Fostering Continuous Value Proposition Innovation through Freelancer Involvement in Software Startups: Insights from Multiple Case Studies

Abstract

[Context] The software startups could continuously innovate business model value proposition by involving freelancers as a source of innovative ideas (that enhance customer perceived value) and as experts for implementing the innovative ideas (by undertaking software engineering tasks). Startups employ one of three strategies for associating with freelancers i.e., task based (association ends with completion of the outsourced task), panel based (outsourcing task to a panel of freelancers associated with startup), or hybrid. Uncertainties, terminology issues, high technical debt, lack of documentation, lack of systematic decision making processes, lack of resources, lack of brand values, need for the continuous involvement of the freelancer to incorporate continuous validated learnings, merging freelancer perspectives, and deciding the level of their involvement in individual requirement engineering (or value proposition innovation) activities, are the main inhibitors for associations with freelancers. The availability of good freelancers and their long term and continuous commitments are necessary requirements for value proposition innovation. The theory about freelancer association with the software startups is extended by studying the real practices of startups, which successfully involved freelancers for value proposition innovation by capturing innovative ideas and acquiring the freelancer’s skills to implement those ideas. [Objectives] The objective of this paper is to explain the strategies adopted by the software startups to foster value proposition innovation by continuously involving the freelancers and the way they overcome the challenges arising because of the associations. The findings are driven by the study of real practices of startups that proved to be successful in the market by involving freelancers and continuous innovations leading to increased market shares. [Method] This paper performs empirical studies through case studies of three software startups located in Italy, France, and India, which are at the verge of being transforming into big companies, with large market share. The current practices highlighting the successful way of executing freelancing association strategies for value proposition innovation and the way to overcome the arising challenges are reported. The findings are also compared with those of two young startups based in Switzerland and India, to bring useful lessons for the young startups. The case study results are validated by employees from the studied startups (both those who participated in data collection and those who did not). [Results] The results indicate that freelancer involvement during value proposition activities, which is the core business operation, is beneficial to the both freelancers and the startups. Startup teams could reduce the development costs, shorten time to market, and increase customer satisfaction (by providing features addressing real market needs) by correctly involving the freelancers uniformly across value proposition activities. The startups could manage innovation with small teams (compared to human resources in companies) if done jointly with the freelancers, that helps the team members to learn new skills, upgrade their skills, and learn new perspectives about their markets. Business impacts due to freelancer involvement are stronger if the level of freelancer involvement across various value proposition activities is higher compared to their involvement across few activities only. The studied startups are not completely dependent on the freelancers but the freelancer’s perspectives and skills are valued as a rich source of market success. Freelancer involvement is taken as an opportunity to gain access to global market perspectives, which otherwise would be effortful for in-house teams to collect. In addition, they resolve technical debt, are a source of upgrading skills for undertaking future innovation, and help reaching customers for marketing (promoting product and gaining access to the feedbacks). Overall, the value proposition innovation in the studied startups have different levels of involvement of the freelancers but these startups have reported positive impacts on the business in terms of development cost reductions, shorten time to market, and high customer satisfaction (measured on early attainment of product/market fit and fast growth thereafter). The case study results are validated by the startup employees (member checking). The responses collected are analysed using box plots, which shows a higher level of result agreements among the employees.

Outsourcing in startups

“…Thus, we advance the understanding beyond the findings of these authors. Furthermore, Gupta et al (2020) focused their investigation on freelancers as one type of outsourcing, and Johansson et al (2016) analyzed only the acquisition of software as another type of outsourcing; however, there are other outsourcing activities in startups business, as we demonstrated herein. Finally, Bustamante (2019) analyzed outsourcing in accelerated startups (a specific kind of startup), focusing mainly on contracting capabilities.…”

“…Currently, outsourcing is an alternative that has been widely used, especially for large companies (Panko, 2019), and even with the great advances of the studies related to human resources, information systems and business processes outsourcing, there are very few studies (Johansson et al, 2016;Duc and Abrahamsson, 2017;Bustamante, 2019;Gupta et al, 2020) that have explored outsourcing in startups. Among these works, there is evidence that startups outsource, for instance, through software acquisition and software development support (Johansson et al, 2016;Gupta et al, 2020) and engineering support (Duc and Abrahamsson, 2017). Although this, there are no studies capable of demonstrating what activities startups commonly decide to outsource.…”

The Human Capital of the Freelancers and Their Satisfaction with the Quality of Life

“…The study [48] highlights that involving freelancers from the beginning can contribute to the development of innovative value propositions as they bring different perspectives and ideas due to their expertise and interactions with customers as members of the startup team. Study [49] also shows that startups can successfully innovate their value propositions to gain competitive advantage by including freelancers as a source of creative ideas and as skilled resources to implement the ideas. In a recent research [50], the authors conducted an international survey by analyzing 75 countries over a 10-year period using the Global Entrepreneurship Monitor (GEM) database.…”

Competency-Industry Relatedness (C-IR) Framework for Sustained Business Growth in Startups during and Beyond Pandemic: Myths and Lessons from Publicly Funded Innovative Startups

“…Three startups were about to turn into companies (on the higher end of the growth scale), and for two startups, there was growing demand for their products (they were just at the beginning of the growth scale). Further, these startups already participated in three previous case studies conducted by the authors [17][18][19], which strengthened the knowledge sharing due to familiarity of research and the startup environment.…”