Lean Startup: Why companies should embrace a Lean methodology

Maria Alejandra Roldán Correa

Politecnico Di Torino
Master in Engineering and Management
Torino
2019

1
Lean Startup: Why companies should embrace a Lean methodology

Presented by:
Maria Alejandra Roldán Correa

Presented to:
Guido Perboli

Politecnico Di Torino
Master in Engineering and Management
Torino
2019
 TABLE OF CONTENTS

1. INTRODUCTION ........................................................................................................8
2. OBJECTIVES ...........................................................................................................10
2.1. GENERAL ............................................................................................................10
2.2. SPECIFIC .............................................................................................................10
3. ARGUMENT .............................................................................................................11
4. THEORETICAL FRAMEWORK ...............................................................................13
4.1. STARTUP .............................................................................................................13
4.2. BUSINESS MODEL ................................................................................................17
4.2.1. Business Model canvas ..............................................................................17
4.2.2. Lean Model canvas .....................................................................................18
4.2.3. Dropbox Model ...........................................................................................19
4.3. BUSINESS INNOVATION ........................................................................................20
4.4. LEAN STARTUP METHODOLOGY ...........................................................................22
4.4.1. HYPOTHESIS VALIDATION ..................................................................................31
4.4.2. MINIMUM VARIABLE PRODUCT (MVP) ................................................................32
4.4.3. MEASURE: LEAN ANALYTICS .............................................................................33
4.4.3.1. ONE METRIC THAT MATTERS (OMTM) ...........................................................36
4.4.4. PIVOT OF PERSEVERE .......................................................................................38
4.4.5. GROWTH ..........................................................................................................39
4.4.5.1. RIES ENGINES OF GROWTH ............................................................................40
5. INVESTIGATION METHODOLOGY ........................................................................42
5.1. INVESTIGATION QUESTION ....................................................................................43
6. ANALYSIS OF LEAN STARTUP METHODOLOGY – PROS AND CONS .............44
6.1. CONSIDERATIONS ABOUT THE IMPLEMENTATION OF THE LEAN STARTUP
METHODOLOGY .............................................................................................................49

7. LEAN STARTUP IN DIFFERENT ECONOMIC SECTORS: INDUSTRY,

TECHNOLOGY AND FINANCIAL SERVICES ...............................................................52
7.1. INFORMATION TECHNOLOGY INDUSTRY ................................................................53
7.1.1. DROPBOX .........................................................................................................54
7.2. FINANCIAL INDUSTRY ...........................................................................................55
7.2.1. WEALTHFRONT .................................................................................................55
7.2.2. INTUIT ..............................................................................................................56
7.3. INDUSTRY AND COMMERCE SECTOR .....................................................................57
7.3.1. TOYOTA ...........................................................................................................60
7.3.2. GENERAL ELECTRIC (GE) .................................................................................60
7.3.3. PROCTER & GAMBLE (P&G) .............................................................................62
7.3.4. ZAPPOS ...........................................................................................................62
8. DESCRIPTION OF THE CORPORATIVE ENVIRONMENT IN LATIN AMERICA
SPECIFICALLY IN REGARDS OF THE IMPLEMENTATION OF INNOVATION. .........64
9. PROPOSAL FOR THE IMPLEMENTATION OF THE LEAN STARTUP
METHODOLOGY IN LATIN AMERICAN BUSINESSES. ..............................................71
9.1. LEAN STARTUP METHODOLOGY IN LATIN AMERICAN ORGANIZATIONS. ...................73
9.2. HOW TO DESIGN A LEAN STARTUP PROJECT WITHIN AN ORGANIZATION? ................74
9.3. HOW TO IMPLEMENT A LEAN STARTUP PROJECT IN THE ORGANIZATIONS? ..............75
 9.3.1. INTERNAL COMMUNICATION ...............................................................................76
9.3.2. LAUNCH OF THE PROGRAM ................................................................................76
9.3.3. REINFORCEMENT TASKS ...................................................................................77
9.3.4. METHODOLOGY APPROPRIATION .......................................................................77
10. PILOT IMPLEMENTATION OF THE LEAN STARTUP METHODOLOGY
PROPOSAL IN A LATIN AMERICAN BUSINESSES. ...................................................79
10.1. FIRST STEP OF IMPLEMENTATION .......................................................................80
10.2. SECOND STEP OF IMPLEMENTATION ...................................................................82
10.3. THIRD STEP OF IMPLEMENTATION .......................................................................83
10.3.1. DETAILS OF E.S LA TORRE PROGRAM .............................................................84
10.4. FOURTH STEP OF IMPLEMENTATION ....................................................................85
10.5. FIFTH STEP OF IMPLEMENTATION ........................................................................89
10.6. RESULTS ...........................................................................................................90
11. CONCLUSIONS .......................................................................................................91
12. REFERENCES .........................................................................................................97
13. ANNEX ...................................................................................................................104
 FIGURES

Figure 1: Four stages of the Startup lifecycle .....................................................14

Figure 2: Business Model Canvas ......................................................................18
Figure 3: Lean Canvas .......................................................................................19
Figure 4: Dropbox model ....................................................................................20
Figure 5: Sawhney´s Innovation Model ..............................................................21
Figure 6: Galbraith´s Innovation Model ...............................................................22
Figure 7: Lean Manufacturing Tools ...................................................................24
Figure 8: Lean Principles ....................................................................................25
Figure 9: Costumer development .......................................................................26
Figure 10: Lean Startup cycle .............................................................................27
Figure 11: Lean Startup Model ...........................................................................29
Figure 12: Business Proposition Sequence ........................................................30
Figure 13: Lean Analytics: Pirate Metrics (AARRR) ...........................................34
Figure 14: Lean Metrics ......................................................................................36
Figure 15: One Metric That Matters ....................................................................37
Figure 16: Ellis´ Growth Pyramid ........................................................................40
Figure 17: limitations to innovation .....................................................................51
Figure 18: Companies´ investment in innovation ................................................65
Figure 19: Distribution of Companies´ expenditures in different countries. ........67
Figure 20: Distribution of types of innovation inside companies per country. .....68
Figure 21: Collaboration in companies from different countries to manage
innovation. ....................................................................................................69
Figure 22: lean startup program implementation in organizations. .....................76
Figure 23: Structure of lean startup program in E.S La Torre .............................84
 TABLES
Table 1: Startup Components ............................................................................16
Table 2:Differences between types of Startups (internal and external) ..............17
Table 3: comparison of traditional firms vs. lean Startups in innovation. ............45
 1. Introduction

Currently entrepreneurs face the most radical changes in the economic scenario.
The rise of the Internet and the proliferation of media mutation have subjected
organizations to situations and internal needs that may not have generated any
relevance or relevant transcendence in the 20th century. The current scenario is
supported by the development of disruptive business models that have shaped
new forms of consumption, which highlights electronic commerce and digital
transactions. The organizations established for decades, with great brands and a
privileged position in the market, have migrated nimbly to channels that could be
called digital.

These conditions highlight the need to rethink the way in which value is created
and offered, today's entrepreneurs must complement their ideas with the new
rules of the business, beginning with understanding the client as a thinking,
connected individual with limited time availability. The current market demands
new methods and strategies to develop and implement new businesses, these
must be coherent with digital resources, binding with the experience that
represents a product or service in the buyer, because the motivations go beyond
the basic function of the product or service.

Against this background, the Lean startup method is shown as a coherent

resource with the dynamics of the current economic scenario and also this
academic research. It is focused on offering new innovation tools for new
businesses and established organizations. When we talk about Lean
Manufacturing, we usually refer to the Toyota production model, and if we talk
about startup, we generally refer to all those technology companies that were
born in the United States (Apple, Microsoft, Google, etc.), consequently that term
or concept is directly linked to the new entrepreneurs of the 21st century.
Nowadays, a new concept called Lean Startup has emerged as a method of
innovation that brings the best practices of customer management, lean
manufacturing and optimal development of products / services so that new and
existing companies can be more agile and competitive in the market.

There is a underdevelopment or lag in terms of appropriation of new innovative

methods in Latin America due to the lack if resources allocated in Research &
Development, deficit in a managerial mindset, entrenched focus in productive
industries of extraction and processing of raw materials, between other causes
that would be described in further chapters.
Innovating is going beyond of what is traditional, considering always the
customer´s needs; the previous statement is the core argument of the Lean
startup methodology. Ries (2011) has been a pioneer in this term that nowadays
has become an attractive alternative of innovation that has been adopted by big
companies such as General Electric, Procter & Gamble and Dropbox.

The current thesis aims to provide bases to Latin American firms that allow them
to venture and dive deep in this new trend of innovation. To achieve the previous
it was compulsory to diagnose the enterprise context in Latin America and to
review examples of savings and success achieved by big corporations in several
industries and market places. The necessity of extracting common actions,
paths, methodologies or strategies that could be applied in the Latin American
firm context regardless of the trajectory (time since foundation) or size of a firm
lead to, not only diagnose and compare the Latin firm status against other firms
on more developed countries, but also drive to how to apply the Lean Startup
Methodology in order to obtain better productivity and profitability of the
businesses.

 2. Objectives
2.1. General

• Provide an implementation proposal of the Lean Startup methodology in

organizations for the management, attraction and conservation of clients
in Latin America.

2.2. Specific

• Identify the relevant elements of the Lean Startup methodology.

• Present cases and results of the Lean Startup Methodology in

organizations.

• Describe the current innovation processes in Latin American companies.

• Formulate recommendations for the application of Lean Startup

methodology in companies in Latin America.
 3. Argument

In the past 30 years firms diverged form a model that offered only one standard
product (also called T Model, which has roots from the Taylorisim), having rigid
corporative structures, accounting only from brand positioning, and other hoary
hierarchical traditions. The boom of “dot com” companies, new social networks,
globalization, software development, artificial intelligence, robots, personalized
marketing, and other trends have impulse companies towards the necessity of
innovation in an agile, effective and profitable way.

In the past years automotive Japanese companies recognized that they had to
re-invent themselves in order to compete against competitors mostly for United
States (i.e. Ford, Chrysler and GM). The first approach to the Lean concepts
where first developed by Toyota in the seventies, these concepts where
conglomerated in what now is known as Lean Manufacturing. Lean
manufacturing aimed at optimizing production processes (Womack, 2003). The
Proposed methodology offered a system (both productive and logistically) more
efficient that intended to diminish any type of waste in the process. This
methodology allowed Toyota to be positioned as the greatest vehicle seller in the
world in the past years.

The basis of the Lean Startup method lies in creating the product that the
customer needs and for which he is willing to pay, using the minimum amount of
resources. The problem of many of the entrepreneurs who have failed is that
they create a business plan, get financing, develop the product and only after
creating it and launching it, the company gets feedback from customers. It is the
moment in which many entrepreneurs learn that customers did not need most of
the characteristics of the product or service.

In big companies, there’s no shortage of new ideas, but there can be little
incentive or opportunity to execute on them. That result is summarized in lots of
conversation, and very little change. Lean Startup provides a framework for
evaluating and mitigating the risk of new ideas. That means a focus on customer
validation and understanding the requirements of the MVP. Once those are
completed, it’s easy to grasp both the impact and the risk of a project.

The approach Lean Startup is a cycle of creating, measuring and learning; this
cycle´s finality is validated knowledge (Ries, 2010). The three main macro stages
of this methodology are: application of the model Lean canvas including the
corresponding nine steps, Customer Development and Agile Development.
Although the name of the methodology has focus in business incubators or
entrepreneurships, this methodology transcended and nowadays expanded the
range were it is applied, encompassing big companies that ameliorate the
development of products and/or services and found an opportunity to improve
their customer development based on the comprehension of the market´s
necessities (Blank, 2006). Complementing the mentioned methodology, Design
Thinking also adds value in enhancing the customer relations; the concept was
characteristic of the creation of Apple products.

The methodology has had such a great influence and reception globally, that
other firms, from different industries have adopted the term Lean to simplify,
innovate and enhance their productive systems or their service offer. From that
revolution in the management of enterprises, companies adopted the Lean
Startup methodology as an innovation mechanism to develop products and/or
services that are demanded by consumers (Ries, 2011)

This work intends to contribute theoretical bases on how to apply a Lean Startup
methodology to attract, conserve and efficiently manage customers for innovative
entrepreneurships or for re-inventing existing companies in the Latin American
market.
 4. Theoretical Framework
4.1. Startup

The term is currently used around the globe and has become a trend thanks to
the expansion of new technology-based companies. A startup is a small or
medium company of recent creation and usually related to technological products
or services. It is demonstrated that the more and greater experiences, good or
bad, in the development and evolution of a startup, more and greater would be
the apprenticeship and continuous learning, that in the end would translate in
better results in and from the processes. A startup is created from an innovative
business idea, based in a product or service, and with the knowledge and
collaboration of one or more partners (Ries, 2011).

