Lean start-up, entrepreneurship and remote orientation: The experience of action research in Manaus, Brazil

2.1 Ecosystem for entrepreneurship, start-ups and particularities for emerging and regional markets

Moore (1993) pioneered the term “ecosystem” when defining the business ecosystem as its external environment. Entrepreneurial ecosystems are vital since they reduce a nation’s economic gap (Stam & van de Ven, 2018). However, despite such importance, entrepreneurship and its ecosystem are most understudied in developing countries because scholars and practitioners assumed that “entrepreneurship is the same the world over” (Lingelbach, de la Viña, & Asel, 2005); however, understanding entrepreneurial ecosystems in emerging economies is imminent for both entrepreneurship scholars and policymakers (Cao & Shi, 2021, p. 76).

For example, the works of Teece (2007) on the relationship between the dynamic capabilities of the enterprise and entrepreneurial ability; and of Bahrami and Evans (1995), who consider that regardless of the size of the company, its location or context, companies can be flexible if the organizational system is aligned with a “rapid-change, maneuver” practice, are among the most cited works regarding entrepreneurial ecosystems and give the necessary attention to regional differences.

The study of the particularities of emerging economies’ entrepreneurial ecosystems conducted by Cao and Shi (2021) pointed out three constraints or barriers: the presence of institutional voids, resource scarcities and structural gaps.

Isenberg (2010), when prescribing “how to create an entrepreneurship ecosystem,” mentions that actors should not emulate Silicon Valley and instead need to strongly shape the ecosystem around local conditions. “The most difficult, yet crucial, thing for a government is to tailor the suit to fit its own local entrepreneurship dimension style (…) and leaders can and must foster homegrown solutions (…) based on the realities of their own circumstances (…)” (Isenberg, 2010, p. 4).

Isenberg (2011) proposes six “Domains of the Entrepreneurship Ecosystem”: (i) policy, (ii) finance, (iii) culture, (iv) supports, (v) human capital and (vi) markets, gathered from entrepreneurs’ perceptions, which impact their decisions and success (Figure 1).

“Policy” regards the role of government, which includes a clear regulatory framework and venture-friendly legislation (e.g. intellectual protection laws, contract enforcement), unbureaucratic processes (to start a business, less paperwork and procedures), financial incentives (tax incentives) and the existence of public research and investment institutes. “Finance” is the domain that touches the availability of money to fund the start-ups. These sources can come from private equity, angel investors, micro-loans, debt, venture capital funds, seed capitals, to name a few. “Culture” represents the characteristics of a group regarding their appetite for risk, ambitiousness, the relevance of social status, the importance of reputation and generation of wealth. ‘Supports’ encompasses the public and private institutions that provide the necessary stimulus to start-ups’ growth, like lawyers, incubators, accelerators, as well as the functions required to establish a company, for example, accountants and lawyers. ‘Markets’ regard the available audience ready to acquire products and services and provide reviews and feedback on them. The market also includes the network of firms or entrepreneurs that can disseminate the product or service. Finally, ‘human capital’ refers to the available human resources and the respective academic and professional background, soft and hard skill levels, which, in turn, include the degree of training in entrepreneurship.

This research focus on the ‘human capital’ aspects, based on the proposition that the lack of knowledge, especially related to the lean start-up and lean development, means that entrepreneurs are unable to see all the domains of the ecosystem proposed by Isenberg (2011), leading them to ineffectively spending resources. Lean start-up is defined by its pioneering practitioner and disseminator Eric Ries as “a new approach to creating continuous innovation” (Ries, 2012, p. 4), and he adds further in his leading-edge text that the lean start-up is “the application of lean thinking to the innovation process” (Ries, 2012, p. 5). Ries focuses on innovation because start-ups offer new products and business models by constantly dialoguing with their consumers to find possible repeatable and scalable business gaps. According to Blank (2013), one of the main differences between a start-up and an existing company is that, while the traditional company only executes a business model, the start-up looks for new business models.

