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Study summary

Scientific approach training for microbusinesses

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In the short run, businesses at higher stages of development benefit more from being trained on how to implement a scientific approach to business decision-making.

General description

Training on how to use a scientific approach to decision-making is embedded in a seven-session strategy training programme for micro firms.

Benchmark programme

A 21-hour strategy training programme divided into seven three-hour sessions that trains entrepreneurs how to make informed decisions about their businesses through cognitive-based strategies and tools (like the Business Model Canvas or the Balance Scorecard) and evidence-based strategies (like data collection and testing techniques). The training programme takes place over three months.

Aim

  1. To help founders to make better decisions regarding the development of their business
  2. To improve microbusinesses’ performance

Context

This intervention was tested as part of a strategy training programme for microbusinesses.

Participants

Entrepreneurial firms with fewer than 10 employees and at varied levels of business development. Participating firms operate in a wide range of sectors, from software to retail, and on average have existed for slightly less than three years.

On average, firms have two members participating in the training as a team. About 46 per cent of participants are women, the average age is 36 years old and team members dedicate an average of 30 hours a week to the business. A third have a STEM background and a sixth an economics background.

Tweak

Half of the participants are trained how to use a scientific approach to apply the tools presented during the training sessions. That is, to explicitly formulate theories about their business models, break them down into separate hypotheses and collect adequate data to test their validity. The other half are left to follow their own intuition to decide how to best apply the tools presented during the training.

Results

  • Firms receiving the scientific approach version of the training were more likely to terminate all activities related to their business (‘exit’) within the nine months following the start of the training.
  • Firms taught the scientific approach to decision-making were more likely to pivot only once, as opposed to not pivoting or pivoting several times.
  • Adding the scientific approach component to the training didn’t have an effect on the average revenues, costs and value added for participating firms within the first eight months after the training.
  • However, the training raised the revenues, costs and value added of firms that were already more established, with increases of US$27,000, US$23,000 and US$3,000, respectively, for a firm with initial annual revenues of about US$83,000.
  • Entrepreneurs at a more advanced stage of development pivoted more but engaged in less radical pivots such as changes to the value proposition or customer segment. This suggests that more established businesses benefited more from the scientific approach training because they were able to apply it in a more focused and contextualised way.
  • The scientific approach led to an increase in the number of employees for firms at all developmental stages within the first eight months, thus leaving open the possibility of further effects on business performance beyond the observation window.

Policy implications

  • In the short run, more established firms seem to benefit more from the training on how to use a scientific approach to decision-making.

Full study