaries and job security however, indicate there possibly is an inherently darks side of pivoting. Originality/value – This thesis contributes to our understanding of the methodology of the lean startup and in particular the under-studied concept of pivoting. The popularity of the lean startup methodology along with the concept of pivoting, and the lack of understanding of its impact on employees’ motivation demonstrate the need for studies addressing this issue.Objetivo - A tese “A dark side of pivoting? – The effect on employee motivation and commitment” de Frederick Meiners pretende examinar como o “pivot”, mudanças no curso de ação- como conceito e parte da metodologia lean startup influencia a motivação e o comprometimento dos funcionários, iluminando a crítica resultante contra o “pivot”. Metodologia / abordagem - Esta tese emprega uma pesquisa on-line voltada para funcionários e fundadores de startups projetados para analisar os efeitos do “pivot” sobre a motivação, totalizando uma amostra de 50 entrevistados. Resultados - Os achados sugerem que o “pivot” tem um efeito geral positivo sobre a motivação. De fato, uma vez que o “pivot” geralmente é desencadeado por uma situação comercial negativa e oferece a possibilidade de fazer um turnaround, isso aumenta a motivação. No entanto, quando os startups experimentam alto número de “pivots”, um lado mais escuro emerge. Um número elevado de “pivots” experimentados pelos funcionários e o efeito de “pivots” sobre os salários e a segurança do emprego, no entanto, indicam que possivelmente existe um lado inerentemente obscuro do “pivot”. Originalidade / valor – Esta tese contribui para a nossa compreensão da metodologia pouco estudada da inicialização lean e, em particular, do conceito de “pivot”. A falta de compreensão do impacto do “pivot” na motivação dos funcionários demonstram a necessidade de estudos que abordem esta questão

Pivoting Strategies: A Study of Pivot Severity, Investor Reliance, and Revenue among Startups

“Pivoting”, or a strategic shift in the direction of a venture, may be one of the most recognizable terms in entrepreneurship. Although this term has entered the entrepreneurial lexicon, very little is known about the causal impact that pivoting has on new venture performance. Some studies suggest that pivoting can have positive effects on performance while others suggest that executing too many pivots can adversely impact it. This paper seeks to better understand the impact of multiple pivots on the likelihood of revenue by investigating the moderating roles of pivot severity (the degree to which a pivot represent a market shift) and reliance on investors. We investigate the impact of multiple pivots on revenue, distinguishing between high-tech vs low-tech startups and between mild vs severe pivots. We also investigate the impact that equity investments have on the pivot-revenue relationship of high-tech firms. Using change in a venture’s NAICS code as a proxy for pivoting, we show an inverted-U relationship between magnitude of pivots and the likelihood of revenue among Kauffman Firm Survey participants. Among high-tech firms, this relationship differs based on the firm’s reliance on investors. This longitudinal empirical study on the relationship between pivot magnitude, investor reliance, and revenue aims to attract attention to this important topic of entrepreneurship, and help the entrepreneur facing the difficult decision of whether or not to pivot

Understanding how high-tech entrepreneurs successfully pivot as part of the entrepreneurial journey

Purpose: In their entrepreneurial journey, high-tech entrepreneurs continuously face a need to devise a competitive value proposition for the startup company and leverage emerging technology to strengthen the proposition. Entrepreneurial pivoting addresses this challenge by allowing startups to validate and refine both their strategy and business model. Therefore, the research study has investigated two theories: the Lean Startup Approach and Technology Entrepreneurship. Consequently, the study has provided an empirical investigation of the pivoting concept examined in the context of the Lean Startup approach (LSA) and Technology Entrepreneurship to improve the understanding of the entrepreneurial journey for high-tech entrepreneurs. The research also focused on understanding how the life cycle stage of an emerging technology impacts the high-tech entrepreneurs’ entrepreneurial journey. The Lean Startup Approach, the technology S-curve, and the technology readiness level (TRL) framework were investigated to address the above question. The study has provided an empirical investigation of the pivoting concept, which has been explained in the context of the lean startup approach (LSA), the technology S-curve and the technology readiness level to improve the understanding of the entrepreneurial journey for high-tech entrepreneurs leading tech startups. Apart from investigating how high-tech entrepreneurs develop competitive value propositions and how emerging technologies impact their entrepreneurial journey, the research study also investigated leadership styles and their influence on tech entrepreneurs. For this, the study has empirically investigated pivoting from the Lean Startup Approach and six different leadership styles. Due to studying pivoting from the Lean Startup Approach and investigating technology entrepreneurship, technology S-curve and technology readiness levels, this research study is titled ‘Understanding how high-tech entrepreneurs successfully pivot their startups as part of the entrepreneurial journey’. Methodological Approach: A qualitative research method was adopted by interviewing hightech entrepreneurs across the United Kingdom to validate the theories associated with the LSA and identify new insights on entrepreneurial pivoting. The interviews are divided into two stages. Firstly, thirty primary interviews were conducted to understand pivoting and the factors that trigger pivoting; the influence of the phases of technology entrepreneurship on pivoting; and the impact of stages of technology maturity in the technology S-curve on pivoting. Secondly, longitudinal interviews were conducted in three phases with nine high-tech entrepreneurs who were also involved in the thirty primary interviews. The purpose of the longitudinal interviews was to collect further data on the above-mentioned topics and understand in more detail and build up a richer picture on how high-tech startups successfully pivot as part of the entrepreneurial journey. Findings: The research study has validated the existing types of pivots and identified two new pivots (giving 16 in total). The study has validated 11 factors that trigger a tech startup to change direction and identified three new factors (giving 14 in total). The research study also determined that there can be a domino effect in pivoting, and the value proposition can be created and sustained through pivoting. The study has established the influence of the phases of technology entrepreneurship on pivoting and the impact of the stages of technology maturity in the technology S-curve on pivoting. Originality: The study provides empirical evidence on pivots and the factors associated with pivots. Moreover, the study significantly helps to improve the understanding of the influence of the phases of technology entrepreneurship on pivoting. The study has developed a new conceptual framework for TE. Furthermore, the study helped in understanding the impact of the stage of technology in the technology S-curve and technology readiness level on pivoting. The study also discusses the challenges faced by tech startups while pursuing pivots; the domino effect in pivoting; and has found evidence that pivoting leads to achieving the desired results