For instance, an academic research “Eight Paths of Innovations in a Lean

Startup Manner: A Case Study” summarised the lifecycle of an innovation in the
following 4 steps. The four stages form a value chain: No idea creates value until
you embody it in a product or service; no product or service captures value until
you embody it in a business model and pricing strategy; and no business model
becomes sustainable until you figure out distribution. (Raatikainen et al., 2016):
 Figure 1: Four stages of the Startup lifecycle

Source: (Mohout, 2015)

• Idea stage: The innovation program should focus on gaining a detailed

understanding of the problem or need that it wants to tackle. At the end of
this stage, the startup should have a holistic understanding of the problem
domain, and a minimal viable product (MVP) or concept to initiate its
validation with real customers and users.
Ideas are handled as hypotheses that need to be validated using the MVP
to collect customer feedback. The primary goal in this stage is learning
(Raatikainen et al., 2016, page 2).

• Problem/solution fit: In this stage, the innovation program or process

should focus on further developing the concept as an optimal solution for
the first lead users and customers. The MVP offers a path of very rapid
iteration of customer requirements followed by testing and validation. This
stage was called ‘going from 0 to 1’ by Peter Thiel in 2014.
Experimenting with (innovative ways of) customer acquisition is the
second key activity of this stage (Raatikainen et al., 2016, page 2).
 • Product/market fit: Once the optimal solution for the lead users is ready
and the innovation program has been able to acquire new customers and
users, its focus should move to customer retention and further generation
of the business model.
In this stage, the innovation program should particularly focus on
retention, the business model, and a pricing strategy (Raatikainen et al.,
2016, page 3).

• Scaling: When the innovation program has found a scalable business

model, the focus should shift to actual scaling. In this stage, the innovation
program should focus on accelerating the business. The acceleration
typically requires large investments in marketing and business
development. This stage is called ‘going from 1 to n’ by Thiel (Raatikainen
et al., 2016, page 3).

The business plan is a key element to evaluate the concept of the business in a
methodical and effective way; through it an idea is progressed and structured into
a new business. This progressive path entails decreasing the risk that
entrepreneurs face when the start their new firm. Additionally, startups have an
objective, a goal that is to create a successful company that changes the world.
This goal is the vision of the startup. To achieve the vision, startups implement a
strategy, that must include a business model, a map of products, and a clear
approach regarding partners, competitors and ideas of how to segment the
market (define consumers) (Ries, 2012).

The innovative aspects is a fundamental part that develops a business model

from original ideas that have the aim to cover needs with a new offer that Is not
yet available in the market or that has been incorrectly developed. Technology is
an essential ally considering that we talk about innovative business models, with
a global and scalable ambition.
Nowadays, startups focus their business model in Blue oceans rather than in red
oceans in the market. A Blue ocean is a new uncontested market within the
same industry. For instance Cirque Du Solei re-invented the whole circus
concept aiming primarily at a different audience, giving more importance to
acrobatics rather than clowns, or removing animals from the show; but yet it is a
circus. In the other hand a Red ocean is a very contested market where the
rivalry is high and it is difficult to innovate or stand out.

Startups are characterized by being young and creative corporations,

multidisciplinary and with a strong innovative component, firms where the direct
contact with the customer is fundamental to cover their necessities. In Table 1
and 2 there are a more detailed description of the common components and the
difference of them depending on the type of startup. All their characteristics and
components make this type of businesses one that constantly learns from
mistakes, which allows them to have an ability of continuous growth.

Table 1: Startup Components

Source: Edison et al. (2015)

 Table 2:Differences between types of Startups (internal and external)

Source: Edison et al. (2015)

In other words, a main goal of a startup is to discover what to produce, based in
close knowledge of the customer´s buying intention (what they want and how
much they are willing to pay). Nevertheless, any business initiative has risks.
Risks can conclude in failure, and this state has always been demonized
because of the consequences that usually impact the entrepreneur. The raw truth
is that 75% of the startups founder (Xavier, 2012).

4.2. Business Model

Peter Drucker first described this concept in “The practice of management”

(1954). According to the author, a good business model is one in which it is very
clear who are the clients and what they value, and also delimit and explains how
to create that value at an appropriate cost (Gonzalez, 2017). The design process
of the business model is a part of the business strategy since it deepens in order
to contribute innovative value proposals. An appropriate business model is an
efficient contributor to the success of the company in development.

There are different methodologies that result in the design of a business model;
three of the most important are: Business Model Canvas, Lean Canvas Business
Model Canvas and Dropbox model.

4.2.1. Business Model canvas

This business model by Alexander Osterwalder is the most known globally; is

consists of nine (9) basic modules, where the main business variables are
contemplated. The nine modules are the main aspects of the four principal areas
of any business: clients, offer, infrastructure and economical feasibility.

Figure 2: Business Model Canvas

Source: Alexander Osterwalder´s model canvas (González, 2017)

4.2.2. Lean Model canvas

Ash Maurya created this canvas; it aims to develop an itinerary that helps
entrepreneurs, from the incubation of an idea until the creation of the startup or
business. The canvas purpose is to express what is more ambiguous or risky.
According to Maurya, Osterwalder´s canvas lacked fields where more risky
hypothesis where deployed and also fields like key partners or key activities
where dispensable for a business model of a startup; that is why he modified it
(Macías, 2015).
 Figure 3: Lean Canvas

Source: Alexander Osterwalder´s model canvas (González, 2017)

4.2.3. Dropbox Model

This methodology to represent businesses has been widely used by several

successful well-known companies around the world such as: Apple, Skype or
Dropbox. For the sake of achieving a better comprehension of this tool, the
Dropbox business model is represented in the following figure.
 Figure 4: Dropbox model

Source: https://www.cleverism.com/company/dropbox/

4.3. Business Innovation

Innovation is nowadays one of the most important pillars of corporative

management. In 1942, Schumpeter affirmed that a process of creativity
destruction or obstruction leads products to enter in a stage of decline (even
when it did not even went through the stage of maturity in its lifecycle). This
caused the disappearance of both products and even companies that where no
longer able to compete. At the same time, it brought alive new products or
companies that used for instance new methods or materials to enhance
customers need satisfaction (Schumpeter, 1942). Ever since that, the theory of
innovation management highlighted the importance of innovation (Tidd et al,
1997).
Enterprise innovation is creating substantial value to clients and the company
through the creative modification of one or more areas of the business system.
Mohambir Sawhney (2006) explained twelve paths to follow to develop
innovative projects in his innovation model; these twelve dimensions of the
projects would therefore contribute to the effective comparison of different
companies. Accordingly, in an environment controlled by big companies,
business competition and technological development, innovation is essential for
corporative success.

Figure 5: Sawhney´s Innovation Model

Source: Sawhey et al, 2011

Another approach to analyse the innovative approach of a company is Galbraith

model (1992) that provides a useful spectrum for innovations, ranging from
incremental up to radical.
 Figure 6: Galbraith´s Innovation Model

Radical Incremental

Disruptive New New Next Line Product Style

New Business Product Generation Extension Improvement
Technology Model

Source: Karlsson (2012)

Finally, is useful to think of innovations as sustainable or disruptive. Christensen

(1997) refers to the first as the answer of a company to the evolutionary changes
in its market, while the second is the revolutionary change in the market.
Also, Tushman and Anderson (1986) distinguish between innovation that
enhance competition and the innovation that destructs rivalry.

4.4. Lean Startup Methodology

Ries found in the production system of Toyota, called Lean Manufacturing one of
the fundamental bases, which applied to innovation, would later derive into the
Lean Startup methodology. The goal of Lean manufacturing is to boost and
optimize any productive system through reduction or elimination of all the
activities that do not generate any added value; understanding the term “value”
like everything that creates benefit for the client, hence everything that oppose to
the previous statement, and does not turn into value or benefits is a squandering
(Llamas and Fernandez, 2018).

The lean Startup methodology is based in the methodology of costumer

development this was described by Steve Blank in his book “The four steps to
epiphany: successful strategies for products that win (2005)”, and Eric Ries in
“The Lean Startup Methodology (2011)”. Blank pointed the difficulties that
resulted of a limited emphasis in the development of a product; he also argued
that emerging companies should majorly focus in mastering “costumer
development”, that is learning about clients and their problems as soon as it is
possible in the development process.

“My belief is that these Lean startups will achieve dramatically lower
development costs, faster time to market, and higher quality products in the
years to come. Whether they also lead to dramatically higher returns for investors
is a question I'm looking forward to getting answered.” – From the very first
blogpost on Lean Startups (September 8th, 2008).

Lean Startup methodology is a set of practices that aim at helping entrepreneurs

to increment their possibilities of creating a successful startup. It is an agile
method, client oriented and focused in reducing risks since it is based in scientific
investigation to prove strategies that companies want to carry on with, allowing
them to know if they are good or bad before investing a lot of time and capital in
developing a product or service that no body wants (Ries, 2011).

Ries (2011) developed this methodology based in three main pillars:

• Lean manufacturing philosophy: (adapted to their own ideas). Startups
work in extreme uncertainty where a priori they don’t indeed know who
would be their customers, what they really need, and consequently what
generates value for them. The aim is reducing that uncertainty.

As shown in figure 7 and 8, the first principle is a specific value created by

the producer from the client’s point of view, and can be achieved through
a group of tools proper of this methodology. Moreover, the continuous
improvement would disembogue in the achievement of the perfection that
is sought.
 Figure 7: Lean Manufacturing Tools

Lean Manufacturing Tools

5S Kanban

Single Minute
Kaizen Exchange of Dies
(SMED)
Eliminate waste and
achieve Continuous
Just In Time (JIT) Improvement Poka Yoke

Total Productive Overall Equipment

Maintenance (TPM) Effectiveness (OEE)

Value Stream
Jidoka
Mapping (VSM)

Source: Vinodh, S. & Ruben R. (2015)
 Figure 8: Lean Principles

1. Identify Value

2. Map the Value

5. Seek Perfection Stream

4. Establish Pull 3. Create Flow

Source: Lean thinking – 5 Lean Principles (Eaton, 2013)

The previous steps allow flow and suppress what does not generate any
value. The third principle is flow and it is a group of steps that creates
value for clients. This phase is followed by the pull stage; this stage is
implemented after the flow stage and it allows clients to gain value from
the product of the firm. The fifth principle is perfection; that entails that the
process do not have an end, after it the cycle would restart and continue
until a condition where the total value is produced without waste.

Having constant contact and dialogs with clients conveys to specific ways
of finding value with greater precision, and in some occasions it also leads
to learning new ways of improving the flow and the attraction. (Womack et
al. 2003, 16-25)
 • Customer Development1: methodology that implies getting to know the
client, thus studying deeply the market to identify what it really want and
need, and consequently be able to design a product or service that meets
their expectations.

Figure 9: Costumer development

Search Execution

Client Client Client Client

Discovery Validation Creation Creation

STOP STOP STOP

PIVOT

Source: Gustafsson, A. (2012) based on blank´s model (2013)

• Methodology of agile software development: Programming technic that

consists in dividing a project into small tasks that can be executed in short
term time cycles. This allows results to be delivered on time to prove if
expectations are met and to promptly implement possible corrections in
the next cycle of the project.

Considering the three previous mentioned dimensions, Lean Startup

methodology is centred in a circuit of three steps that must be accomplished in
the minimum possible time and with the minimum investment (“work smarter not
harder” – Allen F. Morgenstern, 1930). Begin with creating a product, measure
results and learn from them (figure 10).

1
Methodology developed by Steve Garry Blank in his book “The four steps of epiphany”, 2007
 Figure 10: Lean Startup cycle

Ideas

Learn Build

Data Product

Measure

Source: Ries (2012)

• Building: when a startup is launched, there is not enough data to create a

product that perfectly fits into the clients’ necessities, therefore, it is ideal
to create a Minimum viable Product (MVP). An MVP is a product with just
enough features and functionalities to satisfy early costumers but leaves
open a window for feedback and future product enhancements through
validated learning through clients.

• Measuring: the biggest challenge in this stage is to measure how clients

respond to the product, collect that data and take the appropriate
decisions.
 • Learning: the cycle of Lean Startup allows entrepreneurs or firms to learn
if a business is viable/feasible, and based on it persist or otherwise pivot in
order to readjust substantially the ideas that are not working.

The Lean Startup methodology´s proposal is providing innovative ideas through

the previous agile and dynamic cycle where the entrepreneur or the business
man, once established their hypothesis and suppositions, starts validating them
through experimentation (that is the MVP).
A startup or a company creates products, measures results and learn from them.
In other words, is an iterative process of transforming ideas into products,
measuring the reactions and behaviours of clients towards the product and
learning either from persisting or from pivoting. This process is repeated
continuously (Ries, 2011).

The main objective of using this methodology is obtaining validated knowledge;

that is to say, knowing what elements from the strategy work and discovering
what is that the consumer wants. This acquirement grants the possibility of
measuring the progress of the startup and discovering if the business model is
plausible, profitable and scalable; fundamental characteristics and pillars that
must be achieved by a startup in order to become a corporation (Ries, 2011).

Finally in figure 11 and 12 deploy the process of Lean Startup with their
corresponding sub-activities; it starts with the creation of a hypothesis and
finishes with the validation of the model and the pivoting. This last step is a
consequence of learning from the behalf of the entrepreneur or businessman
where he recognizes that he must re-shift his business; that re-shift has the
propose of avoiding being trapped in a process that consumes resources in a
poorly or not optimal way, generating a risk for the company of either not growing
or entering in a decline stage (Dying).
 Figure 11: Lean Startup Model

Phase1: Create Phase 2: Create Phase 3: Validate

and validate the and validate the the business model
problem hypothesis solution and scale it.

