The central paradigm of strategic management is that decision-makers adopt deliberate strategies: they predict future contingencies and allocate resources according to plans. However, the complexity of the 21st century – faster rates of innovation, higher competitive pressures, and greater heterogeneity of consumer preferences – has prompted new approaches, like real option strategies, design thinking and discovery-driven planning. These approaches emphasize that firms should stagger investments, experiment, and adapt flexibly to environmental changes. Decision-makers are increasingly adopting similar approaches, with a wide range of experimental techniques currently employed spanning from trial and error to scientific experimentation.
Despite this growing awareness, there is limited scientific understanding of best experimental approach.
Our randomized controlled trial tests if, to what extent and under which conditions the adoption of scientific experimentation improves firm performance.
We have already conducted a pilot study at Bocconi University involving 116 Italian founders of new startups. We randomly divided the participants in treated and control groups and engaged them in a 3-month training program on managerial practices based on business experimentation (e.g. business model canvas, customer interviews, prototyping, concierge method), with the treated group focusing in particular on how to use hypotheses-based (scientific) experiments to assess the viability of their business idea and evaluate the effect of their strategies. We found that startups adopting the scientific approach receive more than double the amount of expressions of interest from customers than the control group. In order to develop actionable knowledge and derive business policy recommendations we will conduct another randomized control trial to identify the mechanisms that explain why scientific experimentation affects firm performance.
What we are going to do?
We will train both control and treated startups. 8 entrepreneurship training sessions will be offered by seasoned entrepreneurship instructors. The program will be highly interactive. will focus on common entrepreneurial practices associated with business experimentation (e.g. writing a business model canvas – BMC – instead of a business plan; running customer interviews before anything else; building products iteratively; using a concierge method to test customers’ interaction with the product before building the final product) while providing treated startups with a special focus on scientific experimentation. With this design, we intend to test whether scientific experimentation improves performance with respect to other widespread experimentation strategies (blend of trial-and-error, intuitions, forecasts), and to what extent.
This project will contribute to enhance our understanding of how entrepreneurs make decisions and of the impact of scientific experimentation on firm performance. Preliminary results are expected in late 2018.