It is possible to suggest that the human capital aspect explored in the research can be related to the institutional voids, resource scarcities and structural gaps proposed by Cao and Shi (2021). In this context, the difficulties in emerging regional centers – like Manaus, characterized by the absence of specialists and a feeble market for technical support in business modeling – can be compensated by extra support from institutional cooperation like the partnership between INPA and Universidade de São Paulo.

2.2 Entrepreneurship in Manaus region and remote orientation

As previously discussed, Isenberg’s proposed model is not fully applicable to some emerging markets such as Manaus. These entrepreneurs are ‘encapsulated’ in the human capital domain since this would be the most (and only) existent and reliable domain for the entrepreneur in that market. Therefore, human capital is isolated from other domains of the ecosystem (Figure 1), despite being one of the weaknesses in the entrepreneurial ecosystem in Brazil (Junior et al., 2016). Bluntly put, from these entrepreneurs’ standpoint, there is no awareness of an ecosystem existence.

In this sense, the research of Marvel, Davis, and Sproul (2016) brings a relevant contribution. Their findings show relatively few works regarding the early stages of entrepreneurship, despite the theoretical emphasis on opportunity recognition and venture creation in this field. Marvel et al. (2016) focus on the human capital approach to enhance their understanding of the variables related to the entrepreneurship opportunity to develop this idea.

Human capital (domain) exercises a relevant influence on entrepreneurship’s stage of ‘opportunity recognition’ – the conscious realization that an idea may be transformed into a business concept that adds value (Marvel et al., 2016); ‘venture emergence’ – a gradual and an iterative process, in which nascent entrepreneurs continuously evaluate the prospects of their opportunities (Dimov, 2010); and ‘venture outcomes’ – results of the venture, like growth in sales and profitability (Marvel et al., 2016).

Therefore, an effective mentoring process is required considering the importance of human capital’s influence on entrepreneurship. The work of Deakins, Graham, Sullivan, and Whittam (1998) evidenced that the entrepreneurs consider mentoring as the most important source of advice – 69% of entrepreneurs mentioned having an “excellent relationship with their adviser,” and 43% reported that “the mentoring relationship had made a substantial difference on the ability to achieve objectives.”

However, in the pandemic context, the face-to-face mentoring process met barriers, requiring mentors and mentees to look for new alternative interactions, like remote orientation and interactive distance learning. For Stokes (2001, p. 322), “The enormous advantage of interactive distance learning approaches is the flexible nature of delivery which suits busy time schedules and ad hoc questioning, and reflects the kind of informal, on-the-job approach to learning (…).” Furthermore, in a vast country like Brazil, with significant disparities in opportunities, the integration of businesses, research and knowledge exchange could be facilitated with remote orientation and distance learning solutions.

Considering the initial research question and the reflections that followed in the light of the theoretical foundation of the entrepreneurship ecosystem, pointing to the particular fragility in the formation of human capital, the basic question was transformed into a more objective proposition to guide the experiment:

Then, depending on the proposition, there would be a need to define the conceptual basis by which entrepreneurs would be guided. As a matter of research opportunity, described in detail in the Methodology section, the lean start-up orientation model, established in the literature and entrepreneurship practice, was chosen as the conceptual framework to conduct the orientation.

Considering the above proposition, the research will be framed based on the particularities of entrepreneurship in Manaus. Thus, the action research method combined will the conduction of a case study on three groups of entrepreneurs will explore the importance of remote orientation in developing the human capital domain of entrepreneurship.

3.1 Phase 1: conduction of an action research

In general, action research is appropriate to unfold actions over time in a given group, understand how and why their action can improve the work system and understand the improvement process to learn from it (Coghlan & Brannick, 2001). It can generate theory through practice, influencing social changes (Brydon-Miller, Greenwood & Maguire, 2003).