Develop the
Creation of initial minimum feature
hypothesis
set hypothesis

Contact and
schedule Develop virtual
prototype/MVP
interviews

Validating Test and modify

hypothesis the solution

Exploration of
market Go to market
strategy
attractiveness

Source: Gustafsson, A. (2012)
As evidenced in figure 11 Gustafsson´s proposal focused on an initial validation
of a hypothesis and ended with the escalation of it in the market. This 3-phased
process is strongly complemented by Ries (2011) and Blank (2006); Ries stated
that the initial hypothesis is a result of the entrepreneur’s vision and how it is
better tan current solutions to a customer´s problem. Complementing Ries
statement, Blank previously affirmed that the initial hypothesis, thus the
hypothesis to which Ries refers, could only be re-stated/changed based on
empirical evidence.

In other words, the sequence to achieve the phases proposed by Gustafsson is

better explained by the process proposed by Llamas and Fernandez in 2018,
deployed in figure 12.

Figure 12: Business Proposition Sequence

Idea

Hypothesis

MVP

Pivot Measure

Pivot or
Hypothesis iterate
not proved

Hypothesis proved

Iterate

Source: Llamas and Fernández (2018)

The cycle create-measure-learn is the core of the lean start up methodology
(Ries, 2013). A startup has to create products, measure results and learn from
their analysis. In other words, is an iterative process in which ideas are
transformed into products; reactions and behaviours of clients against products is
measured; and there is always improvement in knowledge/learning whether there
is perseverance or there is always pivoting. This process is continually, non-stop
repeated.
The sequence is initiated with the first crucial element in the approach of the
business: the hypothesis, this are the assumptions over which the entrepreneur
relies the viability of his idea. In order to prove the hypothesis, the entrepreneur
would rely in the MVP with which he will experiment, and most importantly he will
learn from his objective clients; therefore, it is important to measure reactions
and analyse them in order to take opportune decisions that imply corrections
over the initial hypothesis. Those corrections might require changes not only in
the products, but also in the restructuration of the business model (also called
pivoting). However, collected data not always result in substantial changes, data
might also carry or suggest to persist in the current product and/or business
model, situation in which the continuous iteration would focus in creating
incremental versions of the product that can be validated from the clients
experience.

4.4.1. Hypothesis validation

Behind every idea and its consolidation, there is always and intuition, a thought
that it would be successful, otherwise it would not be worth it to invest time,
money and effort in it. Notwithstanding, not all the ideas are successful, instead
only few ideas flourish and succeed. The toughest part about starting and holding
on to any project, especially when it is something innovative, is the uncertainty
that it embroil. Projects are based over several suppositions, expectations and
not proven facts, that in Lean Startup methodology are called hypothesis and it is
extremely important to prove them prior to the launch of the business, with this
waste of time and resources can be avoided (Ries, 2013).

Javier Megias (2013), well known entrepreneur, defines a hypothesis applied to

business in a very illustrative way in his blog: “hypothesis are those facts that we
consider as true in our business model but that we cannot be 100% certain of”.
Blank and Dorf in 2013 stated that “hypothesis is just a fancy word for -guess-“.
The same authors suggest that when starting an entrepreneurial route it is
important and indispensable to begin from a business model that helps to
establish the hypothesis and prove the suppositions; for this the authors suggest
the lean canvas of Osterwalder (figure 2) as starting point.

4.4.2. Minimum variable Product (MVP)

One of the best ways of validating the hypothesis is through the construction of
and MVP; this is a version of the product that allows or warrants the cyclic
process of create-measure-learn, with a minimum effort and in a minimum time.
The MVP is one of the most important techniques of Lean Startup; Ries defines it
as “A version of a product which allows a team to collect the maximum amount of
validated learning about customers with the least effort” (2009, p.91).

Blank and Dorf in 2013 defined MVP as “a concise summary of the smallest
possible group of features that will work as stand-alone product while still solving
at least the core problem and demonstrate the product´s value”. MVP helps
entrepreneurs to start with the process of learning as fast as possible and its
main purpose and aim is to prove the fundamental hypothesis of the evaluated
business.

The first product of a startup is not directed to satisfy public in general. Startups
cannot afford to create a product that contains all the characteristics from the
beginning hence, the first efforts are focussed in a small group of people, also
called early adopters. These are the clients that want to be the first and are
willing to adopt a product or service in its initial phase. These are visionary clients
with high interest and trust in the product (Rogers, 2003).

To build a minimum variable product there is not an exact formula. What is

important is that the product permits the entrepreneur to know it´s viability; in
other words, MVP allows him to determine if the product has a future or not. The
importance is highlighted by Cooper and Vlaskovits in their book the lean
entrepreneur: how visions create products, innovate with new ventures, and
disrupt markets; in page 183 in the section of MVP viability experiments the
authors state that the design of an MVP is fundamental to know its viability prior
to the products construction and of course mass production.

4.4.3. Measure: Lean Analytics

In order to achieve a correct and accurate counting of innovation, learning and to

take unsurpassed and more rigorous decisions it is compulsory to be able to
measure the process. For the previously mentioned purpose there are several
frameworks developed in order to analyse the performance of the business;
however one of the most known (the pirate metrics) attempt to the measure the
amount and ability of the business to convert clients; the engines of growth.

As previously mentioned the clearest route is to follow the path of the conversion
funnel defined by the pirate metrics. These metrics where adopted by Dave
McClure (2010), member of the entrepreneurs of 500 startups, one of the main
hubs of startups know for busting the growth and launching of several important
firms in the United States of America. This methodology is defined as a “pirate
methodology” since the initials of the five blocks of the funnel are A.A.R.R.R.
(Acquisition, Activation, Retention, Revenue, Referral) (Figure 13), read as the
assumed yell of this characters.
 Figure 13: Lean Analytics: Pirate Metrics (AARRR)

• How do users become

aware of you?
Acquisition • widgets, e-mail, PR, Blogs

• Do drive-by visitors subscribe, use

or buy?
Activation • Features, design, Compensation

• Does a one time user become engaged?

• Notifications, Alerts, Updates
Retention
• Do you make money from user activity?
• Transactions, clicks, subscriptions
Revenue
• Do users promote your product?
• E-mail, widgets, likes
Referal

Source: McClure (2019)

In a practical and simple way, the funnel adopted by McClure in 2010 will follow
the following sequence:

1. Acquisition: Answers the question of: how does the client or user get to
know the offer of the business? To answer this interrogation, it is therefore
important to determine the acquisition channels and the related costs in
case that either a SEM (search engine marketing) campaign, a mailing or
other type of offline activities (example: publicity in a fair) were developed.
It is essentially the way and instruments used to create attention.

2. Activation: According to Megias (2013), it is all about transforming a

potential interested into a potential client. This stage measures the
percentage of potential interested that have evidenced somehow that they
 can be transformed into potential clients. For instance, people that have
fulfilled a form, subscribe to a platform or register in an app. This stage
evidences the capacity of awakening interest in order to encourage people
to re-contact. The stage is also related with the experience that he or she
had. In order to numerically measure it, divide the activated users (i.e.
those who downloaded the app) by the total number of acquired users.

3. Retention: (Engagement), In a very colloquial way, is how much the client

is hooked or trapped by the product or service. Answers to: is the client
coming back? Thus, it is essential to understand what is behind the
client’s fidelity or his/ her abandonment. Some relevant metrics are
engagement, time since last visit, daily or monthly active use, etc.

4. Revenue: is the business outcome. This indicator facilitates or permits to

know to what percentage of the clients we have been able to sell or to
receive a monetary retribution versus the total amount of clients to which
we have been able to awake interest. It is a very important metric since it
allows the entrepreneur to know and quantify if he is able to monetize, and
therefore make profitable his business model. To calculate the percentage
of conversion, the number of transformed clients (those who already
invested, paid or in general bought our product) must be divided by the
total amount of acquired clients (conversion rate).

5. Referral / Reference: This metric indicates the number of clients that come
for recommendation or virality. Usually, the client referred does not have a
cost and that has a significant influence in the decrease in the acquisition
costs of clients. This metric can be tracked counting the number of
invitations sent, or viral coefficients.
Moreover, there are other metrics equally important that serve also to asses the
situation of the business and its relation with clients. Other five categories to
measure the startup are empathy, stickiness, virality, revenue and scale; together
are better described in figure 14.

Figure 14: Lean Metrics

Source: Berkeley (2014)

4.4.3.1. One Metric That Matters (OMTM)

Also in concern to the measurement of the innovation and its performance some
authors such as Ben Yozkovitz state that every innovation company or incubator
should have a OMTM; this entails that from the beginning of the company all the
way to the moment when it dies or is sold the firm should always take good care
of this measurement. However, it does not mean that the firm should only take
care of this metric but that this is the metric that the firm should care of the most.
The establishment of that OMTM is not generic, not even for companies within
the same industry; in fact this metric relies in three main dimensions shown in
figure 15.
Figure 15: One Metric That Matters

Type of
Stage of company
the
company

Audience
of the
company

OMTM

Source: Author elaboration

From the previous figure it is evident that in order to establish OMTM companies
must always take care and be sure of:

1. What type of company they are? For instance transaction, collaborative or

media. In most cases the companies do not only belong to one type a
good example of this is Amazon, which can be considered transactional,
retailing, or media.

2. What stage they are at? To determine the stage it is also useful to be sure
if 1st people is aware of the initial product/service hypothesis; 2nd The
 hypothesis synchronized with the potential client´s need; 3rd the product /
service production is efficient; 4th the business model is right / optimal.

3. Who is the audience?

The main beneficial consequence if that OMTM is that applying a lot of effort on it
and paying it a lot of attention makes that first objective of improving that one
outcome almost granted; and it will also evidence the next aspect to care the
most about and where to re-establish or re orient the next OMTM.

4.4.4. Pivot of persevere

All the elements that have been developed up to this moment are imperative
elements for the lean startup methodology these are: establish a hypothesis,
create an MVP, measure it and learn from it. These elements have a purpose as
they respond to the following question: Enough improvements have been
achieved that lead to believe that the hypothesis is correct or is it necessary to
develop some relevant change? This change, according to Rice is called
“PIVOT”, defined by the author as an structured correction designed to prove a
new basic hypothesis about the product, the strategy and the growth engine
(2012). Rice continues saying that a pivot requires that a foot remain hooked in
everything that has been learned to the moment, while a fundamental change in
the strategy is done in order to search and achieve a major validated learning.

Thus, pivoting is done as a consequence of a learning in which the entrepreneur

acknowledges that he has to aim to a new twist to his business if he does not
want sink or be trapped, consuming resources, while the business is in risk of not
growing or what is worse in risk of dying before maturing. To continue with this
analysis Rosa Alnasser (2015) wisely stated an important and mandatory
interrogation: when to pivot? Alnasser manages Lean Monitor, a simulation tool
to train entrepreneurs in the design of their startup, based in her analysis and the
data collected she also stated that the ideal moment to pivot is when the
entrepreneur realizes that his statement is not valid. Alnasser says that the key is
acquiring empirical evidence necessary to determine the need or not to pivot at
the earliest in order to avoid or diminish the possibility of losing time and or
money. Consequently, it is highly important to identify the hypothesis and
experiment with it with the objective or aiming at validating or invalidating them.

As a consequence of the phase of pivoting or persevering, we could assert that

the pivot answers to the necessity of being productive and it implies re-assessing
and re-evaluating what we have been doing in the business in order to find a
more positive perspective or future. It is Imperative to learn in time without
abandoning the business; as said before always with one foot hooked, learn to
re-orient the business.

When data obtained suggest persisting, the entrepreneur must continue with the
creation of incremental versions of the product or service.

The main objective of this methodology is obtaining validated knowledge,

knowing which elements of the strategy work and determining what does the
consumer wants and needs. This learning will avow the progress of the startup
and the accurate determination of the viability, profitability and scalability of the
business.

4.4.5. Growth

Once the path in which the entrepreneur must persist is determined in the
previous phase; it is important to determine in which way to grow before misusing
budget since sometimes it seems to be impossible in a highly competitive
market. In this aspects two frameworks were developed, Sean Ellis Growth
Pyramid and Ries engines of growth.

The growth pyramid represented in figure 15 mainly aims in the further macro
steps once the entrepreneur has finished pivoting. In the second level of the
pyramid (stack the odds) Ellis suggest the entrepreneur to find the advantage
and to exploit it in order to reach the third level (scale the growth) where the
business must focus on expansion, either in new products, markets or channels.

Figure 16: Ellis´ Growth Pyramid

Scale
Growth

Stack the
Odds

Product/Market
Fit

Source: Ellis (2009)

4.4.5.1. Ries engines of growth

Moreover and complementing the previous statements of growth for the startup
Ries proposed three engines. Entrepreneurs must focus on one of them in order
to achieve a sustained growth. The three engines are:

• The Sticky engine: this engine aims in capturing clients for the long term;
under this condition it is primordial to maintain customers coming back in a
time loop (for instance every month). Under this circumstances; once you
have a stable clientele the entrepreneur only need to attract few
customers in order to keep his business developing. Having stated the
previous it becomes obvious that the main KPI of the engine is customer
retention (main focus on current customers), and this retention can grow if
clients create value for themselves as they use the product or service.
 • The Virality Engine: this engine is related to the number of users that a
current user is, will or can potentially attract. This engine relies on
customer experience; good experience will increase virality, which means
that the client will do the advertising.

