Frank Germann - On campus - Room T037

Marketing Research Seminar

Speaker:
Frank Germann

Professor Department Chair of Marketing at Mendoza College of Business (USA).

Title: 
Experimentation in New Product Launch: Testing the Effectiveness of the Lean Startup Methodology.

Abstract:

The lean startup methodology has emerged as a prominent approach for designing and launching new products, yet rigorous empirical evidence on its effectiveness in improving firm-level outcomes remains limited. While some scholars argue that its emphasis on customer feedback may stifle innovation, others contend that its focus on fast and frugal validation can enhance entrepreneurial decision-making. We address these competing views by examining the causal impact of the lean startup methodology on firm experimentation and financial performance using a randomized controlled field experiment with 1,024 entrepreneurs across eight cities in Uganda and Kenya. Entrepreneurs in the treatment group participated in an approximately eight-week lean startup accelerator, while those in the control group did not. Two years after the intervention, treated firms conducted, on average, 240% more experiments than control firms, and each additional experiment was associated with significant increases in monthly sales ($30.78) and profits ($10.33). Mechanism analyses show that experimentation mediates the effect of the intervention on financial performance. Consistent with this mechanism, heterogeneity analyses indicate that early-stage ventures benefit more from the lean startup methodology than older, more established firms. This study provides the first large-scale causal evidence on the effectiveness of the lean startup methodology using hundreds of firms operating under real-world growth constraints. In doing so, it contributes to the marketing, entrepreneurship, and development economics literatures and offers practical insights for founders and marketers engaged in new product development.

The paper is co-authored with Stephen Anderson (Texas A&M), Juan Espinosa-Balbuena (London Business School), and Sridhar Narayanan (Stanford).