More than 90% of high-growth tech startups fail, while most of the less than 10% of startups that succeed experience several near-failures. 74% of high-growth tech startups fail because of premature scaling, according to UC Berkeley and Stanford research. Furthermore, CB Insights reports that 42% of startup founders consider the lack of a market need for their products as the main reason behind their business failure. To avoid this scenario, David Collis, Professor of Business Administration at Harvard Business School, gives simple advice: “Know what not to do.” He thus highlights the importance of developing a strong strategy.
Paradoxically, Collis observes that strategy and entrepreneurship are often defined in opposition to each other. Strategy is considered as the pursuit of clearly-defined goals in advance through carefully selected activities, while entrepreneurship is mainly perceived as an opportunistic business activity. Collis notes that in fact there is no such a sharp contrast between them but rather strong interdependence: “Strategy without entrepreneurship is central planning. Entrepreneurship without strategy leads to chaos.” To strike a balance between them, Collis suggests utilizing the potential of lean strategy.*
Despite so much hype around lean, embodied by Toyota’s success, many companies are still struggling with leanifying their production process. Although lean methodology has been widely discussed and analyzed, its implementation is not so straightforward as it may seem. One of the biggest challenges is adapting Toyota’s lean practices in one’s business context. Toyota’s lean business model cannot be simply copy-pasted. It might, but there is no 100% guarantee that it will work efficiently. Instead, it should be used as a point of reference while upgrading one’s business operations.
In the context of the Nordics and Baltics, lean has a lot of untapped potential. While many Northern startups have been leanifying their business practices, the potential of lean still has not been fully explored. Lean offers a lot of room for manoeuvre: Toyota’s business model should be carefully analyzed to identify the practices that suit one’s business interests the best. Having the global mindset from the get-go, Northern innovators can then glocalize their products or services so they reflect Toyota’s lean standards yet retain their competitive Northern know-how.
Despite their growth potential, the vast majority of tech startups fail or experience several near-failures. A failure rate of nearly 90% is a troubling statistic, which could be reversed with lean strategy. Startups which undertake the challenge of leanifying their business operations from the start are more likely to succeed and secure their market position. Lean = competitive advantage. The more startups go lean, the more competitive edge they can gain. Their chances of success in the global market also increase. Sounds simple: go lean. Yet in practice, it takes a lot of effort and perseverance to implement it.
Having this in mind, I have decided to launch XLEAN.com, a Northern lean research project which aims to analyze the concept of Northern lean and position it as an alternative to conventional managerial practices. It seeks to build a framework for developing Northern lean strategy, which could help avoid business failures. Northern business know-how has not been explored extensively despite a surge in high-growth tech startups and their international success. XLEAN.com addresses this gap by collecting and analyzing information on business practices which could be collectively considered as Northern lean strategy.
Birute Birgelyte | #BRG
Infopreneur, BrandComms Consultant and BX Creative
*This is an extract from my text Lean Strategy: Key Principles, posted on my personal website.