effectuation

EffectuationEntrepreneurshipRosalynn L. Pangan, RPh

AGSB MBAH 10B

Entrepreneurship

SARAS D. SARASVATHY

http://www.youtube.com/watch?v=Ruvb_kGAMYw

GENERAL OVERVIEW

Effectuation is an idea with a sense of purpose

GENERAL OVERVIEW

Effectual reasoning is a type of human problem solving developed from a cognitive science

Source: www.effectuation.org

Research Experiment Subjects 27 Expert Entrepreneurs {founders of companies from $200M to $6.5B} method Protocol Analysis {80 hours of tape, 500 pages of data} theory Effectuation: Elements of Entrepreneurial Expertise, 2005

GENERAL OVERVIEW

Effectuation is a logic of entrepreneurial expertise. 

Science to Entrep

Source: www.effectuation.org

CONTEXT

Focus: achieving desired goal through a specific set of given means

Focus: using a set of evolving means to achieve new and different goals

Source: www.effectuation.org

CONTEXT

Causation Effectuation

“If I can predict the future, I

can control it”

“If I can control the future, I do not

need to predict it”

Source: www.effectuation.org

HEURISTIC VS. ALGORITHM

Problem-solving technique that involves creating a speculative formulation and self-led investigation to reach some desired outcome.

most quintessential heuristic is “trial and error.”

step-by-step procedure with a finite number of steps that seeks a specific outcome

recursive

HEURISTIC ALGORITHM

Source: www.effectuation.org

CA

US

ATIO

N V

S E

FFEC

TU

ATIO

N

Source: Effectuation: Elements of Entrepreneurial Expertise

 By Saras D. Sarasvathy

Printed in 2008

5 PRINCIPLES OF EFFECTUATION

BIRD IN HAND PRINCIPLE

start with your means

who I am what I know whom I know imagine possibilities

that originate from their means

Source: www.effectuation.org

AFFORDABLE LOSS

Focus on downside risk

limit risk by understanding what they can afford to lose at each step, instead of seeking large all-or-nothing opportunities

choose goals and actions where there is upside even if the downside ends up happening

Source: www.effectuation.org

LEMONADE

Leverage contigencies

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 marketsSource: www.effectuation.org

PATCHWORK QUILT

Form partnerships build partnerships

with self-selecting stakeholders

obtain pre-commitments from these key partners early on in the venture, experts reduce uncertainty and co-create the new market with its interested participants

Source: www.effectuation.org

PILOT-IN-THE-PLANE

Control vs. Predict Focus on activities

within their control expert

entrepreneurs know their actions will result in the desired outcomes

the future is neither found nor predicted, but rather made

Source: www.effectuation.org

EFFECTUATION CYCLE

Means

Goals

Interact

Gather stakeholder

commitments

Others

Self

What are the 5 Principles?

5 P

RIN

CIP

LES

Source: www.effectuation.org

SUMMARY

Source: www.effectuation.org

Rosalynn L. Pangan, RPhAGSB MBAH 10BEntrepreneurship