Do You Know About Effectuation?

  • 13th Oct'20
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What makes an Entrepreneur different?

There goes a pre-existing thought that to be an entrepreneur, it requires no extra effort or has no science behind it. But, researchers have proved this wrong. What makes great entrepreneurs aren’t genetic or personality traits, risk-seeking behavior, money, or a unique vision. Effectuation research has found that there is a science to entrepreneurship and that great entrepreneurs across industries, geographies, and time use common logic, or thinking process, to solve entrepreneurial problems. 

Effectuation is a logic of entrepreneurial expertise that both novice and experienced entrepreneurs can use in the highly unpredictable start-up phase of a venture to reduce failure costs for the entrepreneur.

 

Click on the following links to know more about effectuation and entrepreneurs:

Effectuation

Effectuation is a form of entrepreneurial reasoning introduced by Dr. Saras Sarasvathy in 2001. To me, it is also a set of useful tools for entrepreneurs. Effectuation is based on the idea that entrepreneurial action begins with the available means, to read more, click here.

The field of decision making and Effectuation

Effectuation is relatively new but already well established in entrepreneurial decision making, enjoying a large number of species theories and empirical evidence proving its existence.

 

Theory of Effectuation

Saras Sarasvathy’s theory of Effectuation (2001) describes an approach to making decisions and performing actions in entrepreneurship processes, where you identify the next, best step by assessing the resources available to achieve your goals, while continuously balancing these goals with your resources and actions.

Effectuation differs from the causal logic, where there is a predetermined goal and the process to achieve it is carefully planned by a set of given resources. 

 

Read in details what effectuation theory is all about here:

Effectuation Theory

Effectuation theory is often considered a process theory because it explains the process that entrepreneurs use to create new ventures. Effectuation theory stems from the way that expert entrepreneurs think about problems and how they go about solving them. Read more, click here.

Effectuation-the best theory of entrepreneurship to follow

Effectuation is practical, sensible, inspiring and inclusive – Just start with what you have, risk what you can afford, be open to pleasant surprises, and seek relationships with others, read more, click here.

 

Principles of Effectuation

Viewed as a logic of thinking, effectuation is what entrepreneurs adopt in approaching problem-solving and decision making. It is a way of thinking wherein non-predictive control is required. It is based on the premise that entrepreneurs do something to the point that they can control the future, not needing to predict it. This way of thinking also takes one's ideas to another level as it creates sellable products and services.

 

Effectuation involves certain other principles and these can be read at below links:

The basic principles of effectuation

Here, you will learn the basic cognitive strategies that make top entrepreneurs successful and learn how you can implement them to become more innovative and action-oriented. Let’s look at effectuation now. Read more, click here.

Effectuation Principles-An entrepreneurial guide to success

It was a very good learning experience for team Think201 at IIM Bangalore where a start-up boot camp was arranged for Entrepreneurs on 4th Jan 2014. The talk was organized by N S Raghavan Centre for Entrepreneurial Learning (NSRCEL) for the budding entrepreneurs. Explore and discover all, click here.

 

How is Causation different from Effectuation?

The causation approach is adopted by people who believe that the environment is largely predictable and that research, analysis, and planning lead to rational decision processes and optimal outcomes. The effectuation approach is put forward by scholars stressing the uncertainty of the entrepreneurial environment in which the future is unpredictable and goals are not clearly known. However, there is no agreement yet on under what circumstances which approach are more effective.

 

Know the differences between effectuation and causation at the below links:

Causation and Effectuation

This qualitative study sought to answer to what extent is Causation and Effectuation followed by Entrepreneurial start-ups in years 4-8 of business? It took a cross industry approach asking does the decision making process differ across industries and perceptions of market uncertainty. Read more about this study, click here.

The main difference between causation and effectuation

The goal of the study is to explore the decision-making processes of causation and effectuation, the scale of Causation and Effectuation followed by entrepreneurial start-ups, explore more, click here.

 

We, at OpenGrowth, are constantly looking for trending start-ups in the ecosystem. If you want to know any further information about the startup ecosystem, then do let us know in the comment section below.

 

Contributor: Amrita Sinha

Amrita is in the field of media. She has a deep inclination towards writing and public speaking. She has the aim of removing the stereotypical mindset of society. She loves to read and photography is her passion.

Sources/References:

*Note: The content published above was made in collaboration with our members.

About the author:

Editor , OpenGrowth Content Team

The Editorial Team at OpenGrowth is working to provide you with the perfect place to know everything about startups. Feel free to connect to us.


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