In this first phase, three entrepreneurs were mentored through the project team assigned by Researcher ‘A’. Researcher ‘B’ selected the entrepreneur groups in Manaus area and those with a relationship with INPA and Universidade Federal do Amazonas. In addition, selected projects received the mentoring of graduate students from Universidade de São Paulo.

The first entrepreneur group (E1), “Biojoias da Amazônia” (Amazon’s Biojewels), has the objective of offering a product that represents the valorization of local culture through the pillars of sustainability and the culture of the Amazon, favoring the economic and social well-being of the communities where each unique piece is produced. The second entrepreneur group (E2) aims to launch a vegetal oil extracted from the Murumuru plant (Astrocaryum murumuru), adopting sustainable organic extraction, using nanotechnology to improve product performance and redesigning the value chain to integrate the local community in a more inclusive manner. Finally, the third selected entrepreneur group (E3) proposes producing and commercializing a new food supplement based on microalgae from regional raw materials, aiming at athletes’ niche market.

All projects were in the same development stage, named ‘ideation’ in the start-up literature (Ries, 2012; Torres Junior & Gama, 2020). Entrepreneurs were stimulated to detect opportunities to model regional businesses and establish an initial proposal, making efforts to start the implementation and operation of the businesses. However, without further structuring, these efforts would lead to failure and waste of resources (Torres Junior & Gama, 2020). E1, E2 and E3 entrepreneurship were representative cases of the local scene in which the entrepreneurs had technical but insufficient knowledge about business structuring. It characterizes incomplete human capital domain development from Isenberg’s (2011) entrepreneurship framework.

The action research aims to simultaneously contribute to both people’s practical concerns in an immediate problematic situation and further goals of social science. Therefore, the action research would give the groups the hypothesis’s assessment and signal the need to move toward a minimum viable product (MVP) or pivot to another hypothesis, avoiding the waste of resources on formatted ideas with a low probability of success. The MVP was synthesized in a business model to highlight the launching strategy.

3.2 Phase 2: conduction of case study

Semi-structured interviews took place with the group of entrepreneurs to gather the descriptions of the phenomena – the results of remote orientation regarding entrepreneurship. Each interview took around 90 minutes and aimed to catch the perceptions of entrepreneurs regarding the effectiveness of remote orientation, feelings about their knowledge regarding entrepreneurship and start-up concepts and their opinion about the perspectives after the orientation period. The objective was to evaluate the perception and knowledge demonstrated by the entrepreneurs about the entrepreneurial action applied to their reality. Therefore, there was no goal of evaluating the lean start-up model as an object. Instead, the objective was to evaluate whether remote orientation promoted changes in the qualification of human capital using a well-established model in the case study of lean start-up. Interviews were recorded and further analyzed independently by Researchers ‘B’ and ‘C’. Additionally, documentation produced during the remote orientation was obtained, such as business model canvas, A3 sheet and slide decks used in pitches. This documentation is essential to compare and spot differences in the orientation approach received by each group of entrepreneurs.

Qualitative data obtained from the transcripts of the recorded interviews were organized and coded, creating categories. Categories, in turn, formed the themes used to create reflections of researchers’ interpretation of patterns across data gathered from entrepreneurs. Qualitative analysis inevitably involves subjective choices and, therefore, the research documented the procedures in detail so that a clear audit trail is provided.

The examination will support the purpose of this study, which is to understand the encapsulation of Isenberg’s human capital domain in entrepreneurship and to sustain our proposition (P1 – Can remote orientation qualify entrepreneurs to structuring a business, avoiding the waste of time and resources?).

5.1 Data gathering

In typical action research, data come from active involvement, observation, intervention and researcher participation in day-to-day activities. However, this research is based on a remote orientation approach which requires adaptations to be made on that process. Therefore, mentors gathered data from online interviews, remote observation of the production process and observing pictures of the product or process taken by the entrepreneurs. In addition, researchers held four virtual meetings with the entire group of entrepreneurs, and three to four additional meetings were held between each group of entrepreneurs and researchers. Each meeting lasted two to three hours, from September to December 2020. In the intervals between meetings, researchers guided the entrepreneurs groups in collecting data and on facts to build and evaluate the hypothesis of the projects’ value and analyzed them together.

