EFFECTUATION

What is the Effectuation?

Effectuation is an entrepreneurship methodology to identify opportunities and undertake personal and professional projects, systematized by Saras Sarasvathy, after a studying hundreds of successful entrepreneurs.

Effectuation is to work with what is in your control -your available resources-, in order to cocreate the future through joining efforts with committed traveler mates.  

What is the Effectuation basis?

What today is liked by the clients or works, tomorrow may be the opposite. We live in a context of constant uncertainty. As it is not possible to erase it, it is necessary to manage it.

Effectuation allows to take into account the uncertainty by basing the decisions on one self’s analysis related to all relevant stakeholders. It assumes that all resources cannot be controlled, so it connects the entrepreneur to his or her stakeholders to progress jointly, constantly revising the change of the circumstances.

It states that the analysis of the past data (market, sector, competitors, etc.) can be useful, but it does not work to forecast the future.

How to predict the future then?

Causal logic: to predict the future, you must plan it. The traditional way to do it is by:

• Analyzing the market
• Writing a business plan making estimations and predictions
• Getting funding
• Setting up the business 

 Effectuation logic: Future cannot be predicted: the key is to COCREATE it. How?

• Analyzing yourself and starting from the scratch
• Experimenting and adapting to circumstances
• Inviting committed people with your same vision on board
• Acting in your area of control

 Effectuation has 5 main principles:

1. Bird in hand

• Start with your available means, resources and experiences.
• Analyze yourself by asking yourself:
• Who am I?
• What do I know?
• Whom I know?
• Then, and only then, start thinking what you can do with that

 2. Affordable loss

• Taking calculated risks is an essential entrepreneur’s soft-skill.
• In each and every step, you must determine what is at stake and, therefore, what can be lost, going further only if it is affordable.
• Thanks to that, even in the worst scenario you will be able to start over.

 3. Lemonade

• Do not waste your time making contingency plans, they are not worth it.
• Take advantage of surprises, setbacks and challenges that will pop up in the project life to create new opportunities and new markets.
• React to the changes and adapt your project to turn the problems into opportunities.
• If it rains, sell umbrellas. If there is a crisis, it is the best moment to improve.

 4. Patchwork Quilt

• “If you want to go fast, go alone. If you want to go far, go together”
• Avoid the mistake of not telling your business idea fearing that it can be copied. Feedback is the best gift you can receive.
• You cannot do it all yourself. Getting agreements and commitments from interested stakeholders from the beginning will allow you to build valuable and valuable partnerships to complement you and to take your project forward.
• E.g: A crowdfunding campaign, a supplier, a mentor, an advisor, a partner.

 5. Pilot-in-the-plane

• Focus on activities within your control. This is the best and only way to direct your actions into your ideal vision.
• Do not put your attention in things you cannot change, out of your sphere of influence.
•  The future cannot be found or predicted; it is invented, is made, is COCREATED.

Premises

• The best and only way to be a real entrepreneur is because of passion, not because of need
• Plans do not work; the only thing that works is to plan
• An individual needs a collectivity to achieve great things
• Making open questions allow to get in deep
• Success is not only based on profitability.
• To be an entrepreneur is not just starting a business; is a method to build new worlds
• Collaboration is always better than competition

 Main goals of Effectuation

• Minimize the cost of failure
• Turn an idea (nothing) to a project
• Continuously look for new market opportunities
• Align a group of committed stakeholders with common goals
• Create value quickly according to your vision
• Getting closer to your goals step by step

 An effectuation entrepreneur:

• Is flexible and adapts to the circumstances
• Admits what he or she knows and what he or she does not know and want and need to learn
• Tries to get a better perspective
• Asks for advice
• Takes into account all relevant stakeholders’ feedback
• Practices the active listening
• Accepts rejection and uses it in his or her favor
•  Joins efforts with other entrepreneurs to maximize the impact of his or her work

Additional resources:

• What is Effectuation?
• Effectuation: un modelo de pensamiento adaptado a la incertidumbre actual by Ana Hernández Serena

THE GOLDEN CIRCLE

Simon Sinek, after analysing outstanding inspiring people and organizations, like Apple, Martin Luther King or the Wright brothers, developed THE GOLDEN CIRCLE. According to that, we can divide the world into 3 different parts:

WHAT?

• It represents the action. Everyone knows what they do.

HOW?

• It is the way to achieve the goals, like a value proposition or a methodology.

WHY?

• It refers to the purpose, the cause, the belief. It relies on intrinsic motivation.

What is the usual way of thinking?

Most people and organization do not reflect on why they do things. They just do it.

Why leaders are inspiring?

Inspiring leaders and organizations are simply different than the rest. They think, act and communicate from the inside out: starting with WHY, following with HOW and ending with WHAT.

In order to inspire, first of all we must start by our motivation, and then, and only then, think of what we want to do and how to do it. As Stephen Covey stated, it is essential to start with a goal in mind. In any project, personal or professional, no matter its entity, the first thing we should ask ourselves is why do I want to do it. Only if the answer is driven by internal reasons we can consider assuming it.

  

Only if you know why you do what you do something, you are able to convince people to buy you, to support you, to join you. When trying to inspire, the goal is not to convince people to follow you; the goal is to make them share your same ideas and values, with a common believing, and only then they will stand by you. 

“If you hire people just because they can do a job, they'll work for your money, but if they believe what you believe, they'll work for you with blood and sweat and tears”

Why is so important the "Why"?

Inspiring is not rational, but emotional. It is about feelings. And feelings and guts, as passion and self-confidence, drive behaviour and, at the end, action, which is what changes the world.

Success is thought to be a lineal function of money, connections (people) and context. But it is not. The real difference relies on the cause, the purpose, the belief. People and organizations that have changed the world actually wanted to change it.

It is important not to confuse the result with the purpose. Success is the result or consequence, never the purpose itself. Be driven by something deeper is necessary to leave a mark on the world.

Dreams are not easy to achieve. To be accomplished, they require a lot of effort, dedication, patience and motivation. And, above of all, to be shared. “People don't buy what you do; they buy why you do it. If you talk about what you believe, you will attract those who believe what you believe”.

Leading means inspiring. We follow leaders not because obligation, but freedom. People and organizations that start with "why" have the ability to inspire others.

How can we apply the Golden Circle to Entrepreneurship?

Going through entrepreneurship just looking for success is wrong. It is necessary to have an intrinsic motivation to overcome all challenges you will have to face, and share it.

People who believe what you believe will be more likely to take your cause and make it their own, and tell other people. Therefore, do not focus on telling your clients about the features of your products and services. Tell your clients about a story, your story, and the reason you are spending so much time on your project.

The key of being different does not rely on structure of resources. We often complain about not having enough money or hands to accomplish a project. Forget about it. The key to sell is to connect with your clients, their beliefs and their needs.   

And remember that it is not just about being different, but also communicating that you are different. In this information era, if you do not communicate, you do not exist.

Example: Youth Business International network

WHY?

• People own their destiny. We all have the right and the duty to pursue our dreams and to be happy. Young people are often underserved, especially in need of resources and opportunities to find their way and succeed.

HOW?

• Building a global network of NGOs specialized in self-employment and entrepreneurship to maximize the impact of their activities, by means of sharing challenges, joining efforts and exchanging good practices.

WHAT?

• Accompanying young entrepreneurs in their self-employment projects through a comprehensive service offer which includes training, access to finance and mentoring, supporting them to shape the world they are living in according to their hopes and values, creating sustainable business and employment and strengthening their communities.

Link of interest:

• TED TALKS: How great leaders inspire action by Simon Sinek