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The lean impact startup framework: Three steps to fuel positive societal changeÂ
Based on a study co-authored with Stephanie Wang, Sophie Bacq explains why we need a new understanding of the lean impact startup and how it can contribute to solving the grand challenges confronting the world today.
Societal grand challenges are complex, systemic issues with multifaceted, unclear causes and effects. Scholars have long debated how to enhance academic research to help solve climate change, water pollution, systemic poverty, inequality, and global health crises.
One potential way forward to address societal problems is to integrate academic concepts with practitioner-focused theories validated by practitionersâ experiences. To this end, Stephanie Wang from Indiana University and I have devised the lean impact startup framework, which merges the conventional lean startup approach (emphasizing experimentation, iterative learning, and customer-centric innovation) with new principles of stakeholder theory.
Our framework, unique in its active consideration of diverse primary stakeholders, serves as a transformative bridge to help close the divide between scholarly research and tangible, real-world impact.
Beyond the conventional lean startup
The lean impact startup framework extends the conventional lean startup approach in three ways:
- It actively considers diverse primary stakeholders (individuals or groups with a direct stake in the startupâs business model) and encompasses their diverse interests, values, and perspectives.
- It extends the two-step conventional lean startup approach by proposing three steps centered on what primary stakeholders value.
- It systematically accounts for multiple outcomes, including economic, social, and environmental value.
If they don't effectively balance value distribution among primary stakeholders, lean impact startups are more likely to fail.
Three-step process
The lean impact startup framework consists of a three-step process: value search, value creation, and value distribution.
Step 1: Value search through empathizing
Value search is about identifying all stakeholders concerned by the societal issue. A unique aspect of lean impact startups is the sheer number and diverse make-up of their primary stakeholders. The lean impact entrepreneur thus needs to begin by mapping all stakeholders for whom they intend to create value. Once they have iterated a few times to identify these, they can engage in âempathy mapping.â This helps the entrepreneur gain a deep understanding of the problem from the perspective of the individuals, communities, and other stakeholders it affects.
Empathizing aims to verify assumptions about who the primary stakeholders are and gain clarity on what value they desire. It is important to emphasize that, in the lean impact startup framework, value-based decisions are not made primarily from an organizational perspective but in relation to the problem and its solution. This is because the raison dâĂŞtre of the startup is to address a human or environmental grand challenge and ensure that the value it creates reaches its target users. By contrast, initiatives based on unverified assumptions risk doing no good at all and can even be harmful.
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Step 2: Value creation through integratingâŻ
This step consists of two iterative phases. The first phase consists of creating value for primary stakeholders. This is likely a mix of economic, social, and environmental values. By engaging iteratively with the set of primary stakeholders, in this phase, the entrepreneur addresses the question: What value mix should be created?âŻ
The second phase consists of designing a scalable, replicable business model that can support the creation of social, environmental and economic value. Beyond its core mission of bringing about positive societal change, the startup needs to generate revenue by selling products and services, whether related to the core mission or not. We call the mechanism underlying value creation âintegrating.â
Value creation, therefore, relies on the entrepreneurâs ability to harmonize various aspects of operations to achieve multiple objectives. This involves seamlessly integrating the social, environmental, and economic dimensions of a startupâs mission and activities to maximize positive impact.
âAlthough value creation needs to happen before value can be distributed, feedback loops exist from value distribution back to value creation.â
Step 3: Value distribution through balancingâŻ
This step also consists of two iterative phases. The first is about finding a balance between multiple stakeholdersâ interests in such a way as to prioritize which stakeholders to distribute the value to. This begs certain questions: Who should get the value first â the communities or the financial supporters? Could the product (such as the portable toilet in the example above) be distributed first, and the investors paid later? What is the appropriate approach?
The answer lies in balancing blended goals. Such a balancing act requires the lean impact entrepreneur to (a) not lose sight of their mission, which serves as a compass, and (b) keep generating enough revenues to support sustained execution for all stakeholders. The goal of balancing is to adjust or manage the value distribution process, ensuring the stability and viability of relationships with all primary stakeholders. Lean impact startups that do not effectively balance value distribution among primary stakeholders are more likely to fail.
It is important to note that value creation (Step 2) and value distribution (Step 3) are not entirely sequential. Although value creation needs to happen before value can be distributed, feedback loops exist from value distribution back to value creation. This interconnectedness emphasizes the dynamism and experimentation inherent in the lean startup approach, which fosters a responsive and evolving model of entrepreneurship for positive societal change.
Pursuing economic and non-economic value creationâŻ
It is also key to note that the core of the lean impact startup framework lies in the pursuit of both economic and non-economic value creation. This process involves continuous feedback and adjustment, reflecting a dynamic negotiation between competing demands. This tends to reduce uncertainty and promote collective learning at a relatively low cost. Thus, instead of seeing value distribution as a zero-sum game, the lean impact startup framework views it as a collaborative and mutually beneficial process involving active stakeholder engagement over the long run.
We thus encourage lean impact startup entrepreneurs to co-create solutions with their multiple primary stakeholders, ensuring that the resulting value is not only generated fairly but also distributed equitably. The iterative, feedback-driven nature of the framework ensures that this value distribution is continuously refined based on stakeholder input, thereby striking a balance between the needs of the community and the expectations of other stakeholders.âŻ
The lean impact startup framework maps out a continuous and interactive experimentation process that involves stakeholders throughout. This is crucial because the framework promotes efficient and adaptive approaches to complex problems, thereby increasing the likelihood of creating a lasting positive impact.
This article is based on a research paper by Sophie Bacq and Stephanie Wang of Indiana University entitled âThe Lean Impact Start-up Framework: Fueling Innovation for Positive Societal Change,â published in Journal of Management, April 5, 2024.
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