Quitting your day job and leaping into being an entrepreneur is often a scary task. Have you ever wondered how some people seem to make the leap with few headaches (at least that’s how it appears to you) whilst others have great ideas but repeatedly fail to take any steps from idea to execution?
In simple terms entrepreneurship is simply ‘taking action’, followed by making more decisions, and taking more action. However, it’s often daunting to many. Often, we perceive people leaping into business ventures without a plan, however our perception is generally mistaken. Most times the entrepreneur has given their actions thought prior to jumping, the thought process is simply different to a traditional business approach. A few years ago, I was introduced to the concept of Effectuation, devised by Dr Saras Sarasvathy, who studied the thought processes of entrepreneurs. The result was five principles that allow entrepreneurs to create a feeling of control in an often-unpredictable world.
Talk to anyone you know who has created a business and you will likely find that they have intuitively applied these thought processes. Rather than a prescribed system, telling you what to do, effectuation is a thinking framework that helps you to approach problems and allows you the ability to do what is within your grasp to establish sellable products and services rather than launch a complete business.
The Effectuation cycle always starts with Means and Goals.
Bird in the Hand:
Who are you? What do you know? Who do you know?
Always start with your means – these are the resources you have on hand whether they be physical or knowledge based. By identifying your means, you can then imagine what you’re able to do with them. This contrasts with the traditional pre-set goals, followed by assembling means to match.
Rather than focus on a return and then minimize risk. Affordable Loss principle aims to limit risk by focusing on what you’re comfortable to lose. This changes the perspective of the risk and identifies positives, even where an outsider might see a negative. This principle is similar to that of ‘fail fast’ in that it doesn’t discourage risk but rather encourages it within boundaries.
From Affordable Loss goals are prepared. The process is in direct contrast to a traditional business process of goals then means.
Next week we explore the three remaining principles; Lemonade, Patchwork Quilt and Pilot-in-the-Plane.