Simultaneous experimentation as a learning strategy: Business model development under uncertainty—Relevance in times of COVID‐19 and beyond

• Author: Bart Van Looy,Petra Andries,Koenraad Debackere
• Date: 01 December 2020
• Published date: 01 December 2020
• DOI: http://doi.org/10.1002/sej.1380

REFLECTIVE PIECE

Simultaneous experimentation as a learning

strategy: Business model development under

uncertainty—Relevance in times of COVID-19

and beyond

Petra Andries

1

| Koenraad Debackere

2

| Bart Van Looy

2

1

Department of Marketing, Innovation and Organisation, Faculty of Economics and Business Administration, Ghent University,

Ghent, Belgium

2

MSI and ECOOM, Faculty of Economics and Business, KU Leuven, Flanders Business School, Leuven, Belgium

Successful exploitation of an entrepreneurial idea calls for that idea to be translated into a viable business model

(Amit & Zott, 2001), a challenge that many technology ventures struggle with. While some take up to 7 years to find

a viable technology–market combination (Ambos & Birkinshaw, 2010), many others are unable to do so and must

cease their activities altogether (Andries & Debackere, 2007). In our 2013 study, we aimed to generate further

insights into how the process of business model development could take place in a more efficient and effective way

by investigating six technology ventures and their business model development trajectories over time.

The main reason why technology ventures face serious challenges in defining viable business models upfront is

that they are confronted with fundamental “Knightian uncertainty”(Knight, 1921). In situations of risk, decision-

making is still a quantifiable process.

1

Organizations can deal with these situations by developing contingency plans

or calculating/balancing risk. In situations of Knightian uncertainty, however, this is no longer the case: Relevant vari-

ables and their functional relationships are, to a considerable extent, unknown (De Meyer, Loch, & Pich, 2002;

Schrader, Riggs, & Smith, 1993). Differing interpretations of the situation exist, and it is initially unclear to the actors

involved what information is needed to solve these differences (Van Looy, Debackere, & Bouwen, 2001). This is typi-

cally the case for technology ventures in emerging industries where what the market will become depends on multi-

ple decisions by various stakeholders, and clarity will only arise when entrepreneurial activities result in tangible

industry and market developments. Consequently, the set of feasible opportunities and viable business models is

simply not predictable in advance (Alvarez & Barney, 2007).

At the time we conducted our study, the dominant view of practitioners, especially investors, was that the devel-

opment and scaling of an entrepreneurial venture required choosing a specific business model and fully committing

to it. Our research challenged this view by pointing to the relevance of a more flexible approach where ventures

develop a portfolio of business model experiments; they refine and adjust this portfolio as they go, until a viable

1

As explained by Knight (1921, p. 20), “the term ‘risk’as loosely used in everyday speech and in economic discussion, really covers two things which,

functionally at least, in their causal relations to the phenomena of economic organization are categorically different …. The essential fact is that ‘risk’means

in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and

crucial differences in the bearings of the phenomenon depending on which of the two is really present and operating …. It will appear that a measurable

uncertainty or ‘risk’proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all.”We follow

Knight and use the term uncertainty to describe cases of the nonquantitative type.

DOI: 10.1002/sej.1380

© 2020 Strategic Management Society

556 Strategic Entrepreneurship Journal. 2020;14:556–559.wileyonlinelibrary.com/journal/sej