Research Objectives
Corporate agility is considered to be a key competitive advantage of startup companies developing new products when compared to larger corporations. With the now popular Lean Startup -methodology suggesting companies should make swift decisions to change their strategy and business model in uncertain new ventures, companies are supposed to know very quickly whether a business model is going to be successful or not. The purpose of this study is to understand why companies make radical changes to their business model and how they try to ensure at a relatively early stage that a business model is likely to fail, and that the most prudent action to take is to change trajectory and focus on another business model. Subsequently, the study seeks to clarify how agile companies develop their products under high levels of uncertainty.
Methodology
The empirical data for this study was gathered from eight semi-structured interviews with founders or early investors from growing Finnish IT startup companies. The respondents were selected as they have been involved with their respective companies from conception or from a very early stage and due to their top management position, the interviewees are very knowledgeable about all the reasoning behind the strategic decisions their companies made throughout the lifecycle of their core product offering. The interviews were analyzed using a systematic coding process.
Findings
The findings of the study indicate that companies either pivot due to a prolonged period of disappointing sales performance, or due to the new opportunities presented by experiments with new business models that lead to an immediate impact in customer satisfaction and revenue growth. The study indicates that disappointing performance is a sound basis for pivot only after multiple iterations on a business model, as it then becomes clearer that progress is too slow to reach desired performance levels and financial trouble is already visible in the horizon. Another finding of the study was the temporal differences between pivots that arose from negative performance and positive surprises from experiments
