Running head: ENTERPRENEURSHIP AND INNOVATION
Entrepreneurship and Innovation
Name
Institution
1
ENTERPRENEURSHIP AND INNOVATION2
Entrepreneurship and innovation
The Concept
The concept under consideration is a new ladies socialization and fitness center. The
Middle East has become a key international market in the growth wave of fitness and
wellness. However, most of the fitness clubs in the region are foreign owned and offer the
traditional wellness services without much differentiation. As such, this has created a niche
market for a differentiated fitness center that can cater for the needs that the existing centers
have failed to offer. Specifically, women have been at a disadvantage in their search for
fitness and wellness services because the existing facilities do not offer an opportunity for the
women to attend their sessions with their kids. Moreover, most of the fitness centers are
designed for adults (individuals aged 18 years and above) with minimal focus on the younger
age groups.
The fitness center offers unique features as compared to any other fitness center in the
Middle East. It has a section for individuals aged 18 years and above as a gym and fitness
class, it also has a section dedicated for ladies aged between 8 and 17 years with a gym, as
well as ballet and zumba classes. It offers recreation for all people in the form of a swimming
pool and a soft play area for children aged below 8 years. The section for children aged below
8 years allows parents to attend the gym sessions or classes with their children because the
children have an area that can occupy them. Moreover, the fitness center is fitted with a study
area in case the attendees also intend to study after their sessions at the gym or they have
been accompanied by friends who intend to study. Lastly, the facility has a health café
because its main focus is on healthy living. Essentially, the facility differentiates itself from
other fitness centers in the Middle East because the mothers can go into the center with their
kids without worrying. Moreover, the Middle East does not have a fitness center catering for
the needs of different demographics including individuals aged between 8 and 17 years.
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Analysis
The Lean Startup Strategy
The Lean Startup Strategy provides a framework for explaining the process through
which the organization implemented its strategy. The first part of the framework starts with
the formulation of a vision (Ghezzi, Cavallaro, Rangone, & Balocco, 2015). Learning was the
most essential part of the implementation process. Validated learning focused on the needs of
the customers so that the organization could offer practical improvements to its services.
Validated learning is supported by empirical data collected from the target customers.
Therefore, before the implementation of the fitness center, the organization engaged in a
collection of first-hand information from the target market (women). The information
allowed experimentation with different products during the initial implementation stage.
The experiment stage was crucial in testing the assumptions made regarding the
market. Two aspects of the experiment stage must be considered: value hypothesis and
growth hypothesis. The experimentation aimed at testing whether the services offered
delivered value to the target customers (value hypothesis) as compared to the competing
services in the market. On the other hand, it also aimed at discovering whether new
customers would discover the services, which would signify growth.
Stage Two of the Strategy involves steering the innovation through a feedback loop.
Minimizing the total time spent before the introduction of the services was one crucial feature
in ensuring the success of the idea. The learning milestones acted as an alternative to the
product or business milestones. In this case, the collection of information regarding the
progress of the business in terms of meeting its objectives enables a focused, accurate, and
objective assessment of the potential of the business. As a start-up, offering the fitness
services to women was a leap-of-faith considering the cultural background of the region
where women are often marginalized. However, the initial data collected helped in building
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customer archetypes that helped in crafting a strategy that would suit the operations of the
business.
Testing was used during the early stages of the business as the organization aimed at
continuous improvement of its products and services. Testing is based on the minimum viable
product, which helps in learning about the response of the customers towards the product.
MVP in this case was the initial services that differentiated the business including the study
area and the section for children aged below 8 years. The build-measure-learn feedback loop
helped in identifying the likeability of the services and the ability of the services to meet the
needs of the target customers. Constant search for feedback from the clients was used in the
learning process, which facilitated the improvement of the service offerings.
Measurements were crucial in identifying the direction of the business. Innovation
accounting was used as an underpinning strategy in discovering progress and areas that
require improvement. Innovation accounting is an alternative to the conventional accounting
processes. It starts with the assumptions underpinning the start-up, which are later quantified
into a financial model. The approach helped in the prioritization of decisions, deciding the
customers to be targeted, and maintaining constant feedback. The identification of progress
based on this approach helped in pivoting the decisions through additional investments of
effort, capital, and time aimed at the improvement of the services offered.
The third part in the implementation of the innovative idea involved acceleration.
