Lean internal startups: empowering software product innovation in large companies

Context: Developing product innovation is a risky activity, but when successful, it enables established and large companies to create new market and entry barriers, to challenge market leaders, to accrue high products and to leapfrog the competition. To compete in this age of disruption, companies can no longer rely on the traditional way of advancement, which focuses on cost efficiency, lead time reduction or quality improvement. Startups are disrupting traditional markets and replacing well-established actors with their innovative products. Corporate management is now looking for ways to innovate like startups. Along with it, awareness and use of the Lean startup approach has recently grown rapidly within the software startup community and among large companies. Objective: The aim of the research activities undertaken during this PhD study was to understand better how the Lean startup-based internal startups (or the Lean internal startups) empowers software product innovation in large companies. Method: A multiple-case study approach was followed in the investigation. Five software product innovation projects from four different companies were investigated. Twenty-three indepth interviews were conducted with employees with different roles and responsibilities. To guide the study process, a conceptual framework based on the method-in-action framework and the ICV framework were developed. The conceptual framework serves as the theoretical lens for the investigation of the case, acting as a sensitising and sense-making device that guides the data collection and analysis processes. It is used to frame the interview questions, and enables a holistic understanding of the dynamics between an internal startup and other entities inside a company. Results: The case study results show that Lean internal startups can be initiated either bottomup by the employees (free initiative) or top-down by the corporate management (organised initiative). Free initiative is influenced by the founder who owns the original idea and defines the scope. An organised initiative is a strategic exercise looking at growth and revenues beyond the current offer. The top-down approach faces the issue that there is no founder with a vision for the new product. Hence, the Lean internal startup searches for a real problem, and an idea to solve this problem. In this ideation process, Design Thinking can complement the Lean startup approach. A list of enablers and inhibitors for applying the Lean startup approach in large companies are identified: top management support and cross-functional teams are key enablers, whereas strategic change and lack of top management support are the common inhibitors. Conclusions: A generic process flow summarises the common key processes of Lean internal startups in the context of large companies. In addition, a set of the enablers and the inhibitors for applying the Lean internal startup approach have been identified. They are rooted in the method-in-action framework and result from the empirical study of a real-world software product innovation process using the Lean startup approach. Three future research directions are suggested. The first is to extend this study by addressing the limitations of the research approach. Secondly, future research should perform a quantitative study to investigate the impact of Lean internal startups to the success of software product innovation (SPI) in the context of large companies. A third and final suggestion is to perform an in-depth study to establish the cause-effect relationships between innovator skills and traits and the success of Lean internal startups.