• The paid engine: maybe the most common engine, where advertising is a
transaction and customers get to know the product by publicity. However,
it is risky since a previous analysis must be done in order to be sure the
cost of advertisement per person is not higher than what they are paying
for and that in the end from his payment there will still be a profit.

The three previously described engines can be applied to startups and

incumbent businesses how ever the author (Ries) recommends that for startups
only one of the engines is used at a time and that as growth in a further and more
developed stage of the business more than one engine can be used.
 5. Investigation Methodology

According to Bryman and Bell (2007), there are two main approaches for the
investigation; these are, quantitative and qualitative. When determining which
methodology was more suited for the present thesis both methodologies where
considered. The main deflecting argument for choosing a qualitative
methodology was that a quantitative study is normally chosen with the aim of
validating with statistical means a hypothesis that was stated by the researchers.
Nonetheless, a quantitative study has the difficulty of identifying and structuring
the dependent variables so as to them to explain the independent variable, to
justify the benefits of this methodology and moreover to validate the central
purpose of this investigation. For the scope of this project and based on the
previously mention it was considered more appropriate to implement a qualitative
study.

A qualitative study is more adequate for an exploratory research that aims to

identify or develop proposals for the implementation of a Lean startup
methodology from an extensive literary review. The exploratory type of research
is carried out in order to know the topic that will be addressed, which allows us to
familiarize ourselves with something that until this point (now) we did not know
about. Additionally, the current document includes the study and breakdown of
different cases of successful application of the lean startup approach in different
economic sectors from an international perspective.

The results of these type of research methodology provide a panorama, scope or

knowledge of the main subject of the investigation, that can be used as platform
or first base for any type of subsequent research that may be carried out, or in
this particular case can be used as the base for the development of a project of
this or other nature. In other words the results of this type of research can be the
initial information for a more rigorous investigation (a hypothesis is left raised and
formulated and can be retaken for further investigations, or not), or the layout for
a more tangible project.

In Latin America there is a scarceness of academic works that deepen in the

application of the Lean Startup Methodology in Latin-American companies,
nevertheless it has not been ignored as a method actually used by new
businesses. For instance Rappi, a recent case and one of the most successful
and known in several countries. The absence of academic contributions in this
new innovation methodology impulse a research that lead to interesting cases of
this ilk in European and North American cases. The cases permit a better
comprehension of how to create a business and the necessity of higher and
stricter rivalry and productivity in more competed markets when compared to
Latin America.

The data obtained from the IDB, academic magazines or publications are a trust
worthy source and also pertinent to be able to analyse and propose how to
impulse a major usage of the methodology in Latin America.

Through a qualitative focus and reviewing the extensive bibliography about the
Lean Startup methodology, the interrogation for this project is:

5.1. Investigation question

Nowadays, how can entrepreneurs and firm leaders use continuous innovation
(Lean Startup method) to improve the profitability of their business and the
experience of their clients in Latin America?
 6. Analysis of Lean Startup methodology – Pros and Cons

Innovation is nowadays in the highest point of the corporative management

agenda. Already in 1942, Schumpeter described how a process of creativity
destruction ended with products or complete firms that were not able to compete.
Today, small entrepreneurial businesses are the ones that challenge and
overcome big incubators through innovation; consequently it becomes almost
natural to look at them as inspiration. Curiously, the last decade has evidenced
theoretical developments about how new firms can follow certain patterns or
guidelines to avoid unexpected failures and/or costs.

It is not easy for companies to alter their innovation focus. Edward Kahn in his
book innovate or perish (2007) stated that barriers for innovation in companies
raise from management, processes, and the culture within the same. The author
wrote that the lack of support from team leaders, bureaucracy and excessive
rationalization hinder innovation in a typical firm. Moreover, Kahn assures that in
firms another important obstacle for innovation is the fear to failure, the
intolerance to out of the box thinkers and the lack or absence of appropriate
rewards or acknowledgements for new and different proposals.

In recent literature, the concept of costumer development and the methods of the
Lean Startup methodology have been an important influence to businessmen
worldwide. In the case of this thesis that is being developed, the starting point is
the Lean Startup methodology developed by Ries (2011), the author arguments
that startups can learn a set of lessons to avoid wastes for investors and their
own time and money. The main message of this methodology is validating
knowledge from clients, working in an iterative way and being prepared and open
to change the direction or scope of the business whenever it is necessary.
The main differences in the way of innovating between traditional businesses and
lean startups are better summarized in table 3 where there are also divided by
the organizational area. This table also represent a big compilation of what the
main author of this investigation (Ries) stated in 20110.

Table 3: comparison of traditional firms vs. lean Startups in innovation.

ORGANIZATIONAL AREA TRADITIONAL BUSINESS LEAN STARTUP

Goal/ Business Plan Execution Discovery
Model Business model Canvas Lean Canvas
Testing Focus Internal External
Product Full product launch Test (MVP)
Metrics Corporative activities Innovation (OMTM)
Strategy Red Ocean Blue Ocean
Process Schedule /quality Learning

Source: UC Berkeley (2014)

As the lean startup methodology gains strength with the pass of time and
demonstrates favourable results, more traditional or incumbent companies have
become more interested in applying this methodology. The recent developments
of the corporative theory (2008) has been recently updated and developed and is
attracting a big amount of followers for new business and to those incumbents
who decide to adopt it.

For instance, Starbucks was able to create a new experience for their clients
which gave them the capacity of being able to sell their product at a higher price
that its rivals even though its quality is not necessarily the best.
Dell became the most successful producer of personal computers of the world
not because of their investments in investigation and development, but as a
consequence of being able to produce laptops easy to use, to include their
products in the market in a faster and more agile way and because they
innovated in processes such as the management of the supply chain, production
process and direct sell.

Ries (2011), who has the brand of “Lean startup” registered; realized that many
of the products that are created after a great effort, fail because they do not have
a good reception in the market. In his experience as an entrepreneur discovers
that there are numerous methodologies in different sectors of the industry that
applied to a startup in an innovative way can support the development of
success. From such methodologies some to highlight are lean manufacturing,
agile development and customer development (Ries, 2009).

• Lean Manufacturing: in the production system of Toyota named lean

manufacturing; Ries found the fundamental bases that applied to
innovation conclude in the lean startup methodology. Lean manufacturing
or adjusted production (as it was initially named) is a model that tries to
extract the maximum value from clients, using the minimum amount of
resources (Womack, Jones and Roos, 1993).

• Agile Development: Ries, with his background in software development,

incorporates the methodologies of agile development in his Lean startup
methodology. The agile adaptive methods, in contrast with the traditional
cascade methods, have a general perspective of the product or services
without specifying the final result since many hypotheses are created, and
these will generate a product prototype. The prototype will then be used to
explore the market and validate the hypothesis or modify them in a
continuous test of trial and error that adapts the product.

With the agile methods, projects are developed in time units called
iterations. Each iteration includes a cycle of development for the product; it
is delivered in a period of time and each delivery will be adding
functionalities in such way that deliveries are transformed in demos. At the
 same time each demo permits the evaluation of the functionality of the
product in collaboration with the client, and it also allows the incorporation
of changes continuously without waiting to the last delivery of the product
(Alvarez, De las Heras and Lasa, 2012). This model aims to optimization
and agility through the interaction of the actors, the collaboration and the
change flexibility (Fowler, 2005).

• Customer Development: Blank criticise the traditional way of creating

companies centred in the development of the product, in which the idea of
product or service is conceptualized: developàtestàlaunch to market
(Blank and Dorf, 2013). The problem is that most of the startups fail
because they do not have any client. The process of client development
starts when the establishment of the hypothesis since many suppositions
must be validated with the direct contact with the presumed users.
The first step is to know if the client really has a necessity and is willing to
pay for it; the second step is to validate if the assumed client is really
willing to demand the product through a MVP; and finally the businessman
proceeds to do the transition from a startup (based in learning) to the
creation of a company focused in the execution of the business (validated
as viable).

In summary, it can be stated that the three main pillars of the Lean Startup
Methodology are: i) create value for the clients, understand as the elimination of
waste, offering what the client really demands with a corresponding quality; ii)
developing the product from the clients point of view, learning and validating for
direct and continuous contact with him; and iii) developing the product in an agile,
flexible, iterative way incorporating new functionalities in the development
process.

The constraint of large companies to innovate does not rely in the lack of
innovative ideas or employees. In technological-entrepreneurs, the entrepreneur
should “get out of the building” to involve the based companies, however, they
limit themselves to work only on the ideas within their scope. This condition is
referred to as “technological inertia” because they have invested many resources
in the existing technology and market. Moreover, the size and complexity of
modern business have made the company to be bureaucratic, which has
potential to lower company agility to innovate. The failure to generate radical
innovation is also caused by “the incumbent’s curse”. This happens when the
incumbents focus too much on their current position in the market and satisfying
current customers rather than seeking for new pathways to which the new
products might lead (Edison et al., 2015).

Finally to summarize this new methodology conceived by Eric Ries (2011) and
described later by Edinson et al (2015) as:

• Entrepreneurs are everywhere: The startup initiative was driven by top

management. The top management provided a theme for new product
development and created a team to implement it. The team explored the
feasible concrete idea. Like in other innovation initiatives, practising Lean
startup inside a large company needs full support from top management.
Moreover, working in a startup manner is not for everybody in the
company. Some people work better with stability, some work better under
uncertainty.

• Entrepreneurship is management: Although the company has R&D, the

top management decided to choose internal startup for new product
development. The top manager argued that the internal startup has to do
some research about the new product and also is responsible for its
commercialisation. One reason for pivoting was that there were not
enough end users. One of the lessons learnt was there was no need that
would be solved by that product.
 • Validated learning: The internal startup involved the customers in
development phase, which reduced the experimentation time to validate
the ideas. The team managed to pivot from a specific to common market
segment.

• Innovation accounting: The customers for the internal startup are the end
users and top management. Therefore, the team must aim to not only
increase the end users’ perception but also secure the sustainability of the
project fund from the management. Measuring is useful, but it is costly.
For developers, main training several versions of the same app is
complicated. To track the progress of the startup, the top management
always relied on two measures: net promotor score (NPS) and the number
of users. The top manager said that these two measures are enough to
decide whether to stop the process or to continue. It is interesting because
the reason why they used the measures is because the competitors are
also using them even though they develop different types of software.

• Build-Measure-Learn: Working in build-measure-learn loop allowed the

team to build the right product. The startup mode increases the speed of
development. One of the innovation managers said that the term viable in
MVP is misleading and suggested that the product should be desirable.
However, to increase the speed of learning, breaking the rules is
inevitable. Following standard architecture and programming practices
that potentially slow down the speed of development should be avoided.

6.1. Considerations about the implementation of the Lean startup

methodology

Studies developed by Harvard University, found that there are certain limitations
for the application of the lean startup methodology after evaluating more than
250 firms in the United States. These studies concluded that there was no linear
relation between the number of validated hypothesis and the further success of
the team. In summary, it is not said that more validation is better, but that the
process must be adapted to each situation. Furthermore, it was common in most
of the firms that failed or had the worst performance that they realized open
conversations and more formal experiments with clients; while teams that did
either open conversations or formal experiments only at the beginning of the first
stages of designs of the business were more competitive and had better final
results (Harvard University, 2016).

Between other factors that limit innovation according to Harvard University (2016)
some are:

• The high price paid to obtain the first client and the cost even higher of
erring the product.

• Long cycles of technological development.

• Limited number of risk oriented people that will get involved in the
founding process or even working in a new or in building process
company.

• The structure of the venture capital industry; in which a small number of

firms needed to invest massive amounts of money in several new created
companies to obtain a relevant opportunity to obtain significant utilities.

• The concentration of experienced people in ambits of how to build new

business. In the United States most of these people are concentrated in
the east and west costs. (This is less of a problem and Europe and other
parts of the world, but even in the rest of the world there are critical
geographical business points).
 In Latin America, a study developed by the Inter-American Development Bank
(IDB) in 2010 the following indicators presented in figure 15 where found:

Figure 17: limitations to innovation

Percentage

Easiness of imitation

technologies
Market´s structure

technological change
Limited dynamism of

Lack of information about

Possibilities
Lack of cooperation
Public policies

market places
Lack of information about the

High costs
Weakness in

System of intellectual
Organizational Rigidities

property
Insufficient size
of the market
Lack of financing

science and technology

Lack of qualified

Infrastructure
personnel
Underdeveloped institutes of
Time of return

Source: IDB (2010)

As evidenced in the previous figure the studies performed by the IDB in 2010
evidence that the main obstacles for innovation for firms in Latin American
companies are: i) limitations to financing that allow entrepreneurs to carry on
(added to high costs and risks of innovating); ii) inability of the companies to
adapts in long terms (assumed or real) that must happen before the firm can
recuperate itself or before it can at least obtain returns (profitability rates); iii) the
reduced size of the market (reduced demand) and iv) the lack of qualified
personnel suitable for the required tasks.
 7. Lean Startup in different economic sectors: Industry, Technology and
financial services

The goal of any country, whether developed or in a development phase, should

be to increase dynamic or high-value ventures since they are the ones that
contribute the most to generating innovation, employment and wealth. To
achieve this objective, enterprises can be transformed a) by necessity into higher
growth companies, by achieving adequate levels of differentiation and
organization, or b) by motivating entrepreneurs with greater potential to start
businesses with higher added value, innovation and growth potential.
In both cases, a strategy focused on fostering dynamic entrepreneurship from
universities, including the Lean Startup methodology as a fundamental basis in
courses on entrepreneurship and business creation, can have a significant
impact on the quality and quantity of business ventures.

