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What can entrepreneurs learn from startups and scientists?

In the last decade, I've had the privilege of working with seven different entrepreneurs, each with a unique approach to building and growing their businesses. Some looked to the startup community for inspiration and ideas, hoping to discover new strategies to expand their revenues. But, what if there was a more systematic approach to business growth?

In 2018, Bocconi University researchers in Milan, Italy conducted a study to compare the effectiveness of two approaches used by 116 start-up companies. The first approach was a heuristic one, relying on intuition, past experiences, trial and error, pattern recognition, and analogy. The second was a scientific approach, relying on empirical data, experiments, hypotheses, and systematic observation to make decisions.

After an eight-week training program, the researchers collected data on the actions and performance of all 116 start-ups over the following year. 59 of them were encouraged to use the scientific approach. Here are the key findings:

  • 24 of the start-ups using the scientific approach dropped out, compared to 20 of those using the heuristic approach.

  • The start-ups using the scientific approach pivoted 26 times, while those using the heuristic approach only pivoted 12 times, indicating that the scientific approach may lead to more frequent pivots and greater adaptability.

  • Start-ups utilizing the scientific approach earned higher average revenue, which the researchers attributed to the precision that helped them perform better and avoid bad decisions.

Earlier in 2011 Eric Ries wrote, “The Lean Startup,” which proposed the following process:

  1. Develop a hypothesis: Identify a problem or opportunity and formulate a hypothesis about how to address it. This could involve creating a new product, service, or business model.

  2. Build a minimum viable product (MVP): Create a basic version of the product or service that allows you to test your hypothesis with real customers. The MVP should be simple and cost-effective to produce.

  3. Test the MVP: Launch the MVP and collect feedback from early adopters. Use this feedback to make improvements to the product or service.

  4. Measure progress: Set metrics to measure the success of the MVP and track progress over time. This could include metrics like user engagement, conversion rates, or revenue.

  5. Iterate and pivot: Use the feedback and metrics to make data-driven decisions about how to improve the product or service. If the hypothesis is not validated, consider pivoting to a new idea.

  6. Scale: Once the hypothesis is validated and the product or service is successful, scale the business by investing in marketing, hiring, and expanding the product or service offerings.

Since its publication, several companies have cited the Lean Startup process as key to its success, such as Dropbox, Airbnb, and Instagram.

So what can existing businesses learn from these startup companies and their approach?

  1. Agility: Startups are often able to move quickly and make decisions faster than larger, more established companies. Existing businesses can learn from this by embracing a culture of experimentation and innovation, and by being willing to pivot or change direction if needed.

  2. Customer focus: Startups are typically very focused on understanding and meeting the needs of their customers. Existing businesses can learn from this by investing in customer research and feedback, and by making customer needs a top priority.

  3. Lean approach: Startups often operate with limited resources and budgets, which forces them to be creative and resourceful. Existing businesses can learn from this by adopting a lean approach to their operations, streamlining processes, and reducing waste.

  4. Entrepreneurial mindset: Startups are often driven by a strong entrepreneurial spirit and a willingness to take risks. Existing businesses can learn from this by fostering a culture of innovation and encouraging employees to take risks and explore new ideas.

  5. Technology adoption: Startups are often early adopters of new technologies and tools. Existing businesses can learn from this by staying up-to-date with the latest technology trends and investing in new tools and systems that can help them work more efficiently and effectively.

Another interesting connection is the approach startups use in relation to the scientific method. In the 16th and 17th centuries, scientists such as Francis Bacon, Galileo Galilei, and Issac Newton were just a few who were responsible for the creation of the scientific method. They created this process:

  1. Observation: The scientific process begins with observation, which involves using our senses to gather data about a natural phenomenon.

  2. Question: Based on the observations, a question is formulated that seeks to understand the underlying cause or mechanism of the phenomenon.

  3. Hypothesis: A hypothesis is a proposed explanation or prediction for the observed phenomenon that can be tested through further experimentation.

  4. Experimentation: Experiments are designed to test the hypothesis by manipulating one or more variables and observing the effects on the phenomenon of interest.

  5. Analysis: Data is collected and analyzed using statistical methods and other techniques to determine if the results support or refute the hypothesis.

  6. Conclusion: Based on the analysis, a conclusion is drawn about the validity of the hypothesis, and the results are reported in a scientific paper or presentation.

  7. Peer review: The scientific process involves peer review, where the results are reviewed and critiqued by other experts in the field to ensure that the study is conducted in a rigorous and unbiased manner.

  8. Replication: The scientific process also involves replication, where other researchers attempt to replicate the results of the study to confirm its validity and reliability.

This then made me start wondering about - What can entrepreneurs learn from thinking more like scientists?

  1. Hypothesis-driven problem solving: Scientists use the scientific method to identify and test hypotheses. Entrepreneurs who think like scientists can use this same approach to identify and test business hypotheses, such as the potential market for a new product or service.

  2. Data-driven decision-making: Scientists rely on data to make decisions and entrepreneurs who think like scientists can do the same. By gathering and analyzing data, entrepreneurs can make informed decisions that are based on facts rather than speculation.

  3. Experimentation: Scientists conduct experiments to test their hypotheses and entrepreneurs who think like scientists can do the same. By testing different approaches and strategies, entrepreneurs can learn what works and what doesn't, and adjust their business accordingly.

  4. Risk mitigation: Scientists carefully design experiments to minimize risk, and entrepreneurs who think like scientists can do the same. By testing and validating their ideas before investing significant time and resources, entrepreneurs can reduce the risk of failure.

  5. Innovation: Scientists are often at the forefront of innovation, and entrepreneurs who think like scientists can leverage this same approach to drive innovation in their businesses. By constantly testing and experimenting with new ideas, entrepreneurs can stay ahead of the competition and develop new products and services that meet the needs of their customers.

Overall, entrepreneurs who think like scientists are more likely to make data-driven decisions, minimize risk, and drive innovation in their businesses.

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