An Ateneo Graduate School of Business Advantage
Like conversation mapping of John Stayton, design and kitchen workshop of Dr. Peter Kelly, FMB based MBA program, effectuation is entirely new thing for me. It totally contradicts my learning on academic teaching of entrepreneurship; but confirms my experience as an entrepreneur.
Saras D Sarasvathy, the author of the book Effectuation: Elements of Entrepreneurial Expertise, even said, and I agree that the way we teach entrepreneurship is wrong. For instance, many entrepreneurs hate business planning and market research. They do much more conversation and practical research.
For instance, the richest woman in the world, who is in China and engaged in paper recycling became an entrepreneur without employing sophisticated academic research tools, consultants, without going into industry study. All she knew were:
l. There is a high demand for paper in China;
2. In the USA, there were plenty of waste paper begging to be disposed off; and those who had waste were even willing to pay for its disposal;
3. There were plenty of empty containers from USA going back to US and shipping companies would just be willing to have them loaded at a discount.
This woman saw the opportunity, jumped into it and became very very rich
Effectuation, what is it?
As I do this post, the blog underlines the word, because it may be wrong. The concept tries to answer the age old problem, what makes the entrepreneur entrepreneur? By interviewing 27 entrepreneurs all over the world (we do not know much about the research method used), Sarah was able to come up with some concepts.
l. That process is learnable and teachable;
2. It is based on pragmatism;
3. It involves transformation; ie not being determined but influencing external environment. Here Saras involved us in game theory; by having a container with unknown contents, with win or lose consequences, one loses by merely accepting the rules, but win outcomes could be determined by changing the rules (hhhmmm smells of Pralahad) (I long have wanted to have game theory exercsises and the library to buy one for entrepreneurship teaching. I will just do with Saras method and example)
Predictability can be increased to the extent we can control. Experts can influence the outcomes. Persistence increases the probability of the success of the outcome.
Distinction between Corporate Managerial Thinking and Effectuation Thinking
The businessman, or the managers who have variety of means and resources can choose from his means various option to attain an objective. The entrepreneur, on the other hand, has little or no resources to achieve various imagined or dreamed ends. How true.!!
The VMOKRAPI thing and begin with the end in mind is entirely contrary to effectuation. Even writing a business plan!! BP goes well with existing businesses with established resources, but not start ups. They start with entirely new principles
The Principles
l. Bird in hand. Begin with what you have.
2. Affordable loss. How much can you afford to lose?
3. Lemonade principle. Be ready to accept surprises along the way
4. Crazy quilt principle. Accepting various stockholders who can help you get more resources. Getting commitment especially to add to resources and affordable losses, in which case you can scale up your probable outcome
The link: Effectuation
Like conversation mapping of John Stayton, design and kitchen workshop of Dr. Peter Kelly, FMB based MBA program, effectuation is entirely new thing for me. It totally contradicts my learning on academic teaching of entrepreneurship; but confirms my experience as an entrepreneur.
Saras D Sarasvathy, the author of the book Effectuation: Elements of Entrepreneurial Expertise, even said, and I agree that the way we teach entrepreneurship is wrong. For instance, many entrepreneurs hate business planning and market research. They do much more conversation and practical research.
Entrepreneurs Do Like Formal Market Research at the Start
For instance, the richest woman in the world, who is in China and engaged in paper recycling became an entrepreneur without employing sophisticated academic research tools, consultants, without going into industry study. All she knew were:
l. There is a high demand for paper in China;
2. In the USA, there were plenty of waste paper begging to be disposed off; and those who had waste were even willing to pay for its disposal;
3. There were plenty of empty containers from USA going back to US and shipping companies would just be willing to have them loaded at a discount.
This woman saw the opportunity, jumped into it and became very very rich
Effectuation, what is it?
As I do this post, the blog underlines the word, because it may be wrong. The concept tries to answer the age old problem, what makes the entrepreneur entrepreneur? By interviewing 27 entrepreneurs all over the world (we do not know much about the research method used), Sarah was able to come up with some concepts.
l. That process is learnable and teachable;
2. It is based on pragmatism;
3. It involves transformation; ie not being determined but influencing external environment. Here Saras involved us in game theory; by having a container with unknown contents, with win or lose consequences, one loses by merely accepting the rules, but win outcomes could be determined by changing the rules (hhhmmm smells of Pralahad) (I long have wanted to have game theory exercsises and the library to buy one for entrepreneurship teaching. I will just do with Saras method and example)
Predictability can be increased to the extent we can control. Experts can influence the outcomes. Persistence increases the probability of the success of the outcome.
Distinction between Corporate Managerial Thinking and Effectuation Thinking
The businessman, or the managers who have variety of means and resources can choose from his means various option to attain an objective. The entrepreneur, on the other hand, has little or no resources to achieve various imagined or dreamed ends. How true.!!
The VMOKRAPI thing and begin with the end in mind is entirely contrary to effectuation. Even writing a business plan!! BP goes well with existing businesses with established resources, but not start ups. They start with entirely new principles
The Principles
l. Bird in hand. Begin with what you have.
2. Affordable loss. How much can you afford to lose?
3. Lemonade principle. Be ready to accept surprises along the way
4. Crazy quilt principle. Accepting various stockholders who can help you get more resources. Getting commitment especially to add to resources and affordable losses, in which case you can scale up your probable outcome
The link: Effectuation
