Lean Startup Approaches and Business Model Innovation—A Case Study on Digital Startups in an Institutional Void

Sabeen Husain Bhatti1 and Mohammad Muawiz Zia

1Management Studies, Bahria University Islamabad 2AUSOM, Air University Islamabad


The use of ubiquitous and versatile digital technologies by firms has led to significant transformations in multiple sectors and industries (Ghezzi et al., 2015). Many firms have adopted newer methods of operation and reinvented their supply chains in order to cater to the demands of a well- informed and quality-conscious segment of market. The internet has provided an opportunity for cheaper and better ways for firms to improve their competitive advantage and increase customer satisfaction. In internet-based firms, value capture and value creation are not possible without a well-developed business model because of the complex nature of doing business in a digital environment (Teece, 2010).

The role of business models in tech startups has caught the attention of researchers in the last decade or so because of the growth of e-commerce businesses, the globalization of supply chains, and the consequent restructuring of revenue streams for these tech ventures. Recent literature has highlighted the need for businesses to change and adapt to emerging technologies in order to create value for their customers and achieve competitive advantage (Baden-Fuller &c Haefliger, 2013; Hienerth et al., 2011; Massa et al., 2017). However, the way in which these business model innovations enable digital startups to achieve their strategic objectives is still not clear from the current literature.

Entrepreneurial ventures are constantly under great pressure because of the limited resources available to them, and they need to change and adapt to emerging and ever-changing technologies in order to remain viable (Hanlon &c Saunders, 2007; Katila Shane, 2005). The situation is even more complex for digital startups because of rapid changes in technologies that occur at a faster pace (Sirmon et al., 2007). Technological innovations have resulted in two streams of literature, namely new product development and new business models (Brown & Eisenhardt, 1995; Teece, 2010).

The second of these streams, which is also known as business model innovation (BMI), has recently attracted the attention of researchers. Although new product development and BMI are interconnected concepts, they have both evolved in a disconnected way (Ghezzi & Cavallo, 2020). This chapter focuses on BMI, which has been defined as “novel, non-trivial changes to the key elements of a firm’s business model and/or the architecture linking these elements” (Foss & Saebi,

2018, p. 201).

Researchers have highlighted the lack of consistency, clarity, and direction in the research on BMI (Ghezzi, 2013; Wirtz et al., 2016), and have stressed the need to investigate the ways through which early stage digital startups innovate their business models by leveraging on emerging agile and lean practices (Ghezzi & Cavallo, 2020). According to Hacklin et al. (2018), ambiguities still exist regarding the conditions under which business model innovation takes place, and how this innovation plays out.

It is a common assumption that, in an entrepreneurship ecosystem, all entrepreneurs have equal access to resources, equal membership and support, and an equal chance of achieving a successful startup, but, in practice, this is rarely true for both genders (Brush et ah, 2019). There is substantial evidence that women entrepreneurs’ participation, access to resources, and outcomes in ecosystems differ from those of their male counterparts (Brush et ah, 2019). This phenomenon is even more pronounced in societies that are characterized by institutional voids. An institutional void is defined by Elert and Henrekson (2017) as either an absence of, or a weak, institutional framework that provides comprehensive support for entrepreneurship. In cultures where entrepreneurship is associated with masculine dimensions, it has been observed that women entrepreneurs have relatively less access to various resources (Marlow 8c McAdam, 2015; McAdam et ah, 2019). Researchers have argued that how and why cultural principles and norms are critical for entrepreneurship literature should be explored in depth (Krueger et ah, 2013). It is therefore pertinent to investigate the process of business model innovation in startups owned and operated by women entrepreneurs in a culture characterized by an institutional void.

The past literature has also emphasized the lack of research into digital startups, and maintains that existing studies are either nonempirical or based on firms that have not yet succeeded (Zaheer et ah, 2019). In our study, we therefore aim to explore business model innovation among successful digital startups run by women entrepreneurs in the context of a developing country characterized by an institutional void. In particular, this study will try to answer the question of how tech startups owned by women entrepreneurs evolve their business models as they grow and expand. A qualitative study was undertaken and three firms were selected that met the criteria set for the study: the firms chosen were successful digital ventures started by women entrepreneurs that were at an early stage of business development.

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