Entrepreneurs face a constant barrage of choices, often in situations with limited information. Many rely on intuition or gut feelings, but research suggests that a more systematic approach can lead to better outcomes.
A new study published in the Strategic Management Journal (SMJ) by researchers from Bocconi University (Italy), IE University (Spain), University of London (UK), Politecnico di Torino (Italy), and INSEAD (United Arab Emirates) explores the concept of a “scientific approach” to entrepreneurial decision-making and the potential benefits it offers.
The problem: intuition versus science
Traditionally, entrepreneurs have not always followed structured methods for decision-making. Studies show that they may even neglect basic steps to validate their ideas.
While intuition can be valuable during the development of a startup, it can also lead to costly mistakes. Studies reveal that entrepreneurs often do not validate their ideas before heavily investing in them. This highlights the need for frameworks that can enhance the quality of strategic choices.
The scientific method for startups
A scientific approach encourages entrepreneurs to be more critical thinkers. Here is the process:
- Identify a problem: Start by defining a clear problem you want to solve.
- Develop a hypothesis: Formulate a hypothesis about why your solution would work.
- Make predictions: Based on your hypothesis, predict the outcomes of different actions.
- Test your predictions: Rigorously test your predictions to see if they hold true.
This approach mirrors how scientists conduct research. It leverages established business frameworks and emphasizes the importance of experimentation to reduce uncertainty.
A large-scale study shows the benefits of scientific entrepreneurship
This recently published study, involving more than 750 companies in four randomized control trials, investigated the impact of a “scientific approach” on entrepreneurial decision-making.
The study divided entrepreneurs into two groups. One group received training in the scientific approach, while the other continued with their usual methods. The results are promising for aspiring business owners.
Key findings:
- Better idea evaluation: Entrepreneurs trained in the scientific approach were more likely to abandon ideas with low potential. This suggests new efficiency in eliminating less promising ventures and focusing resources on stronger concepts.
- Focused pivots: Companies using the scientific approach were more likely to make focused pivots, meaning they made significant changes but stayed within the core direction of their initial concept. Companies using a scientific approach were more likely to make some strategic changes, rather than sticking to a failing strategy or constantly changing direction.
- Stronger performance: Companies using the scientific approach showed signs of better overall performance.
These findings suggest that a scientific approach can lead to more informed decision-making and ultimately improve the success rate of startups.
Why science works for startups
Researchers propose two reasons why a scientific approach benefits entrepreneurs:
- Greater search efficiency: Like scientists, entrepreneurs using a data-driven approach can become more efficient at identifying and evaluating potential business ideas.
- Methodical doubt: The scientific method emphasizes questioning assumptions and considering alternative possibilities. This “methodical doubt” can help entrepreneurs avoid clinging to failed ideas or making hasty decisions based on gut feelings.
The study suggests that “methodical doubt” might be the strongest mechanism leading to project termination. However, “efficient search” likely plays a role in focused pivoting.
How can you incorporate a scientific approach into your startup?
- Develop a hypothesis: Clearly define your initial assumptions about your target market, product-market fit, etc.
- Test and refine: Design experiments or gather data to test your hypothesis. This might involve A/B testing marketing campaigns, user surveys, or customer interviews.
- Analyze and adapt: Don’t be afraid to adjust your course based on the data. If your hypothesis is incorrect, change your strategy, but do so based on evidence, not hunches.
Conclusion for aspiring entrepreneurs
This research offers valuable insights for both entrepreneurs and the field of entrepreneurship research:
- Systematic replication: It emphasizes the importance of replicating studies to solidify findings and increase generalization.
- Scientific reasoning for entrepreneurs: It demonstrates the effectiveness of training entrepreneurs in scientific reasoning, leading to positive outcomes.
- Mechanisms of action: The study proposes two mechanisms by which the scientific approach works: efficient search for solutions and methodical doubt about assumptions.
This research paves the way for further exploration of the scientific approach and its impact on entrepreneurial success. By adopting a more scientific mindset, entrepreneurs can increase their chances of making sound decisions and navigating the inherent uncertainties of the startup world. Additionally, you can employ tools like Design Thinking to scale research into innovations.
The study was funded by ICRIOS—Invernizzi Center for Research in Innovation, Organization, Strategy & Entrepreneurship at Bocconi University, the Innovation Growth Lab, the Strategy Research Foundation, the Department for Business, Energy and Industrial Strategy of the UK Government, City, University of London, The Italian Ministry of Education, Universities and Research, and the Polytechnic of Turin.
Contact
Arnaldo Camuffo
Department of Management and Technology and ION Management Science Lab—SDA Bocconi, Bocconi University
Via Roentgen 1, 20136 Milan, Italy.
Email: arnaldo.camuffo@unibocconi.it
Reference (open access)
Camuffo, A., Gambardella, A., Messinese, D., Novelli, E., Paolucci, E., & Spina, C. (2024). A scientific approach to entrepreneurial decision-making: Large-scale replication and extension. Strategic Management Journal, 45(6), 1209-1237. https://doi.org/10.1002/smj.3580
