Managing operational capabilities in startup companies/

Abstract

Hundreds of papers exist on entrepreneurial marketing and finance, whereas capabilities for operations get far less attention. Furthermore, much of the literature in operations management addresses challenges of companies in stable environments, leaving entrepreneurs with little theoretical or practical guidance on operations strategy. As a result, many entrepreneurs focus their efforts on value creation: marketing, product development, lead generation, and conversion. Ironically, extreme focus on value creation might represent a trap, whereby a company fails not because of a poor value proposition or bad marketing, but because of an inability to scale up and deliver value for perhaps an outstanding, innovative new product or service. In over a dozen case studies written during the past four years, we have found numerous examples where the development of operational capabilities was a determining factor for success or failure in entrepreneurial firms. We study the effect of timing of introduction of operational capabilities on market success as a function of firm's value proposition. We provide case evidence on the challenges and opportunities of building operations capabilities in entrepreneurial firms and we construct theoretical and testable models for assessing when and why entrepreneurs should invest sooner, or later, in operational capabilities.