Innovation and the lean startup methodology are kind of new topic that in the
recent years have gained significant importance among not only university
lectures but also companies. In fact several elite companies such as Google,
Apple, Toyota or JetBlue (notice that all in different industries) have implemented
the methodology and re-directed their businesses in order to adapt to the current
market scenario; a scenario that pushes them to break rules, to rise value for
customers, and to pivot and iterate continuously.

The Lean Startup is a methodology that contributes significantly to promote the

creation of dynamic ventures. This is because the process of creating-
measuring-learning increases the probability that the entrepreneur incorporates
variables not considered by him but considered by potential clients, and that will
undoubtedly make the product he develops have high levels of differentiation and
innovation, consequently his product will also have characteristics of important
scalability and growth.
Since the Lean Startup is a fairly new methodology, there are still no conclusive
figures (mainly in Latin America) showing how the implementation of the method
has contributed to improving (especially dynamic) ventures or has managed to
increase economic indicators such as greater number of companies created with
dynamic characteristics. This could become an important and necessary
research topic to address in the future.

In this chapter several cases of success of the Lean Startup methodology in big
corporations will be presented, these will be useful since they are a references
that involved better practices and learn in the process; these cases presentation
intends to be the base for readers, entrepreneurs, and other interested figures to
involve the further exposed in companies in the Latin-American market.
The information regarding exit cases of big firms was obtained from several
digital publications about Lean Startup2.

7.1. Information Technology Industry

Although we are already very used to work with new technologies, and
digitalization is nowadays extremely common in our lives and our employment,
we might have not yet seen its full potential. Technology is not going to stay
stagnant; in fact experts say that as the years go by, new, totally revolutionary
and disruptive technologies will continue to emerge. We can say that there are
still "emerging" technologies; reason why many specialists believe that within a
few years the technological trends of the future will be incredible. Technological
innovations are guiding the evolution of society, as well as of the organizations

2
Government Technology - http://www.govtech.com/pcio/Governments-Take-a-Lean-
Startup-Approach.html
Decidedly - https://decidedly.com/3-examples-of-lean-startup/
Lean Startup Case studies - http://theleanstartup.com/casestudies
Fortune - http://fortune.com/2018/02/22/startup-way-procter-gamble-general-electric/
themselves. So far, progress was made in virtual reality, artificial intelligence,
cyber security, UX design, etc.

Even if to the date there are still around 4,000 million people (more than half of
the planet) without access to the Internet, the speed with which new digital
platforms advance generates great challenges. And it is said that technological
changes are the main element of the next Industrial Revolution. If the First
Revolution, associated with the steam engine and the development of the
railway, took 120 years to reach the whole world; Now the implantation of new
technologies happens every time at a higher speed and each change produces
more acceleration (Siemens, 2017).

One excellent example of technological innovation and its revolutionary impact is

the case of apple. In 2007, Apple launched today's almost ubiquitous iPhone, the
first smartphone. In just 10 years, there are 5 billion smartphones, which have
become a powerful productivity tool and, in many cases, essential for the work
itself. In fact, ten years ago, the largest companies in the world by market
capitalization had little to do with the current ones. If before the largest
companies were related to the hydrocarbons or energy sector, now the power
lies in the technology. According to a Bloomberg article, ExxonMobil has left the
podium to Apple, Google or Microsoft (Siemens, 2017).

7.1.1. Dropbox

Drop box is one of the most known examples of a startup that implemented the
methodology and its growth has been huge; in fact the service of digital archive
transfer nowadays has more than 500 million users around the world. Dropbox
started with a MVP presented in a video of three minutes, the video showed the
possible consumers what the platform could do; how ever up to that phase not a
single line of programming code had been written.
The response to the video allowed Dropbox to prove if the product had demand
and at the same time its presentation was the first step to capture audience
through a waiting list. Moreover, the video was also crucial since it was possible
future clients gave feedback ant the comments collected were high quality
information that the team used further to configure and edify what the product
should offer in symmetry with the clients necessities.

7.2. Financial Industry

With the use of technology in the financial sector new channels are created,
these channels benefit the interaction with the client and his/her experience,
providing greater agility in the processes. Standing from a digitalization point of
view, and considering the pace at which the modern society is moving, fewer
people want to approach a physical branch. For this reason, the sector points to
the use of new technologies in order to provide complete customer service.
Israel, global power in innovation and the second incubator of startups in the
world, recognizes that one of the main problems that the sector has is the
authentication process, some of its practices generate friction with customers
and finally sales fall.

On the other hand, the Internet of Things is about to have a great impact on the
services sector, reducing costs, maximizing data analysis and extending the
useful life of products. In fact, by 2020, 25% of the companies with intensive
assets are expected to adopt both technologies to optimize their financial
services. There is still a long way to go in terms of innovation in the technology
sector among the new initiatives such as artificial intelligence in financial
applications.

7.2.1. Wealthfront

This company (former startup) offers an automated investing service powered by

software algorithms; the platform allows users in a wide segmentation of the
market to access investing funds; it offers a solution for investors who are not
able to access to the main hedge funds and money managers. It examines
managers and with a fair scale it works as platform for them to become
accessible for regular investors.

Wealthfront implements continuous deployments of information and money.

Considering that this industry is characterized by having high risks, high costs
and additionally it is part of an environment that is regulated by the SEC
(Securities and Exchange Commission), it provides users a more confortable and
secure way to invest. Nowadays the company (founded in 2009) manages assets
worth more than $200M and processes around $2M dollars daily.

7.2.2. Intuit

Intuit is a platform that finance and accounting services mostly for small
businesses, accountants and individuals. The company offers several products
according to the clients’ necessity.
One of the company´s co-founder stated that it were the established companies
the firms that needed the most of the adoption of a lean methodology that
involved innovation; therefore, in its working processes the company implements
incentives for innovation, horizontal planning, non-structured working time for
employees, start events, between other activities that power the innovation that is
then canalized through lean methodologies.
Since the company´s launch in 2008, all the previous initiatives implemented for
workers have been an important part of the designing of new products such as
SnapTax, Gopayment and ViewMyPaycheck.

One of the cases where the MVP implementation was clear was SnapTax. Carol
Howe (manager of software products in Intuit) stated SnapTax was launched in
2009 as a tool for the management of documents online and its development
was based in the comments and feedback of clients. The company experimented
with changing the reach and scope and segment of the product in order to be
able to complete and gain all the information regarding taxes for the basic tax
declarations of clients in California. Its product was also suitable for people
without home, children and/or investments.
Customers response was superb; during the first three weeks the product was
downloaded more that 3500,000 times, and consequently it was the beginning of
a whole new line of products for Intuit.

To conclude, Intuit is a business that firmly believes that lean innovation is

compulsory to achieve its vision evidence is the statement gaved by Scott Cook
(representant of the company in 2012); he said that the company intends to
change lives of its customers so deeply that they cannot even imagine going
back to their old methods. And that statement is deeply correlated to one of the
values of the company that says, “ We are laser focused on our customers. We
line and breathe innovation. We champion those who dare to dream”3.

7.3. Industry and commerce sector

Industrial innovation can be divided of classified into four categories that are
described and in a wide spectrum parameterized bellow. The first two can be
considered technical innovations, while the last two can be considered
management innovations (Sancho, 2007, page 556):

• Product innovation: A product innovation is achieved when the product is

entirely new (radical innovation) and is introduced in the market; or when
there an incremental innovation is achieved. An incremental innovation is
the substantial improvement of an existing product; this improvement
might involve the enhancement of technical specifications, components or
materials, embedded software, etc. The achievement of an incremental

3
Retrieved from: Intuit (2019) https://www.intuit.com/company/
 innovation normally is followed by the work of engineers, technicians
and/or market researchers; in the other hand radical innovation are more
commonly based on science.

• Innovation of production methods or processes: Innovating in the

processes or method of production implies the introduction doing the
same but through a new process that improves the exiting one. It includes
significant changes in the techniques, in the equipment used in the
software, etc.

• Innovation in management: Innovating in the managerial aspect means

that a change or improvement in the organization of the company is
implemented. This category of innovation involves the inclusion of new
methods in the practice of work or in external relations; it is particularly
important that firms consider it and do not belittle the impact of this kind of
innovation since it might be the base for further innovation in other of the
categories here presented. This innovation can trigger the creativity of the
workers and lead to new ideas, processes and products or ways of
marketing that will support the company in its flexibility to adapt to internal
and external changes of the environment.

• Innovation in marketing: innovating in marketing comprise the creation of

new marketing structures in the company, for instance changes in the
aesthetics of the product (design of the product, its packaging or
presentation in general), in its promotion, in the places it is sold, or in its
price.

From the four categories above presented it can be deduced that innovation in
not always an invention; however it always implies novelty. A novelty can be
introduced in the whole world (in this case it is also called “Maximum
innovation”), in a country, or even only in a determined company (in this case in
also called a “Minimum innovation”).
When an innovation is introduced and it generate successful results, the
competitors know about it, and it is very common that competitor/s become
imitators; imitators are the companies that put into practice the developments
initiated by others, in other words the copy.
Commonly SMEs are imitators that copy one or more of the previously
mentioned innovations, thus they involve maybe an incremental innovation of an
already existing product, process and its adaptation to the markets (Snacho,
2007, page 557).

The evolution of the needs of consumers, the development of new technologies,

and the liberalization of international trade, among other changes have led in the
last decades to profound changes in the structure, strategy, activities and
functioning of industries. On the other hand globalization has also played an
important roll in the changes of actual industries since it has increased the
access to information and opened new markets; the combination of all this
factors have lead to greater international competitiveness (Sancho, 2007, page
557).

The pressure to reduce prices increases continuously while the demands on

quality standards increases. Under these conditions, the only system that can be
used to face competition is the development of innovative products and
processes. Currently, the most competitive companies are those with the
greatest capacity of innovation (Sancho, 2007, 557).

Finally other great challenges that companies might face in a higher degree in
the coming years is the need of reducing costs, improve flexibility, improve
productivity, improve quality and improve the speed (speed in terms of
production or launch for instance) of the product; all the previous pressures to
competition are results that the introduction of industry 4.0 entail.
7.3.1. Toyota

The carmaker was one of the biggest inspirations for Ries due to its unique
adoption and implementation of lean manufacturing techniques. Toyota included
fabrication of small lots, fast iteration and the search of information that could
come from workers. Nowadays, the company recognizes that it is behind its
rivals in connected automobiles; therefore it is implementing lean techniques to
find new approaches in order to update itself.

In a conference developed at the beginning of 2013, two delegates (Matt Kresse

and Vinuth Rai) from Toyota Infotechnology Center34 shared their experience in
the application of lean principles to attract clients and request from them
comments in regards of an earlier incorporation in the development of products.

The two designees shared their considerations about Toyota´s system; they said
that even if the production system implemented by the company (based in
Toyota´s Product Development System principles) was efficient, other aspects
regarding the clients’ perception of the car such as the navigation and multimedia
system could only receive comments and feedback after the vehicle was
launched.
To enhance the prior obstacle, Toyota used an android tablet connected to the
car as a MVP, this facilitate an interface in which the client could have direct
interaction with the system. Toyota placed announcements in Craiglist requesting
trial clients; more than 300 people replied, after that they performed live trials
with the prototype system to ease feedback. These trials were considered
successful for the team, not only they received feedback but 60% of the clients
were retained and 40% of them did referral to others.

7.3.2. General Electric (GE)

In the heart of FastWorks there is Ries philosophy of testing prototypes with
consumer and in a further stage iterate them as a consequence.
A positive outcome for GE was possible thanks to the business of gas turbines.
GE changed its approach of selling updates with the pass of time to an approach
where the company engaged with the future changes in advance, this new
approach was a lot friendlier with the clients.

The prototype base of all the change passed through around 18 interations, each
of which was informed and received feedback from clients. To the day, more than
40,000 employees in General Electric have received training in the lean startup
methodology as part of FastWorks, system that constantly inform the teams
about the development of everything from light bulbs to gas turbines; and the
system is said to be paying excellent tributes.

