How do Entrepreneurs Think?

Effectual Thinking &

Entrepreneurship

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Pleroma

Managerial Thinking - Causal Reasoning

• Selecting between given means to achieve a pre-determined goal

Given Goal

M1

M2

M3

M4

Strategic Thinking - Creative Causal Reasoning

• Generating new means to achieve pre-determined goals

Given Goal

M1

M2

M3

M4

M5

M6

• Imagining possible new ends using a given set of mean

Entrepreneurial Thinking- Effectual Reasoning

M1 M

2

M5

M3M

4

Imagined Ends

E1

E2

E3

E4

E5

E6

E7

Three categories of Means

• Who they are– Traits– Tastes– Abilities

• What they know– Education– Training– Expertise

• Whom they know– Social network– Professional

network

Difference

Planning Execution

Causal Reasoning

Customer

Interaction

& Execution

Plans made

Plans Unmade

Plans Revised

Plans Recast

Effectual Reasoning

Principles of Effectual Reasoning

Affordable Loss

Strategic Partnership

Leveraging Contingencies

Affordable Loss

• Managers are taught to analyze the market and choose target segments with the highest potential.

• Entrepreneurs find ways to reach the market with minimum expenditure of resources such as time, effort, and money.

• Ideal case: Zero resources to market

• Entrepreneurs - Open themselves to surprises as to which market or markets they will eventually end up building their business in or even which new markets they will end up creating.

Strategic Partnership

• Focus on building partnerships NOT competitive analysis.

• Ideal beginning => induction of customers into strategic partnerships.

• Strategic partnerships + Affordable loss = idea to market at the least capital outlay.

Leveraging Contingencies

• The ability to turn the unexpected into the profitable.

• Ready,Fire,Aim [@Arjuna, You got it wrong bro]

• Not all surprises are bad and that surprises, whether good or bad, can be used as inputs into the new venture creation

Logic about Future

• Causal reasoning => “To the extent that we can predict the future, we can control it.“

• Effectual reasoning => “To the extent that we can control the future, we do not need to predict it.”

Future -Create

• They believe that the future is not “out there” to be discovered, but that it gets createdthrough the very strategies of the players.

Reference

• http://www.effectuation.org/sites/default/files/documents/what-makes-entrepreneurs-entrepreneurial-sarasvathy.pdf

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Pleroma