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The Entrepreneurial Method
• We have been living in the dark (grey?) ages preceding Novum Artificium
• In other words, we throw away millions of people
• We waste the potential in human nature just as our pre-
scientific ancestors did not realize the potential in nature
• But we are beginning to spell out entrepreneurial
effectuation – just as Bacon began spelling out scientific experimentation
I don’t know how to make it happen
Who I am
What I know
Whom I know
What can
I do?
Effectual stakeholder
commitments
Interactions with other people
(Affordable loss)
• Crazy Quilt principle: Build a network of self-selected stakeholders
Effectual Logic = Non-predictive control
Co-create
Plan
Persist
Adapt
Low
High
Low High
PREDICTION
CONTROL
= Non-predictive control
How do you control a future you cannot predict?
You co-create it through stakeholder commitments
Plan
Persist
Adapt
Expert Entrepreneurs Build Markets
Who I am
What I know
Whom I know
What can
I do?
Effectual stakeholder
commitments
Interactions with other people
New means
New goals
NEW MARKETS
AND NEW FIRMS
Expanding cycle of resources
Actual Means
Converging cycle of constraints
Actual courses of Action possible
(Affordable loss)
Who We are
What We know
Whom We know
What can
We do?
The Market for Electric Bulbs
Year Cost Price Sales Price Quantity 1 1.25 0.40 20-30,000
2 0.70 0.40 50-80,000 3 0.50 0.40 100-300,000
4 0.37 0.40 > 1 Million
The Entrepreneurial Method
• The scientific method is about unleashing the power of nature to develop new means to achieve our ends
• It is about finding out about existing worlds
• The entrepreneurial method is about unleashing the power of human
nature to create new ends as well as new means
• It is about making new worlds
Markets and Worlds: Made through the Entrepreneurial Method
Not like a jigsaw puzzle
More like a crazy quilt
www.effectuation.org
EFFECTUATION E l e m e n t s o f
E n t r e p r e n e u r i a l E x p e r t i s e
N e w H o r i z o n s i n E n t r e p r e n e u r s h i p
SARAS D. SARASVATHY
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