Entrepreneurship

Principles  of  Effectuation

Bird-­in-­the-­Hand  Principle

Means  Driven

Corridor  Principle

4  Lessons

Affordable  Loss  Principle

2-­Step  Process

Bootstrapping

The  Big  Accounts

Sources  of  Funding

Crazy  Quilt  Principle

Effectual  Partnering

Stakeholder  Commitments

Persuasion

Ownership  &  Control

Lemonade  Principle

Effectual  Planning

Contingencies

Business  Plans

Pilot-­on-­the-­Plane  Principle

ż Entrepreneurship�is�a�discipline�and,�like�any�discipline,�can�be�learnedż Entrepreneurship�is�a�way�of�thinking,�reasoning,�and�acting�that�is�opportunity�obsessed,�

holistic�in�approach,�and�leadership�balanced�for�the�purpose�of�value�creation�and�capture"�Jeffrey�Timmons

ż Individuals�=�Effectuationż Companies�=�Entrepreneurial�Orientation

ż

ż Entrepreneurs�manage�uncertainty�and�in�exchange,�are�justified�a�profit�above�what�is�economically�normal

ż Probability,�risk�and�uncertainty�are�different�things.ż Uncertainty�is�where�entrepreneurs�operateż True�uncertainty�is�when�a�situation�is�unpredictable

Knightian�Uncertainty

ż Managerial�Thinking�(Causal�Reasoning)

ż

Selecting�between�given�means�to�achieve�a�preͲdetermined�goal.�What�resources�do�I�need�to�achieve�my�goal?

ż

ż

Strategic�Thinking�(Creative�Causal�Reasoning)

ż Entrepreneurial�Thinking�(Effectual�Reasoning)�

ż

What�do�I�have�and�what�can�I�do�with�it?�What�is�at�my�disposal?

Approaches�to�Reasoning

ż Innovativenessż Proactivenessż RiskͲTaking

Elements�of�Entrepreneurial�Orientation

Introduction to EntrepreneurshipMonday,�24�June�2013 1:03�PM

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BirdͲinͲHand�Principle (Means�Driven)

ż Traitsż Abilitiesż Attributes�

• Who�I�am�(the�unbeatable�competitive�advantage�Ͳ what�makes�me�unique?)

ż Educationż Experienceż Expertise

What�I�know�(bringing�learning�to�the�venture�Ͳ focus�a�venture�on�what�you�know�that�others�may�not)•

ż Social�networks• Who�I�know�(six�degrees�of�separation�Ͳ the�strength�of�weak�ties)

Means�(Pool�of�resources) Ͳ can�change�over�time�and�with�new�partners�that�you�join

• Choosing�to�change�goals�(not�remaining�tethered�to�specific�goal/s)�rather�than�chasing�after�means�that�we�have�no�control�overOur�means�are�our�starting�point�and�basic�ingredient�of�a�venture�and�market�opportunity�that�we�set�out�to�create.�Allows�us�to�open�doors�to�courses�of�action�that�we�would�otherwise�be�blind�to

•

ż Not�chasing�investorsż Not�waiting�for�the�'perfect�opportunity'�or�'perfect'�set�of�resourcesż Working�with�personal�strengths�without�having�to�overcome�personal�weaknesses�firstż Good�stakeholders�want�to�shape�goals�Ͳ not�just�provide�meansż Increasing�the�possible�slate�of�stakeholders�who�can�selfͲselect�into�the�ventureż Increasing�the�probability�of�innovative�surprisesż Increasing�likelihood�of�finding/creating�opportunities�that�are�a�better�fit�for�youż Increasing�likelihood�of�failures�being�learning�experiences�that�can�be�recovered�from�faster�and�built�on

� Slack�resources�are�resources�that�are�left�over�from�other�uses�or�laying�around�because�nobody�has�found�a�use�for�them�or�paid�any�attention�to�them

ż Forces�you�to�be�creative�with�a�limited�amount�of�resources,�including�slack�resources�and�waste

Advantages•

Means�Driven

• Describes�how�new�and�unintended�opportunities�often�arise�for�entrepreneurs�when�they�are�launching�a�new�venture.�Until�you�proceed�down�the�corridor�you�won't�know�what�it�holds.

The�Corridor�Principle

1. Don't�wait�for�the�opportunity�to�come.�Just�go�for�it2. Stay�within�your�scope�Ͳ don't�attempt�a�venture�that�requires�items�which�are�not�in�your�pool�of�resources3. Means�are�about�more�than�just�money�and�often�cost�nothing4. Means�include�not�only�personal�means�but�also�those�of�your�partner/s�Ͳ the�combination�can�create�a�

competitive�advantage

4�Lessons�from�the�BirdͲinͲHand�Principle

What�are�you�able�and�willing�to�lose?�(wealth,�time,�emotion,�health,�relationships,�reputation,�career,�physical�assets…)

•

• Make�decisions�on�acceptable�downside�rather�than�predicted�upside• Peg�the�risk�and�maximise�return• Ultimate�question:�Is�the�venture�worth�doing�even�if�the�invested�amount�is�lost?

Affordable�Loss

• Consideration�of�affordable�loss�reduces�the�threshold�of�financial�risk�taking,�increases�confidence�and�perceived�controllability�and�is�more�realistic

Reducing�Risk

5 Principles of EffectuationMonday,�24�June�2013 1:04�PM

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