The remote orientation procedure was evident in the process involving ‘E2’ and mentors to explain the harvest, transportation and oil extraction process of Astrocaryum murumuru. The remote observation allowed mentors to understand the hurdles to harvest (only harvesting what falls on the ground is allowed); to transport (harvesting area can be 2 miles, more than 3 kilometers, far from the dispatch area, in a closed forest, meaning that transportation is done by human force); and to extract oil (not the most efficient machines and devices available, and unstable supply of electricity).

On the other hand, still in E2 case, the entrepreneurs realized that it would be useless to buy new equipment (initial idea) if these craftworks were not standardized. Each member performed differently, and there was disagreement about what could be mechanized or what should remain artisanal. Also, the mentors showed, through videos, applications of specific devices in the forestry activity whose execution would not harm the intended natural and artisanal harvest.

5.2 Data feedback

Mentors and entrepreneurs analyzed the data collected from the sessions and the product value validation process, transforming them into a business concept. Finally, mentors adapted the product and idea according to their view on how the products can have a higher success rate in the most promising markets in Brazil and the world. These ideas and findings were then shared with entrepreneurs in Amazonas using business tools and templates, such as the A3 sheet and business model canvas. The data below demonstrates the change in obtaining primary market data sources.

1. E1 (Biojewels)

   • Before remote orientation: General sales data in the researched market based on Internet sales exploration.

   • After remote orientation: Data from distributors of ecological and natural products in the southeast region and for export.

2. E2 (Murumuru plant oil)

   • Before remote orientation: Historical data of the coop’s sales to local intermediaries.

   • After remote orientation: Data on national trade, sources and uses were obtained in a study by EMBRAPA (Brazilian public agricultural research corporation).

3. E3 (microalgae)

   • Before remote orientation: Historical sales data from local producers.

   • After remote orientation: Cosmetic industry demand data obtained indirectly, through advertised products information.

During the interviews, entrepreneurs reported not having a business background; most of them have a background in biological studies, education and engineering. Therefore, the data feedback was necessary for these entrepreneurs to contact business management tools first. According to E1, due to my academic background in non-business-related majors, the market vision was too narrow, and for E3, I was not aware of most of the market data sources used in the business model canvas. Actually, the business model canvas was a novelty for me. Finally, according to E2, most approaches were a novelty for the group. These findings corroborate the importance of constant dialogue of the business model with the market demand to find possible scalable business gaps as preconized by the lean start-up model (Ries, 2012; Torres Junior & Gama, 2020) and pieces of evidence of model’s contribution to entrepreneurs, through the remote orientation process.

5.3 Data analysis

Using a collaborative approach, building on the idea that entrepreneurs are the ones who best understand the Amazon values, local restrictions and potential, mentors and mentees discussed the ideas created in the previous steps. This collaborative analysis and understanding of data were more evident in the microalgae business than in others. However, the definition of the product took longer in this business. According to ‘E3’, it was challenging to match the concept of a product with good penetration in the market and a product that can be produced sustainably, aligned with our values.

5.4 Action planning

Action planning consisted of a joint activity where entrepreneurs and mentors created a work agenda to deliver a solid business plan. In this phase, participants set up the communication management plan, fixed the follow-up meeting dates and established the project’s milestones and each part’s responsibility to complete the task. Based on our interviews, E1 and E3 expressed a clear understanding of the importance of action planning, whereas E2 had no such precise planning – unfortunately it was not possible to assess if the mentors’ explanation was flawed. This fact shows that the experiment with remote orientation focused only on the first phase – structuring the idea – despite having impacted groups E1 and E3; in the case of E2, it required extended remote orientation to the following phases to deal with emerging issues that still needed to be monitored by mentors.