Acceleration entails increasing the realization of benefits from the feedback loop. The first
aspect of this part involved reducing “batch sizes.” Essentially, the lean startup strategy is
based on lean thinking, which focuses on the conversion of the push methods into pull
methods and reduction of batch sizes. The reduction of batch sizes in this case involved
introducing the services slowly and systematically to identify the extent to which they suit the
needs of the target customers.
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The engine of growth was used as a mechanism to ensure sustainable growth. The
organization focused in four primary modes to ensure sustainable growth: word of mouth,
social media advertising, effects of the service usage, and membership subscriptions. WOM
is embedded in the growth strategy as a cause of customer satisfaction. Social media
advertising helped in creating awareness about the facility to the target customers. The effects
of service usage are tied with WOM in that the status associated with the usage of the
services drives awareness about the services because of the associated benefits. Promotions
through membership subscriptions also increased the growth of the company. A sticky engine
of growth was used in which the organization tracked the clients who remained engaged with
the services offered and the rate of new client acquisition.
The Blue Ocean Strategy
The Blue Ocean Strategy offers a unique differentiation strategy from the traditional
differentiation strategy in starting businesses. The traditional competitive strategies focus on
cost leadership, focus strategy and differentiation. However, the Blue Ocean Strategy as a
framework offers a stepwise framework for the implementation of innovative business ideas.
It focuses on value innovation in which a company competes in an uncontested market
segment. Moreover, it involves a “combination strategy” in which the business can pursue
differentiated products while controlling the costs. The “combination strategy” is achieved
through the delivery of features that provide the highest marginal benefits to the needs and
preferences of the customers (Kim & Mauborgne, 2014). The analysis below illustrates the
application of the Blue Ocean Strategy in the establishment of the fitness center.
Step 1a: Examination of the Industry and the Customers
What was working?
The fitness and wellness industry in the Middle East has been expanding over the past years.
Although the countries in the region account for a small proportion of the global wellness
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tourism, the domestic demand has been growing as people grow more health conscious. The
region is considered as the second fasted growing region in the fitness and wellness industry
across the globe. The incomes of the people in the region offered an opportunity for increased
spending on wellness and fitness.
What was not working?
Several aspects of the market provided the impetus for the innovative business opportunity.
First, the concept of wellness in the Middle East has often been associated with luxury
(relaxation and pampering) rather than holistic concepts of lifestyle services including fitness,
nutrition, and mental balanced. While the demand for healthy lifestyle activities and services
has been growing, the number of fitness centers capable of meeting the needs of the
population remains low. Second, the high costs of healthcare coupled with the lifestyle
diseases that have emerged because of rising incomes have not been addressed well through a
holistic fitness approach. As such, many people seek wellness or medical tourism services
abroad. Therefore, there is an inadequacy of services directed to meet the demand for fitness
in the country. Third, the demographic focus of the fitness center also proved to be working
against a significant proportion in need for fitness services. Specifically, the few fitness
centers do not provide additional facilities or services other than the traditional gym lessons
for adults. Moreover, they do not address the needs of mothers who may intend to visit the
fitness centers with their kids. As such, these women who do not have house helps are left out
from the fitness activities because they cannot leave their kids alone at home unattended to
attend the fitness activities.
Step 1b: Strategy Formulation
Focus: The focus of the fitness center was on reaching the underserved population in need for
fitness services through an inclusive center that allows the participation of different age
groups.
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Divergence: Commitment towards the improvement of health of the female gender, which is
the main demographic on which the center focuses.
Step 2: Decision on the Features to Add and Eliminate
Addition of Underserved Features
As identified above, the wellness industry in the Middle east has not been inclusive of the
female gender. Therefore, an innovative package of services was required to ensure the
inclusion of women and children in the fitness industry. The nature of the fitness center
indicates the underserved features added in the implementation of the strategy. The features
include the following.
A section for >18 year-old individuals with a gym and offering fitness classes
A section for individuals aged 8-17 years with a gym, as well as zumba and ballet
classes
A swimming pool to offer recreational services for the attendees
A soft play area for children aged below 8 years where women with kids can leave
their children while attending their sessions
A study area
A health café providing healthy foods and tips on healthy lifestyle
Elimination of Unnecessary Features
As stated above, the wellness industry in the Middle East is associated with
relaxation, which has led to increased emphasis on spas. However, the focus of the fitness
center deviates from this traditional view of wellness. Therefore, it excluded aspects of spas
where wellness focuses largely on relaxation. Moreover, it eliminated the need for hospitality
services or packages such as accommodation because it does not target only the tourist but
also the locals who do not need to reside in the facility during their sessions.