According to Bloomberg, one of the gas turbines developed as part of the

FastWorks program was developed with more that two years of anticipation and
with 40% lower costs than if the company would have used the traditional
approach that GE used before for product development. The company points out
that they received around $2 billion dollars in additional sells in 2016 as result. In
fact Janice Samper (GE Executive development Leader) said that through
FastWorks, GE was “creating a culture where we operate faster while delivering
better outcomes. At the heart of it is the discipline of testing and learning that
permeates the entire the organization,”
And in 2013 GE final year report stated: “In the first year, Ries trained 80
coaches exclusively dedicated to FastWorks. Together they exposed almost
1,000 GE executives to Lean Startup principles. GE also launched 100
FastWorks projects in US, Europe, China, Russia and Latin America. They range
from building disruptive healthcare solutions to designing new gas turbines. GE
plans to expand the program to 5,000 executives and launch hundreds of new
projects next year. “GE is an ideal laboratory for applying lean practices because
of its scale,” Ries says. “This is undoubtedly the largest deployment of Lean
Startup ideas in the world.”4

7.3.3. Procter & Gamble (P&G)

When launching some of its most disruptive new products, P&G uses a “lean
startup” approach to innovation. This approach brings together small cross-
functional teams to develop and launch a series of “minimally viable products”.
These early launches allow the teams to test and adapt their propositions with
the speed and agility of a startup. A lean approach drives value in different ways:
it brings together the best of P&G’s capabilities from all of its business units; it
increases innovation productivity by testing market potential early; and it
encourages innovation in business models as much as in products and services.

By adapting the concept of "more viable product" of Ries, Procter & Gamble got
two new lines of feminine hygiene products for the test phase of the consumer
market in just one year; an extremely short time considering that this type of
processes usually take up to three years under other circumstances or following
other procedures and/or methodologies.

7.3.4. Zappos

Another excellent example of a lean startup is Zappos. Zappos is an online

retailer; the company focus on selling a wide variety of shoes and bags. Ever
since 1999 (date in which the firm started operations), its founder, Nick
Swinmurn, was not sure if the market was ready to purchase shoes online. In
that moment with the capital he had and his experience Swinmurn could have opt
for buying stocks, developing inventory systems, built a network of distribution

4
GE´s annual report (2013). Retrived from:
https://www.ge.com/reports/post/82723688100/the-biggest-startup-eric-ries-and-
ge-team-up-to/
channels, and evaluate if traditional operations would have worked; however, the
entrepreneur decided to prove his hypothesis that consumer will buy shoes in
online platforms. To prove his hypothesis, he used a minimum variable product.

Swinmurn’s MVP worked with pictures that he took from local shoe stores; he
approached the stores and took pictures of the inventory; these pictures where
published in a basic web platform. If the SKU received an order he will return to
the store, buy the article in full price and send it directly to the customer that
placed the order. Soon, Swinmurn proved that there was a demand for his
hypothesis and consequently Zappos could finally become a million-dollar
business based in an online shoe retailer model.
8. Description of the corporative environment in Latin America specifically
in regards of the implementation of innovation.

There are two dimensions to the concern over the situation of Latin America. The
first related to the incapability of entrepreneurs in transforming ideas into
successful businesses and the second in concern to the week and inappropriate
allocation of expenditures within companies that would foment or encourage
personnel to be innovative and grow together (both individual professionals and
the firm itself).

The first dimension of the problem, where a low quantity of startups that are
being developed can be related to the background of the entrepreneurs or the
market where they compete. For instance:
• There are few necessity entrepreneurs (only 3% of the total) this means
that most of the people that decide to build a startup have works behind
therefore there is not a real need to put a 100% effort on making it
succeed. (M. Grazzi et al, IDB, 2016, pg. 24).

• Only 16% of the startups perform or even considered exporting their

goods. This evidence that the entrepreneur does not vision to other
markets to make the business grow. (M. Grazzi et al, IDB, 2016, pg. 24).

• The government does not provide a lot financial support for startups.

The second dimension concerns on the deficit of innovation within companies.

For this, it is important to highlight that innovation and productivity are tightly
related at a business level; in fact, it can be said that they have a direct and
proportional relation; consequently, the usage that the company gives to
knowledge is one of the main factors that will determine if the innovation system
is adequately working. Moreover, the investment that the firm gives to R&D
(Research and Development) can also be one of the impetuses for the business
 success in technological transfers and in the growth of the company’s capability
of absorbing external knowledge.
Investing in R&D companies can gain advantages in at least two things: 1)
generate new and innovative ideas, and 2) have direct effects in the development
of absorbing capabilities of employees and consequently in the business in
general (IDB, 2010). Below find a summary concerning the diagnosis of
innovation in Latin American in relation to other European countries.

Figure 18: Companies´ investment in innovation

Intensity of expenditure in R&D (as % of total sells)

Percentage
Intensity of expenditure in Innovation (as % of total sells)
Belgium

Italy

Chile

Brazil
Holland
France

Denmark

Spain
Luxembourg
Sweden

Colombia
Germany

Panama
Argentina
Costa Rica

Uruguay
Norway
Austria

United Kingdom

Source: IDB (2010)

In Latin America and the Caribbean (LAC) the innovation done by companies is a
reflect of the weaknesses that can be observed in a wider or national panorama
at a science and technology level. Companies in the region develop different
innovation activities if compared to activities developed by companies in more
industrialized countries. Most of the LAC companies are in fact very distant from
even trying to innovate in the technological frontier; their innovation strategies are
essentially oriented to the acquisition of incorporated technology. Acquiring
technology developed in foreign regions and incorporating them to their
production system is in fact one of the main worries of companies in the LAC
region.

In Latin America, the expenditure in innovation is condensed in the acquisition of
high-tech machinery; however, the overall panorama of the region seems to
indicate that the capacity of R&D in the firms’ structure is not enough to allow the
company the possibility of transforming external knowledge in autonomous
capabilities of innovation. To verify the previous statement in figure 18, find the
percentage allocation of companies’ expenditures; it is evident that the
distribution of this is extremely diverse in LAC compared to other more
developed countries where R&D is a more significant investment. While the
general investment are majorly assigned to machinery and equipment as
evidenced in figure 19, and the same scenario similarly replicates in most of the
countries of LAC.

Also as prove of the previous statement is the panorama that in many LAC
countries there is an increasing number of forums and congresses that work on
different startups; therefore there are innovations that are being born from this
region. However, since the investment in R&D and in the enhancement of
procedures in extremely disproportional, plus the situation of expenditures
priorities; it is evident that most of these innovation die in early phases without
getting to a mature stage in the market. (IDaccion business news, 2018)
 Figure 19: Distribution of Companies´ expenditures in different countries.

Percentage R&D Machinery and Equipment Other

Austria
Sweden

Luxembourg

United Kingdom
Finland

Belgium

Uruguay
Paraguay
Holland

Norway

Germany

Argentina
Korea

Colombia
Brazil
Source: IDB (2010)

The technological delay in the companies from the LAC region has a direct
impact innovation (Navarro et al., 2010). Technological innovation normally
focuses on innovations related to adaptation and/or gradual enhancements; as a
consequence, the degree of novelty in innovations regarding products is very
low. One additional consequence of the low degree of novelty is that the
enhancements or results are limited to the company’s scope (new for the
company) but do not reach a bigger scope where they are new to the market.
Under the previous circumstance firms become followers in technological
aspects and never pioneers, since their main innovation strategy is one of
adopting technologies already developed in other places (IDB, 2010).

In the LAC countries, with exception of Costa Rica, innovation of the processes is
a lot more frequent than innovation in the product. Apparently, the previous
situation is related to the normal behavior of companies in the region of acquiring
knowledge related to capital assets since the incorporated technology must have
a direct impact over the enhancement of productive processes. In the other hand
I many countries members of the OECD (Organizations for Economic Co-
operation and Development), such as Japan, Germany, United Kingdom,
Switzerland, Norway and Finland; innovating in products is a lot more frequent
than innovating in processes. The previously explained panorama reflects why in
the second groups of countries there is a higher degree of technological
sophistication (IDB, 2010).


Figure 20: Distribution of types of innovation inside companies per country.

Technological Innovation Non Technological Innovation Patents
(as % of total number of (as % of total number of (As % of total number of
firms) firms) firms)
Percentage
Switzerland

United Kingdom
Luxembourg

Colombia
Costa Rica

Argentina
Germany

New Zealand

Panama
Denmark
Belgium

Japan
Korea
Finland

Chile

Uruguay
Austria

Holland

Norway

France

Brazil

Source: IDB (2010)

Continuing with the LAC panorama it is to highlight the importance of

collaboration to achieve innovation grows; with the increase of complexity of
technologies and the new products and/or services there is also a growth in the
requirement of a wider variety of technological capabilities. Another reason why
firms turn in favor of collaboration is in consequence of the high costs related to
innovation tasks.
Regarding collaboration in LAC there is not a lot of information, it is a subject that
has not yet been well examined; hence they expose significant differences in
relation to the concept of innovation, even more in what concerns to
collaboration. For example some studies only survey topics that concern to
collaborations in R&D, while others only examine the different forms of
collaborations that are made in the region. In figure 20 it is evident that some
LAC countries (i.e. Panama, Chile or Colombia) are still extremely behind in
collaboration between companies while other countries like Korea, Sweden,
Denmark, Finland or Belgium recognize the importance of cooperation and
implement it more.

Figure 21: Collaboration in companies from different countries to manage

innovation.

Percentage Collaboration (as % of the total number of firms)

Korea

Germany
Denmark

Belgium

United Kingdom
Luxembourg

Canada
Finland
Sweden

Norway
New Zealand

Austria
France
Switzerland

Costa Rica
Australia
Holland

Panama
Uruguay
Argentina

Brazil
Japan

Chile

Colombia

Source: IDB (2010)

To conclude, companies in Latin America usually base most of their innovation

decisions in information that was collected with data from the market in general
(suppliers, clients and competitors). This data is normally was collected by
scientific institutions that might not do a relevant distinction between the market’s
differences (for instance the difference between LAC from European or north
American markets); therefore, this situation entails that both companies and
scientific institutions do not give a big importance to the source of information.
 9. Proposal for the Implementation of the Lean Startup methodology in
Latin American businesses.

Once analysed the Lean Startup methodology and the overall panorama of the
Latin American industry, there are some recommendations for the
implementation of the methodology in the region; these are:

• Work in the emotional relationship not only of yourself as an entrepreneur

but on your workers. This relation with the business determines the type of
firm that it is, the way it operates and how it would be managed. (IDB,
2016).

• Previous experience of the founder of the firm is a positive asset; although

it is not required it does provide a base for the managerial level to rely on
situations were experience might help to identify opportunities, improve
weaknesses, exploit competitive advantages or solve problems (IDB,
2016).

• Although entrepreneurial financing is still weak within Latin America, it is

important to have and secure a strong of big financial capital. This capital
is extremely useful not only for covering and correcting mistakes (normal
in initial phases), but also to accelerate the growth of any business (IDB,
2016).

• Once established the startup or business think big consider exporting you
product as soon as possible, believe in you product.

• Train your workers to have flexibility towards working in new ideas that
might be other than the normal tasks he/she develops normally.
 • Allow workers to present proposals and new ideas that would favour the
tasks he develops, the processes or the business in general.

• Create spaces for your workers to present their proposals in the firm and
assure that their proposals and the given information flow rapidly to a
committee or to the people/ person in charged of reviewing it.

• Evaluate and filter the proposals /ideas in a methodical and systematic

way and use the correct /appropriate business process to do so.

• Assure the support and protection (isolation if necessary) at a corporate

level of the selected ideas.

• Provide a mechanism to measure the success of the innovation using

counting tools outside the regular objectives of the firm.

• Define the stages of preparation for the investment using clear guidelines.

• Provide the adequate resources for each stage of the project in order to
fulfil the goals.

• Design a reward structure that foster innovators to present projects, that

betters their professional carrier and that encourage them to share their
success.

Moreover, this project will present reference of the work developed in the
University of applied sciences in Finland in 2014. To create a practical way of
introducing a Lean Startup methodology in a business, they created a model that
presents a new scope for the organization and at the same time facilitates
innovation. The model suggested is a sand box for innovation, a sandbox where
the organization has a new canvas to begin its learning on the application of the
Lean Startup methodology.

The program suggested points to teach organizations how to innovate and

develop new services and concepts in an agile, fast, efficient and reasonable
way. It also presents a new mentality that is a core tool to become more
innovative and more client oriented (as suggested by the Lean Startup
methodology). In the whole program the client never stops being the center or
the main actor and determinant of the process.

9.1. Lean Startup methodology in Latin American organizations.

Additionally to learning a new scope, the program of lean startup innovation can
be used to create new services and business concepts or to renew the existing
services. The objective is to promote employees to be more innovative and give
space for them to make, contribute or see their ideas grow into products or
services.
The program also stimulates the firm´s members to work with an intrapreneur
spirit (defined by Gifford Pinchot as the spirit of “workers within an organization
that follow their entrepreneurial spirit generating and exploiting ideas initiative
and business innovation”) in order the offer opportunities not only for the
organization, but also for the workers. Under an ideal situation the program is
useful for learning and creating new business ideas.

The proposal for Latin American organizations is to use this program since it
presents the main principles of the lean startup methodology in conjunction of the
process and methods of designing a service. Workers will learn these things
through workshops, tasks, assignments and personal studies. It is important that
the organization along with the learning program for workers profits from it and
learn as a conglomerate or community; this will be possible if the organization
involves work with the program to become an active part or it as it is being
developed.

