Effectuation

Effectuation Theory of Entrepreneurship general overview, context, worldview, effectuation vs. causation, and more - effectuation.org

• Effectuation – the best theory of entrepreneurship you actually follow, whether you’ve heard of it or not

• Entrepreneurs don't start out with concrete goals. Instead, they constantly assess how to use their personal strengths and whatever resources they have at hand to develop goals on the fly, while creatively reacting to contingencies. By contrast, corporate executives use causal reasoning. They set a goal and diligently seek the best ways to achieve it. 

• Chef analogy

• Principles

  • Bird-in-Hand: When expert entrepreneurs set out to build a new venture, they start with their means: who I am, what I know, and whom I know. Then, the entrepreneurs imagine possibilities that originate from their means.

    • Bird in Hand Principle (4:31)

    • Means Driven vs Goal Driven (4:09)

    • Who I am 

      • Personality (Big Five), BOSI, Risk Aversion, Grit, Promotion vs Prevention Focused, General Self-efficacy  

    • What I know 

      • CareerOneStop Skills Matcher, O*NET Interest Profiler 

    • Whom I know

      • use LinkedIn, Interpersonal ties - strong ties, weak ties 

  • Affordable Loss: Expert entrepreneurs limit risk by understanding what they can afford to lose at each step, instead of seeking large all-or-nothing opportunities. They choose goals and actions where there is upside even if the downside ends up happening.

    • Affordable Loss Principle (9:01)

    • Affordable Loss and Opportunity Cost (3:35)

  • Crazy-Quilt: Expert entrepreneurs build partnerships with self-selecting stakeholders. By obtaining pre-commitments from these key partners early on in the venture, experts reduce uncertainty and co-create the new market with its interested participants.  

    • Crazy Quilt Principle (6:24)

    • Build on ideas from other people, make teams diverse, network with diverse people

  • Lemonade: Expert entrepreneurs invite the surprise factor. Instead of making “what-if” scenarios to deal with worst-case scenarios, experts interpret “bad” news and surprises as potential clues to create new markets.

    • Lemonade Principle (6:59)

  • Pilot-in-the-Plane: Effectuators believe that the future is not something you can or even should attempt to predict. The future is instead something you try to control. With this perspective follows that your focus is on activities that are within your control. With this approach the expert entrepreneurs achieve the outcomes they desire.

    • Pilot in the Plane Principle (6:48)

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