The Role of Technology Pivots in Software Startups: Antecedents and Consequences

Software startups implement and deploy innovative software-based products and services, for which they are in search of a viable and scalable business model. In the well-established Lean Startup Approach, pivoting – testing new fundamental hypotheses about a product, strategy, or engine of growth – is a standard method applied in this process. Failing to pivot at the right time and for the right reasons can substantially jeopardize a startup’s chance to develop into a viable business. Given the alleged importance of pivots, surprisingly little is known about the events leading up to and resulting from pivots. Our study starts to fill this gap in theoretical knowledge by empirically investigating the circumstances under which it is beneficial to perform pivots and what to expect from them for product development, business model development and innovation. Focusing on technology pivots – one specific type of pivot – we use an embedded inductive multi-case research design to propose a preliminary model that identifies three prerequisites, five antecedent and nine consequence categories of technology pivots. Lastly, we discuss the impact of technology pivots on individual business model dimensions

Customer Discovery and Customer Validation in Lean Software Startups

The traditional business models and the traditionally successful development methods that have been distinctive to the industrial era, do not satisfy the needs of modern IT companies. Due to the rapid nature of IT markets, the uncertainty of new innovations‟ success and the overwhelming competition with established companies, startups need to make quick decisions and eliminate wasted resources more effectively than ever before. There is a need for an empirical basis on which to build business models, as well as evaluate the presumptions regarding value and profit. Less than ten years ago, the Lean software development principles and practices became widely well-known in the academic circles. Those practices help startup entrepreneurs to validate their learning, test their assumptions and be more and more dynamical and flexible. What is special about today‟s software startups is that they are increasingly individual. There are quantitative research studies available regarding the details of Lean startups. Broad research with hundreds of companies presented in a few charts is informative, but a detailed study of fewer examples gives an insight to the way software entrepreneurs see Lean startup philosophy and how they describe it in their own words. This thesis focuses on Lean software startups‟ early phases, namely Customer Discovery (discovering a valuable solution to a real problem) and Customer Validation (being in a good market with a product which satisfies that market). The thesis first offers a sufficiently compact insight into the Lean software startup concept to a reader who is not previously familiar with the term. The Lean startup philosophy is then put into a real-life test, based on interviews with four Finnish Lean software startup entrepreneurs. The interviews reveal 1) whether the Lean startup philosophy is actually valuable for them, 2) how can the theory be practically implemented in real life and 3) does theoretical Lean startup knowledge compensate a lack of entrepreneurship experience. A reader gets familiar with the key elements and tools of Lean startups, as well as their mutual connections. The thesis explains why Lean startups waste less time and money than many other startups. The thesis, especially its research sections, aims at providing data and analysis simultaneously.Siirretty Doriast

Exploring entrepreneurial pivoting and the factors that trigger pivots by tech startups

Technology entrepreneurship is an emerging domain in the field of entrepreneurship and the practice-oriented method called the Lean Startup approach (LSA) has made a big impact in this area. However, many technology startups continue to have survivability issues. This study focuses on understanding the theory of entrepreneurial pivoting and its associated factors. In this study, we have collected secondary data comprising 80 tech startups to validate the different types of pivots they pursued by the companies and the factors that triggered the pivoting. The most common pivots among these were found to be customer segment pivot and customer need pivot

On the Timing of Pivots: Jumping the Gun or Late Out of the Gate?

Startup literature has demonstrated a growing interest in topics related to strategic pivots however very little is known about the impact pivoting has on new venture survival and many aspects remain unexplored. While some studies treat pivots as though there are no tradeoffs involved, others suggest pivoting has either positive or negative effects. This paper seeks to better understand the impact of pivoting, namely does the timing of pivoting impact startup survival. Using change in a venture’s North American Industry Classification System code as a proxy for pivoting, we find that earlier pivoting activity has a more positive impact on survival than later pivoting activity among Kauffman Firm Survey participants. This longitudinal empirical study on the relationship between pivot timing and revenue aims to attract attention to this important topic in startup literature, and help the entrepreneur facing the difficult decision of when to pivot

Software Startups -- A Research Agenda

Software startup companies develop innovative, software-intensive products within limited time frames and with few resources, searching for sustainable and scalable business models. Software startups are quite distinct from traditional mature software companies, but also from micro-, small-, and medium-sized enterprises, introducing new challenges relevant for software engineering research. This paper's research agenda focuses on software engineering in startups, identifying, in particular, 70+ research questions in the areas of supporting startup engineering activities, startup evolution models and patterns, ecosystems and innovation hubs, human aspects in software startups, applying startup concepts in non-startup environments, and methodologies and theories for startup research. We connect and motivate this research agenda with past studies in software startup research, while pointing out possible future directions. While all authors of this research agenda have their main background in Software Engineering or Computer Science, their interest in software startups broadens the perspective to the challenges, but also to the opportunities that emerge from multi-disciplinary research. Our audience is therefore primarily software engineering researchers, even though we aim at stimulating collaborations and research that crosses disciplinary boundaries. We believe that with this research agenda we cover a wide spectrum of the software startup industry current needs