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