Customer-led versus market-oriented: An investigation of the lean startup methodology framework

Abstract

Market-oriented approach to customer development has been strongly associated innovativeness and new product success. There is also evidence to suggest customer-led approach, or responding to explicit customer needs, impedes innovation. This thesis investigates whether the increasingly popular Lean Startup Methodology (LSM) favours customer-led or market-oriented approach to discovering and learning about customer needs.

The study was conducted using a participatory action research methodology. The LSM was used as a framework for investigating the commercial value of two researched projects originating from within Victoria University. The LSM was also applied to a third project founded by the Master of Advanced Technology Enterprise (MATE) team.

The LSM process is shown to assist in the discovery of both explicit and latent customer needs. However, which one the framework favours depends on whether the product or the market is the primary driver of the validation process. In one instance the entrepreneur is deliberately looking to discover a present market need in order to align it with a pre-defined solution, while the alternative is to study the market in order to identify an opportunity followed by the development of a specific solution. The latter is shown to support becoming market oriented.

The findings also suggest Domain Knowledge plays a vital role in establishing and maintaining market-oriented approach to customer development. Domain knowledge aids in understanding market data in order to extract novel and meaningful insights. Establishing close relationships with emerging customers and „lead users‟ in a particular market is shown to be an effective method of compensating for a lack of domain knowledge. What‟s more, the presence of preconceived prototypes is shown to negatively impact on the entrepreneur‟s ability to approach customer development in a market-oriented manner.

By drawing on the MATE team‟s experiences, this thesis aims to provide practical lessons for individuals and teams that are looking to take a market-oriented approach to customer development.