Results
The combination strategy used by the fitness center has enabled it to serve more than 500
customers per day. The trends in the operations show an increasing number of women in need
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for the services, although the capabilities of the facilities cannot handle an additional number
of customers per day. Over the past two years since establishment, the fitness center has been
able to reach its breakeven point and maintain high profitability and return on investment.
Conclusion
The analysis of the organization based on the lean startup strategy and the Blue Ocean
Strategy provides significant insights regarding the real life situation of starting a business.
The Lean Startup Strategy used reveals the importance of confirming the customers’ needs
and preferences rather than speculating. Essentially, face-to-face interaction with the target
customers enables an organization to identify a problem and device appropriate strategies to
solve the problem of the target market. Moreover, this strategy helps in understanding the
potential the market holds pertinent to their problems.
The strategy also reveals the importance of an MVP. The MVP helps in the validation
of the leap-of-faith assumptions. In turn, this can help an organization in readjusting its
product or service offerings as promptly before losing the market. The build-measure-learn
(BML) feedback is also revealed as a crucial element of the startup process. The loop enables
a business to turn its innovative ideas into actionable services products, as well as measure
the response of the customers to determine whether to preserve the strategies or pivot them. A
pivot is a change in the strategy in which the business can change its strategy in the market
based on the feedback it receives from the customers.
As such, the lean startup strategy deviates from the traditional conceptualization of
starting a business. In this case, the entrepreneurs understand that they have a short period to
implement their untested hypotheses. Rather than developing a complex business plan, the
entrepreneur summarizes those hypotheses through a business model canvas. The canvas
involves all aspects of the business including the value it adds to the customers. Additionally,
the lean startup strategy emphasizes the customer development approach in testing the
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hypothesis. The customer development approach involves collecting actual information about
the customers and using the feedback in aligning the products or service with the needs of the
market. Essentially, this requires agility and speed to ensure sustainable growth of the
business. The customer input helps in revising the assumptions of the business after which
the organization can go over the cycle again to test whether the new hypotheses make
significant impact on the position of the organization in the market.
The Blue Ocean Strategy is the main idea used in the planning and implementation
process. From a general perspective, the use of the strategy requires examining the customer
needs, studying their potential, and structuring the services or products to meet those needs. It
creates a new value curve based on four aspects. First, it focuses on the elimination of the
factors through which the existing players have competed in the industry. Second, it raises
the factors that improve competitiveness above the industry standards. Third, it helps in
focusing on the reduction of the factors considered to be below the industry standards. Lastly,
it enables the entrepreneur to create the factors that the industry has not experienced before.
The implementation of an innovative business idea through the Blue Ocean Strategy
helps in mass market through the transformation of the extremes. The extremes refer to the
actions or people that have disproportionate influence on the performance of the business.
Offering a unique service can help in tipping the balance of the market in that the people with
the disproportionate influence can help sustaining the profitability of the firm. Similar to the
lean Startup Strategy, the Blue Ocean Strategy helps in changing the core market rapidly
through low cost execution. In other words, coupling the two strategies through agility can
reduce the costs such as those associated with reinventing the services in case the initial
services fail to attract an adequate number of customers. The strategy also helps in the
identification of the factors that can have a disproportionate effect on the performance of the
organization. The value curve of the Blue Ocean Strategy can be achieved through the
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learning process ensured by the Lean Startup Strategy. Therefore, the execution of the Blue
Ocean Strategy requires the alignment of people, value, and profits.
The strategy helps organization in achieving differentiation at low costs. The strategy
breaks the value-cost tradeoff emphasized in traditional approaches through the elimination
or reduction of the factors that companies compete through within the industry and creation
of factors that the industry has not experienced in the past. Ultimately, the differentiation
ensured through this strategy helps in the creation of an uncontested market space for an
organization. It prompts organizations to create a new demand and generate high profitability
through focusing on services or products that the existing players in the industry have not
used. Lastly, the application of the two strategies helps in the minimization of risks and
maximization of opportunities. The agile approach to the introduction of services or products
helps in adjusting the offerings to suit the needs of the market.
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References
Kim, W. C., & Mauborgne, R. A. (2014). Blue ocean strategy, expanded edition: How to
create uncontested market space and make the competition irrelevant. Harvard
business review Press.
Ghezzi, A., Cavallaro, A., Rangone, A., & Balocco, R. (2015, April). A Comparative Study on
the Impact of Business Model Design & Lean Startup Approach versus Traditional
Business Plan on Mobile Startups Performance. In ICEIS (3) (pp. 196-203).