9.2. How to design a Lean startup project within an organization?

Hereunder, find 5 essential steps to carry on this methodology (proposed

program of the university of applied sciences in Finland in the company).

1. The first step´s main objective is to understand the interests, necessities

and preparation of the client (seen as the company that should implement
the suggested program) for the lean startup innovation program. The goal
is to obtain a deep vision of the client with several questions. For this,
during the first meeting with the client the aim is to prepare him and agree
with him to a second meeting.

2. The second step is the planning with the organization. In the second
meeting the goal is to analyse the client´s requirements for the lean
startup innovation program. The requirements include the clients’ focus,
the group to which the program should aim, the boundaries, the resources
available for it, the schedule and milestones and the budget. These said;
the aim is to comprehend and define the goal and objectives of the client
for the program.

3. The third step is to develop and present a proposal of the program that is
coherent and in line with the requirements and expectations of the client.
The proposal includes a structure for the program, the topics to cover and
the results that will be created along the program. The proposal should
also include the price and the conditions. At the end the main goal of this
step is to achieve an agreement for the proposal and to set land for the
next steps.
 4. The real project starts at the fourth step with the information collected from
the client. This includes ethnographic studies (such as interviews and
observations and a possible workshop with the interested people). The
objective is to get to know what type of tools, installations and resources
the client already has and how could they be used in the program. Once
the evaluation is finished the program can start; its execution is always
modified and fitted for each customer in function of its own conditions.

5. The last step is to close the project. After executing, is time to move
through the entire project and present the client a final report. The
evaluation of the success of the program is presented with a final reunion
of the lessons learned and the analysis of the results, the comments and
possible future steps. The goal is to present a general vision of the project
and if necessary and required agree to more implementations of the
program.

9.3. How to implement a lean startup project in the organizations?

The basic structure of the program is the following and it is scalable according to
the necessities of the client.
The program starts with the introduction of the topic and then the participants will
start their real idea with the program´s defined task. It is important that the
objective of the program is clear to all. At the end of the day, the objective is to
learn how to create a sustainable business with the clients with the usage of the
lean startup methodology.

The program aims to study the focus of the lean startup, workshops,
collaboration and to share ideas. All the previous actions support the
cooperation, aggregate creation and the learning with the clients and other
interested parts. The client decides how many events the program will have, but
it is suggested that the program should have at least four workshops. However,
the program can be organized with fewer workshops if the client wants to have a
shorter version. The program was then divided into four steps presented in figure
22.
Figure 22: lean startup program implementation in organizations.

Final
Launch and Workshops, self- presentation and
introduction of learning and appropriation of
Internal Comunication. the lean startup reinforcement the methodology
project tasks

Source: Author`s creation

9.3.1. Internal communication

I recommend having good internal communication in all the organization prior to

the beginning of the program. Its objective is presenting the program and it´s
main objective and topic to the employees expecting and encouraging them to
request it. In the case that the organization selects in advance the participants,
the objective is presenting them the program and the topic in order to incentive
the rest of the employees to be part of the program. The internal communication
can be for instance presented through an internal newsletter, the intranet of the
company and/ or through email to manager and they pass the information the
their teams if needed.

9.3.2. Launch of the program

The real program starts with the initial meeting, where the objective is presenting
the structure, the schedule, the objectives and the assignation of the program; as
well as a brief introduction to the focus and tasks for the first lean workshop. In
this initial meeting to the participants, previous studies and cases can be
requested for the next meeting where these interviews, observations or
information collected will be required for the next workshop.

9.3.3. Reinforcement tasks

The program´s participants begin to work in teams the workshops. The teams will
be formed with people from different department or at least with different
functions in the organization in order to foment the share of knowledge from
different perspectives and to promote the creation of new connection and
linkages between employees.
The workshops will be planned according to the resources given by the client.
The agenda for the workshop will always be unique and the goal for each
workshop could be different according to the quantity of workshops that will be
included and their duration. The idea is that in each workshop, the teams will
develop and implement changes to their ideas regarding to the task.

After each workshop, the teams share their results with the rest of the
organization ad with the client if possible; after which they will receive comments
and suggestions to their ideas. With this the teams will enter in a cycle of
feedback (collecting-measuring-learning).

The objective of the next assignment is preparing the participants to the next
workshop. The assignment can include finding others ideas or tests. In this case
the assessments can be videos or articles about the lean startup approach and
the updated methods to design a service or process. The goal is to provide
deeper comprehension of the topics to the participants and to foment mutual
learning.

9.3.4. Methodology appropriation

The last step is a final presentation to the whole group and the managerial forces
of the organization, or at least those in position to make decisions within the
organization. The objective is selling the ideas to the teams to encourage their
development and implementation. In the stage the teams can also share their
results in a presentation to other employees.

The final evaluation of the program is crucial for closure. The client and
participants must provide feedback in order to evaluate the success of the
program and if it achieved its objectives. It is also important to follow the learning
and to do corrections in the program if necessary.
 10. Pilot implementation of the Lean startup methodology proposal in a
Latin American businesses.

As mentioned before there are several recommendations to make and take into
account not only in small business but in any type of entrepreneurship in order to
succeed and last in the market.
In order to partially apply the proposal scheme developed in the previous
chapter, a company in Cali Colombia was contacted and the macro purpose/aim
of the project was explained. For this case there was no monetary charge at all to
the firm and the scope of the program was always customer oriented and to
initiate a culture of innovation within a company. In this program every employee
who enrolled into it gained capabilities that permit him/her to generate innovative
ideas. This ideas where then analyzed and subject of another internal process
within the company in which it will evaluate all of them, select one or two ideas,
implement it/them and create a rewarding mechanism for the intrapreneurs. With
this it was expected that not only the employees received benefit but also the
business in general.

The company chosen was Estacion de Servicio Mobil la Torre, this is a big gas
station located in Cali Colombia (south west of the country). In the gas station
several different services are offered to clients, some of the main are: gas sell, oil
change, parking for short and long duration, and carwash.
Due to the diversity of the tasks employees are divided in functional teams in
which they specialize in the task developed; for instance, there is the security
personnel, the gas pumping personnel, the car washers, secretaries, etc.
The company got stuck in sells and margins didn’t have significant variations in a
long time according to its General Manager Marly Correa.
The company was chosen since it was not evidencing any growth and was a
typical LAC business that although it innovated in its beginnings ultimately was
stuck and innovation was not part of the recent firm´s culture.
Following the five steps of methodology proposed by the university of applied
sciences in Finland in Estación de Servicio la Torre:

10.1. First step of implementation

The first step during the first encounter with the company it was deeply analysed
and understood; entailing that several questions where done in order to
understand their core business, their core capabilities and their weaknesses,
opportunities and strengths. Some of the questions and answers were:

a. Q: What are the different activities developed in the firm and how would
you classify them from most to least relevant?
A: it is hard to classify al the activities in a ranking since there are some
bureaucratic and administrative tasks that are relevant and
indispensable for the business but are a little more upstream in the
value chain. However the core business is undoubtedly the gas sells,
after which the parking represents an important margin and it requires a
higher proportion and deployment of security 24 hours, the third activity
will be the oil changing, the fourth will be the car wash and last but not
least the rent of the cafeteria is an important part of the revenues and
furthermore is needed since clients require a leisure space where they
will wait while pampering their vehicles.

b. Q: Is the company lately subject to growth or any new project is being

implemented?
A: No, the company in the last years has been stuck in growth and
margins are very stable, not to say that is the best and that we will like
to keep growing as it was before, but lately it is not the case.
Additionally Mobil was sold to Primax, a peruvian company, this entails
that the gas station will change its main supplier and also its image and
corporative colors. Facing this imminent change a small event was
thrown where raffles were carried and some recurrent clients were
 interviewed in order to try to asses how the upcoming changes can
affect sells, although some clients stated that they will stick to the gas
station and its services, others however did not look pleased and
manifested that they will very likely change of gas station.
The situation up to this moment is very ambiguous and we know we
need to adapt to the environment and its changes and requirements.

c. Q: How is the business fostering or implementing new innovations?

A: Nowadays there is not a standard procedure to foster or implement
new ideas; every worker is free to come and talk to me (manager) if
he/she has an idea. We know that although we are open to listen
workers we do not incentive this to happen and probably many
employees do not even know that they can come and do it so they
probably don’t bother to communicate although they might have many
thing to say. The few times that some employee come with an initiative
it is pleasantly heard and if it if feasible and we consider it useful we will
carry it on and additionally the employee will receive a bonus in their
payroll but it is not part of any standard operational procedure, and to
be honest this situation do not happen very often.

d. Q: What is the average time that employees have been enrolled to the
company?
A: We like to believe that workers are happy working with us, we do not
have at the moment the exact data but we have people working up to
25 years with the family group in different positions through time. There
are always new employees but other as mentioned before have been
part of our team for a very long time. I believe that they are happy
because we care about them we try to make people feel like we care
about them and we listen to them, that makes us a family and we are
proud about that; we value our workers and their job.
 e. Q: Do you believe that employees work pleasantly and are they being
listened?
A: as said before I believe yes they are mostly happy and comfortable
in their workspace, which is what encourages them to last longer with
the group. This does not mean that all of our workers are old or have
eternal history with our group; there are also positions were rotation is a
little higher and these receive new workers.
The previous were briefly the main questions asked in order to understand the
client and its modus operandi. That first meeting was very useful and was the
first step to get him exited about having a second meeting.

10.2. Second step of implementation

During the second meeting the main goal was to definitely catch the client and
awaken interest in him about the proposal for the implementation on an
innovation program within the firm. Through these second meeting the client
manifested that he did not have a broad budget since the firm was going through
a lot of changes and several different projects in order to adapt to its new
supplier and brand. It was also clear that the main focus was to implement the
program in the operating core, in the workforce basically (at least during this first
part of the plan). Estación de Servicio (E.S.) La Torre wanted to give clients a
better service and to take them with them through a smooth change, but they
also knew that to accomplish this it was necessary to work first with the
employees that had direct contact with customers. In this case it was very useful
that I developed the program at a cost cero and that the cost for ES la Torre were
only those incurred in the implementation of this.

The goal was therefore to foster intrapreneurs in the operating core to enrol in
the program, develop a program that will foster and encourage them to bring new
ideas and to teach the firm how to carry on these projects and to reward
employees who bring ideas.
The client also stated that it was important for them to carry on this project before
the change of bran happened. This entailed that while middle and top managers
were taking care of the Primax changes, the core will be prepared and hopefully
bring ideas to mitigate the impact generated in clients. It was an excellent
opportunity for both the employees and the firm to make changes that will
complement the biggest change that they will be having and the were also
positive that this will also help employees to feel more listened and motivated in
their jobs.

10.3. Third step of implementation

As mentioned before many changes were going to be carried by the time the
program was being developed in the firm; hence, it was compulsory to start as
fast as possible. The client accepted the initial proposal and not only the
manager but also several other employees were exited about it.
Highlighting that each program must be adapted to the clients unique needs;
firm´s needs and overall situation were taken into account for the development of
the schedule for E.S. La Torre scheme is deployed in figure 23. The same plan
or model was carried on each of the three shifts focused mostly on the operating
core.
 Figure 23: Structure of lean startup program in E.S La Torre

First meeting

Employees received an introductory explanation of the program and it´s goals.+

stating the final reward of the final selected proposal.

Second meeting
Explanaition of innovation and lean methodology + several different examples.
Additionally request to each employee for an initial proposal for the enhancement of
their tasks, workspace and/or the relationship with clients.

Third meeting

Presentation of the proposals and suggestions and/or ccontributions from coworkers

for enhancement of the idea. assignment: Polish the proposal and prepare
presentation

Fourth meeting
Presentation of the proposals to the managerial force of the firm and to the rest of the
members of the program. + feedback and evaluation of the program by managers and
participants.

Source: Author`s creation

10.3.1. Details of E.S La Torre program

• The introductory explanation was a fast description of the program. In this

part workers and employees were encouraged to participate. Another aim
of these first meeting was to awaken the sense of belonging and to allow
employees to think on how to better their workspace or their co-workers
work day.
• A presentation and summary of the main concepts required for the
development of each individual project was presented to the 84% of the
workers of the operating core who were interested. In the presentation
 concepts such as innovation, lean startup, intrapreneurs, and continuous
improvement were explained.
• After the explanation of concepts some examples (also deployed in this
document) were exposed to all the participants in order to vouch the
previously presented theoretical concepts.
• During the presentation of the proposals all the participants of the program
were motivated to add something or provide some kind of feedback to the
projects of their colleagues.
• For the final presentation of the proposals to the management force all the
proposals were requested to be sketched in a paper form and taken to the
GM assistant. A meeting was arranged between both parts were they
were supposed to present the proposal receive a final feedback from the
management and an overall perception of the idea.
• Finally top projects and proposals were selected and management in
collaboration with proposal developers created a pilot project to carry
before implementation.
• The project that within a period of time of 15 days represented the best
reception within clients and evidenced a higher enhancement margins in
economical utilities was to be selected for further investments and
development.
• All the participants of the program that presented top proposals were
rewarded with a small economical amount; while proposal top winner
received a bigger reward of 300,000 (three hundred thousand) COP.

