how do entrepreneurs think?
TRANSCRIPT
Effectual Thinking &
Entrepreneurship
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Managerial Thinking - Causal Reasoning
• Selecting between given means to achieve a pre-determined goal
Given Goal
M1
M2
M3
M4
Strategic Thinking - Creative Causal Reasoning
• Generating new means to achieve pre-determined goals
Given Goal
M1
M2
M3
M4
M5
M6
• Imagining possible new ends using a given set of mean
Entrepreneurial Thinking- Effectual Reasoning
M1 M
2
M5
M3M
4
Imagined Ends
E1
E2
E3
E4
E5
E6
E7
Three categories of Means
• Who they are– Traits– Tastes– Abilities
• What they know– Education– Training– Expertise
• Whom they know– Social network– Professional
network
Difference
Planning Execution
Causal Reasoning
Customer
Interaction
& Execution
Plans made
Plans Unmade
Plans Revised
Plans Recast
Effectual Reasoning
Principles of Effectual Reasoning
Affordable Loss
Strategic Partnership
Leveraging Contingencies
Affordable Loss
• Managers are taught to analyze the market and choose target segments with the highest potential.
• Entrepreneurs find ways to reach the market with minimum expenditure of resources such as time, effort, and money.
• Ideal case: Zero resources to market
• Entrepreneurs - Open themselves to surprises as to which market or markets they will eventually end up building their business in or even which new markets they will end up creating.
Strategic Partnership
• Focus on building partnerships NOT competitive analysis.
• Ideal beginning => induction of customers into strategic partnerships.
• Strategic partnerships + Affordable loss = idea to market at the least capital outlay.
Leveraging Contingencies
• The ability to turn the unexpected into the profitable.
• Ready,Fire,Aim [@Arjuna, You got it wrong bro]
• Not all surprises are bad and that surprises, whether good or bad, can be used as inputs into the new venture creation
Logic about Future
• Causal reasoning => “To the extent that we can predict the future, we can control it.“
• Effectual reasoning => “To the extent that we can control the future, we do not need to predict it.”
Future -Create
• They believe that the future is not “out there” to be discovered, but that it gets createdthrough the very strategies of the players.
Reference
• http://www.effectuation.org/sites/default/files/documents/what-makes-entrepreneurs-entrepreneurial-sarasvathy.pdf
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