Based on the interviews, business culture and values were the most challenging aspect in all three cases. Entrepreneurship and business concepts encountered barriers regarding how different cultures deal with business and do business. Speed, approach, philosophy, holistic view and respect for the traditions are variables that we can learn, as mentioned by E1. The data below compare these perspective changes in planning of actions before and after the remote orientation process:

1. E1 (Biojewels)

   • Before remote orientation: Must respect the time of traditional people for the collection of seeds.

   • After remote orientation: People's time can be planned together with them and put on a schedule.

2. E2 (Murumuru plant oil)

   • Before remote orientation:- Buying equipment can distort the tradition and culture of the cooperative members.

   • After remote orientation:- The way in which the culture of the people performs the extraction can be helped by friendly equipment and devices without aggression to nature.

3. E3 (microalgae)

   • Before remote orientation: Farms with microalgae activities already exist, and they know the business.

   • After remote orientation - Microalgae are cultivated on different scales and purposes, and current growers want new purposes that require adaptations.

The results of this phase strengthen Isenberg’s proposal that other governments and countries should not emulate the Silicon Valley entrepreneurship model and instead the ecosystem should be shaped around local conditions (Isenberg, 2010). The Amazon region has its own culture, beliefs, traditions and a strong connection with its people’s roots. Therefore, aligning the mainstream ideas of business models with these cultural aspects is a challenge for entrepreneurs in the Amazon region, as mentioned by E2.

5.5 Implementation

Entrepreneurs and mentors built the concept papers of their respective businesses (A3 concept paper) and slide decks to use in the pitch. Although the tangible outcome was very similar among the three businesses, the content and approach varied significantly. For example, while E1 and E3 focused on aspects like product vision, key product attributes, customer segments, competitors and strategies to launch the MVP and pivoting, E2 focused excessively on the technical aspects of the product and the production chain.

These results are connected with information captured during our interviews. E1, working with Amazon’s Biojewels, stated that I honestly had many difficulties understanding these concepts of entrepreneurship because my field of study is education and teaching, not business. In this sense, E1 mentioned that it was very fruitful to absorb the critical concepts of starting a business despite the short length of the remote orientation. On the other hand, unlike E1, it was explicit that E2 found some difficulties in incorporating the foundations of entrepreneurship during the interview. The semi-structured interview script was designed to stimulate entrepreneurship groups to explain the business start-up process, assuming that the remote orientation contributed to collaborative growth and development.

Thus, interviews demonstrated the difficulty found during the action research regarding the disconnection of the technical ideas from viability in an ecosystem, demonstrating the little knowledge of entrepreneurship in Isenberg’s (2011) human capital dimension.

5.6 Evaluation

Evaluation is key to the learning process in action research. It involves reflecting on the outcomes and reviewing the process to implement, if necessary, adjustments in the new development cycle. All projects were submitted to the mentors and then to the program’s leadership, researchers ‘A’ and ‘B’. Additionally, the final session of the remote orientation program was dedicated to presenting the groups’ results and establishing an agenda for the next steps.

The evaluation step was distinct among the three groups based on the evidence collected during the interview. E1 suggested, as an improvement point, extending the orientation length and strengthening follow-up actions because, after the program's final session, there was no contact from mentors to check on the progress of implementation. As for E2, it was difficult to establish an agenda after the final session because the group did not fix the next steps with the mentors, and some members from E3 did not understand “what to do next.” Finally, E3 reported that communication with mentors is still occurring occasionally to check on progress and support data preparation and reporting.

The analysis of the action research (phase 1) and the interviews (phase 2) of this research will shed light on the effectiveness of the remote orientation in qualifying entrepreneurs in structuring a business, avoiding the waste of time and resources, as proposed in our P1. Conclusions and suggestions for further studies are described in the following section.