A Startup Cockpit for the Proof-of-Concept

Abstract

More and more innovative new ventures step away from the traditional business plan centred model and follow the “Lean Startup Idea”. This paper introduces a measurement tool – the Startup Cockpit – that helps startups on their way from an idea-based organization to a company with a profit-generating business model. It is based on the Customer Development model of Blank (Blank SG (2006) The four steps to epiphany. San Mateo. cafepress.com), the Lean Startup methodology of Ries (Ries (2011) The lean startup: how today’s entrepreneurs use continuous innovation to create radically successful businesses. Crown Business, New York), and Maurya (Maurya A (2012) Running lean – iterate from plan A to a plan that works. Second edn. O’Reilly Media, Sebastopol), the Lean Analytics concept of Croll and Yoskowitz (Croll A, Yoskowitz B (2013) Use data to build a better startup faster. O’Reilly Media, California), and Faltin’s ideas (Faltin G (2013) Brains versus capital: entrepreneurship for everyone – lean, smart, simple. Stiftung Entrepreneurship, Berlin, (2008) Kopf schlägt Kapital. Carl Hanser Verlag, München). All of those authors introduced a number of crucial processes and meta-principles that promote successful business model development for startups.

In an innovation-driven market a business plan is not always the instrument of choice in the early days of a business. Many Internet startups have established a key performance indicators (KPI) oriented process and successfully refined their business model or, as Faltin calls it, the entrepreneurial design (cp. Faltin G (2008) Kopf schlägt Kapital. Carl Hanser Verlag, München). This paper analyses the foundations of the Lean Startup process: the discovery-driven planning and the hypotheses-driven planning approach and the application of those principles in Ries’ Lean Startup methodology and Blank’s Customer Development model. A business plan still is a necessary tool. But it comes later in the startup process, after the proof-of-concept.

In our research we found patterns in the usage of numbers/metrics/KPIs to support the business model design process – a Startup Cockpit seems to be within reach. But it is often said that “every entrepreneur is unique”. That makes it difficult to define a “one-size-fits-all”-set of KPIs that helps startups from different industries and in different development stages. Nevertheless, a generic Startup Cockpit can be outlined. But according to our findings it has to be adjusted to each startup’s situation. The main determinants are the development stage, the business model, the strategy, and the financing structure.

We prefer the term “cockpit” over “dashboard” as the later has become directly linked to online business models whereas our approach is to find a generic approach to manage the process from an idea to the proof-of-concept. In the same way every airplane pilot and every car driver only tracks a selected set of information such as speed, engine temperature, and gasoline, an entrepreneur has to think about and find those elements of information that best reflect the core of his or her business model to achieve a better understanding of the process to the proof-of-concept.

Sven Ripsas, with support from Birte Scharper and Steffen Tröger