10.4. Fourth step of implementation

In this phase of the program an excel file was filled in order to control the
assistance and overall development of the program´s participants. 35 workers
subscribed to the initiative and their initial perception of it was highly positive and
motivation was the main emotion after the first meeting.
During the deployment of the program the second meeting was base of incentive
for workers to research and dive deeper in topics and in a margin of a week
sketch up a proposal to be presented to the rest of the program´s participants.

In the third meeting participants first sketched up their proposal and presented
them in printed form find some of the proposals attached in annex 1,2,3, and 4.
After the proposals were presented initially most of the participants remained
silent after their colleagues presentations; however after the third presentation
they started to interact a lot more with the methodology; suggestions and
feedback for the rest of the project commenced to grow and it was evident for
both mentors and participants that this stage was crucial for each of them since it
was base for cooperation and enhancement of all the proposals.

Finally after the fourth meeting and after the proposals were polished with the
feedback received; management selected some of the proffers to be tested with
pilot projects. After this meeting it was evident that proposals were enhanced and
they were a lot more structured. As part of the methodology appropriation, the
top proposals selected by management are further described and summarized in
english below:

1. Create a frequent client database. With this a direct contact with faithful
customers will be possible and for them offers and different combo
promotions were going to be designed during each season (around every
two months). The diffusion of the information of the offers should be
through social media especially through whatsapp or facebook. Find in
annex 5 part of the initial database proposed and filled by one of the
workers. The maintenance of the database should be a result of the
collaboration between operating core and sales assistant. Operating core
should postulate clients who they believe were part of the loyal clients
 (marked with a number one in column “Habitual”) and sales assistant
should corroborate their loyalty using the information collected in the
system about the sales. Once a client was selected he/she should be
added to the facebook of whatsapp group in order to receive the
exclusive offers. This initiative was useful to incentivize sales in
schedules of low demand and to increase loyalty and switching costs of
these customers.

2. Design a menu (that eventually could be digital) in a laminated paper with

an erasable marker attached. In this menu all services and products
offered by the firm should be deployed. Each category for instance: car
wash, oil products, oil changing and engine maintenance services,
parking fees and time tables, etcetera will be deployed with its
corresponding fee and price. Next to each product or service a small box
were client could mark its desire and needs will be places and the person
entailed of the initial service should give or collect this form in order to
offer a more complete service. With this menu client will have a full image
of the firms offer and catalogue, additionally this is something new that for
sure no other gas station in the region is doing and it can enlarge the
scope of loyal clients. Furthermore, this is a client oriented initiative since
customers won’t have to move from their position to communicate all the
teams in the gas station their needs and those that can be fulfilled while
he/she is for instance filling the tank will speed-up their requirements
which consequently increase their satisfaction and customer experience.
Find the menu design attached in annex 6.

3. Having a fidelity club. This fidelity club will work with a small card with
spaces for stamps. Each card will belong to a client (identified with an
identification number) or a licence plate and will expire within a period of
time; in this card clients who reach a certain volume of sale in each visit
will receive a stamp. The amount of stamps is equivalent to the benefit
 he/she could receive. For instance if the client has four stamps he will
have a bonus of 10.000 (ten thousand) COP for the next gas buy, or if he
has 6 stamps he will receive a full car pampering car wash, vulcanization
and vacuum. These benefits will be design by the managerial team who
will design it based on statistical information collected. The menu
representing the benefits obtained for each number of stamps will be
deployed in different places around the firm in order to be always in sight
for clients.
Find the fidelity card design in annex 7.

4. The gas station is well known for having a good festivity spirit and clients
have always value that aspect and initiatives. In special dates
management has always made some kind costumes for the workers and
they gladly agree to wear them. The proposal of one of the workers was
to not only wear costumes, but to decorate the spaces such as the petrol
pumps and in order to attract more clients offer some kind of appetizer
typical of the festivity for those clients who make some kind of
expenditures in services of products. The specific initial proposal was to
design a kind of ghost costume for petrol pumps for Halloween, and with
the feedback and suggestions the proposal grew as a more macro project
to be carried in different festivities.

5. Nearness offers. This proposal used the Wi-Fi network; when someone
connected to the net he/she will suddenly receive current offers through
e-mail; additionally their e-mail will be saved in a database to sed this
clients more information about different promotions that will encourage
and hopefully increase sales in low traffic hours.

6. Offering coffee and/or snacks in hours where sales are lower. This
benefits can only be claimed presenting the bill of the product or service
acquired in the cafeteria immediately after the purchase.
The previously presented projects as mentioned before where only some of the
projects presented but these were the ones that management chose at the end
of the program to be tested; Some of these where easier and faster to tests while
others required more effort and investment; moreover, and to fasten and
complement projects some of these were merged together since they were not
mutually disruptive but they were complements.

10.5. Fifth step of implementation

At the end of the project two final meetings were programmed one with
management and the second (optional) for the operative core of the firm. The
purpose of these meetings was to receive feedback from them regarding the
program and its results. The comments and feedback received could not be more
positive, workers and management were positive about results and exited to
foment innovation culture within the company; all of them expressed their
happiness and satisfaction about the optimal disposition and enthusiasm.
Moreover, management agreed to implement a suggestion box called workers’
voice; In the box workers could continue adding value to the firm by formally and
continuously presenting proposals; additionally in this box workers could also
present complains about their workspace or things that they believe were not
working properly (the last were to be reviewed by management who in innovative
ways would try to solve the issues).

The document summarizing the last meeting with management is attached in

annex 8. In this document management stated their satisfac0tion with the
projects and manifested also briefly their intention to implement the suggestion
box and the further programs name called workers’ voice.
10.6. Results

• Increased participation of workers. This participation in terms of

suggestions or complains.

• Development of an innovation culture through the implementation of a

lean methodology within the firm.

• Satisfaction of management and workers.

• Increased motivation of working force.

• Projects increased a 14% of amount of sales in low volume hours.

• Loyality club retained some clients that where inclined to change gas
station due to change of supplier.

• Increased sales in products that did not have significant rotation.

• Clients value the initiatives and manifested it in several occasions to

management and workers.

• During the program development workers encouraged friends and family

to bring their CV even though during the time there were no open
positions.
 11. CONCLUSIONS

For all the analysis developed and presented before in this same document
about the lean startup methodology and how could it be applied to the current
Latino American business environment, the main conclusions are:

• The lean startup methodology suggests the launch of the business from a
learning point that must be continuously validated in a cyclic process. The
methodology states that it begins with the initial idea of a product or
service, this is summited to several experiments, in which it will be
measured in the market to determine the interest of the potential clients.
From the received feedback all the information is transformed into
learning, and this is the base for the entrepreneur to keep developing his
or her product or service in an iterative way. The mentioned iterations can
lead to persisting in the increment of the functionalities of the product or
service through some changes or pivots that conduct to a viability that
lead to a business model that works without wasting resources.

• The lean startup methodology requires getting out and watching clients
from day one of the implementation. After which validated learning must
happen in order to grow/ progress continuously

• The Lean startup methodology is built around five principles (Edison,

2015) presented bellow:

o Entrepreneurs are everywhere. Anyone can be an entrepreneur

without owning a business; in fact a student or an employee within
a corporation can be or become one.
 o Entrepreneurship is management. A startup should never be seen
as only about product development but also about business
development.
o Validated learning. To build sustainable businesses, entrepreneurs
should run experiments and validate what customers need.
Therefore, they reveal current and future business prospects.

o Build-Measure-Learn. This should be the fundamental activity of a

startup. To perceive customer value, an entrepreneur should start a
feedback loop that turns an idea into a product then learn whether
to pivot or persevere. To determine which one of the previous
action possibilities to take, the entrepreneur should develop a
minimum viable product (MVP) using an agile development
method. MVP is used as a tool to collect customer feedback on the
product. Furthermore, the feedback is used to create and diffuse
learning though the organization; possible through the analysis; and
the leaning collected is posteriorly used to improve the product.
Through customer feedback, a startup can also validate their
hypotheses. As the result, the startup might pursue a new direction
of the business or continue and scale the current one. The Pivoting
process is almost compulsory for any startup since it will prevent
the startup from falling in bankruptcy if time between pivots is
minimised.

o Innovation accounting. To improve the outcomes, entrepreneurs

must empirically and continuously measure and communicate the
real progress of innovation.

• The lean startup methodology has been disaggregated following a

suggested sequence in order to start a business:
 1. Validation of the hypothesis: Validating the assumptions from which
the process commences, since they are assumptions that must be
confirmed through contrasting them with the market and the client.
Hence, it is recommended to use some of the business model
canvas developed by experts, or at least create and be clear about
the conception of business model.

2. Creation of an MVP (minimum variable product): creating a product

with some minimum characteristic that provide value to the client
and that allow the launching part to obtain as much information as
possible from the market segment at which it aims.

3. Measuring: establishing elements that permit the quantification, a

measurement of the expected performance in order to make
opportune and accurate decisions.

4. Pivot or persevere: the acquire knowledge through iterations will

permit the enhancement of what works and the functionalities, and
will guide to perseverance in the implementation of changes
through pivoting. The previous based on the data and information
obtained.

• In Latin America there is a concerning disproportional or inadequate

allocation of the expenditures that is causing that the number of
innovations born in the region do not emerge.

• Implementing the lean startup methodology is a way to advance in the
corporative world in an agile, flexible and profitable way; evidence of this
are the cases presented prior in this same document. Latin-America must
embark in an innovation route; possible only if two scenarios surge
simultaneously with the support of the government; first facilitating the
 launch of new businesses whose owners are new entrepreneurs; and
second supporting and promoting that big established companies begin to
be innovative in order to compete globally.
Companies such as GE or Procter &Gamble are betting in innovation, not
only in the design, but also in the way of working and how to understand
the client’s necessities. Accordingly, this work emphasize in the necessity
to develop a corporative environment that promotes the generation of new
ideas, reducing unnecessary procedures and supporting new leaders that
use technological tools to analyze data about their clients to propose
products that are almost tailor made to their clients necessity.
All the previous emphases are expected to result in the increase of sells,
utility and dividends; moreover they can also result in the enhancement of
the job offer for new professionals.

• Assuming and accepting the Lean startup methodology from a managerial
level, keeping as a main aim the intention of using new practices for the
development of products or services, is undoubtedly a success since the
method will generate benefits that can be addressed from three areas:
optimization of resources, reduction of times and synchronization with the
market.

o Optimization of resources: The firm will gain the ability of efficiently
using its risk capital considering that the development and usage of
an MVP will generate lower costs and provide key market
information to accurately and promptly implement adjustments.
Additionally, in relation to the level of acceptance of the product by
the client, the firm can generate premature invoicing or the offer.

o Time reduction: Time to markets can be reduced since the
understanding of the client is achieved in a faster way;
consequently the production or implementation of the changes are
 implemented faster and the overall time to market is benefited from
it in any industry. However, the clearest example of the
improvement in this area of he business can also be evidenced in
the automotive industry, where firm in traditional contexts demand
years to develop a new model or a successful vehicle line. With the
implementation of the Lean startup methodology

o Synchronization with the market: Once the lean startup
methodology is assumed it will definitely increase the
synchronization with the market since it is based in client’s
feedback and in cycles of improvement of adaptation. Being this
cycles a series of short steps to pivot or persist if the market
evidence any change it is easily and promptly identified in order to
change with it and adapt constantly to its dynamism. In the case of
mature companies that already have mature, stable, star or cash
wows products or services (that have generated and identity and
brand positioning in the market); assuming the Lean startup
methodology is necessary and useful since it helps them to
diversify and have a growth of their portfolio adapting to the market.

• In the sectors where the lean startup methodology or at least some of the
concepts or proposals of it have been applied, its growth has been
accelerated since the consolidation of both the products/ services and
consequently the companies’ names have been rapidly achieved.

• Companies´ that have implemented Lean startup methodology have

increased their financial assets and reduced the time to market of their
product as a result of their reduction of the time of product development.
This methodology has shown entrepreneurs in a short period of time if
their products or new business model is fit with the market (there is a
 demand for the entrepreneur´s idea) and will generate economic
retributions or benefits in general.

• The research and present project leaves open a further study that will
investigate in more depths the lean startup methodology put into practice.
Moreover, a comparative study on more Latin American companies that
successfully implemented the lean startup methodology will be
complement for the investigation here deployed.

• Finally it is to state that The Lean Methodology, without a doubt, offers a

great opportunity to approach innovative businesses and minimize the
uncertainty, the waste of resources and the high risk that the
entrepreneurship or endeavour usually entails.

• Previously mentioned conclusions were proved by the implementation of

the project in E.S. La Torre. During this implementation it was evidenced
that projects could be proved faster and in a more economical way with
pilot projects. Moreover, it also proved the importance of innovation within
the company and the importance of giving a voice to workers not only in
crisis times but always.
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 13. ANNEX

ANNEX 1
ANNEX 2
ANNEX 3
ANNEX 4
ANNEX 5
ANNEX 6
ANNEX 7
ANNEX 8