156830 Master Thesis Heaps
Total Page:16
File Type:pdf, Size:1020Kb
Copenhagen Business school 2016 Handelshøjskolen Master of Science in business administration and information System | IT management and business economics d Exploration And Exploitation In Rapid Growing Startups A theoretic approach on how startups can become sustainable and ambidextrous businesses. Authors: Niklas Frederik Kaden Jannis Leon Littmann Supervisor: Mareike Buss Date of submission: September 25th, 2016 Number of pages: 111 Number of Stu’s: 197.756 Copenhagen Business School 2016 | Cand.Merc. IT Abstract In this thesis, we analyze how startups can grow into ambidextrous organizations. The theoretical concept of ambidextrous organizations that master to exploit their core business, whilst exploring new market opportunities, has gained a lot of attention in the academic world. However, only in relation to legacy firms, which creates a gap in the existing ambidexterity theory, when it comes to startups. This paper seeks to fill this gap, by creating a theoretical framework, focusing on startups. Our approach is theoretical in its foundation and based on the combination of academic literature and (non-academic) startup literature. Throughout the thesis, we establish a view on ambidexterity and in this process we conclude that startups can follow two paths to grow into ambidextrous organizations. On the first path a startup focuses on an explorative strategy in its early days, where the second path is building on an exploitative early stage strategy. This finding is opposing a general misconception that startups by nature are explorative in their strategy. Correspondingly, to test our hypothesis and framework, the thesis moves from a more theoretical focus to the case study of the organization Heaps. The findings suggest that long term strategic positioning can be difficult for startups, as their focus will often be set on short term goals to survive. However, the findings also suggest that a path awareness and the knowledge of whether one’s strategy is more explorative or exploitative in its focus, can help the startup make decision that will increase the chances of survival and growth into an ambidextrous company. Furthermore, the thesis sheds light on the fact that startups have to become more aware of exploitative practices in order to balance a current overemphasis on explorative strategies. 1 Copenhagen Business School 2016 | Cand.Merc. IT TABLE OF CONTENT ABSTRACT.............................................................................................................................................. 1 TABLE OF CONTENT................................................................................................................................ 2 TABLE OF FIGURES ................................................................................................................................. 5 1. INTRODUCTION .................................................................................................................................. 6 1.1 MOTIVATION FOR THESIS..................................................................................................................... 6 1.2 THE TALE OF THE PAYPAL MAFIA ........................................................................................................... 9 1.3 PROBLEM FORMULATION................................................................................................................... 10 1.4 SETTING THE SCENE: AN EVOLVING TECH STARTUP WORLD.......................................................................... 12 1.5 RESEARCH QUESTION ....................................................................................................................... 18 1.6 SUMMARY..................................................................................................................................... 19 2. METHODOLOGY ............................................................................................................................... 20 2.1 RESEARCH PHILOSOPHY .................................................................................................................... 20 2.1.1 Research Approach and Strategy ........................................................................................... 23 2.2. DATA COLLECTION .......................................................................................................................... 24 2.2.1. Interviews ........................................................................................................................... 24 2.2.2 Observations ........................................................................................................................ 27 2.2.3. Quantitative data ................................................................................................................ 28 2.3. DATA ANALYSIS .............................................................................................................................. 28 2.4. VALIDITY AND RELIABILITY ................................................................................................................. 29 3. LITERATURE REVIEW......................................................................................................................... 31 3.1 ACADEMIC LITERATURE BACKGROUND .................................................................................................. 31 3.1.1 Strategic Management Literature.......................................................................................... 32 3.1.2 Strategy as Practice .............................................................................................................. 36 3.1.2.1 Recursive Tendencies of Practice ................................................................................................................................36 3.1.2.2 Adaptive Tendencies of Practice .................................................................................................................................37 3.1.3 Exploration and Exploitation in Organizational Learning ......................................................... 39 3.1.3.1 The Success Trap of Exploitation .................................................................................................................................40 3.1.3.2 The Failure Trap of Exploration ...................................................................................................................................42 3.1.4 Dynamic Capabilities and Organizational Ambidexterity ......................................................... 44 3.2 LITERATURE BACKGROUND ENTREPRENEURSHIP ...................................................................................... 49 2 Copenhagen Business School 2016 | Cand.Merc. IT 3.2.1 Part 1 - Entrepreneurial theory and its development ............................................................... 50 3.2.1.2 The old approach to entrepreneurship .......................................................................................................................50 3.2.1.3 A new approach to entrepreneurship .........................................................................................................................52 3.2.1.4 The influence of agile development on entrepreneurial literature ............................................................................54 3.2.1.5 The latest approach to entrepreneurship ...................................................................................................................55 3.2.2 Part 2: How to find the new and improve the existing ............................................................ 57 3.2.2.1 The customer oriented school.....................................................................................................................................58 3.2.2.2 The market oriented school ........................................................................................................................................62 3.2.3 Summary ............................................................................................................................. 65 4. THEORETICAL FRAMEWORK - TWO PATHS TO AMBIDEXTERITY ......................................................... 66 4.1 PATH 1: ‘NAILING VALIDATED LEARNING - CHEAP AND DIRTY!’ ..................................................................... 68 4.1.1 Phase 1 ................................................................................................................................ 68 4.1.2 Phase 2: ............................................................................................................................... 70 4.1.3 Phase 3: ............................................................................................................................... 71 4.2 PATH 2: ‘BENDING THE WORLD TO ONE'S WILL’ ....................................................................................... 73 4.2.1 Phase 1 ................................................................................................................................ 73 4.2.2 Phase 2: ............................................................................................................................... 74 4.2.3 Phase 3: ............................................................................................................................... 76 4.3 SUMMARY....................................................................................................................................