Do entrepreneurs think differently?
What is this “outside the box” all about?
Is outside the box for real?
Question for today
Start at any of the nine dots and draw four straight lines that go through all nine dots without lifting your pencil and no tracing over an existing line.
Four straight without connecting all nine dots w\o lifting your pencil, no tracing over an existing line.
You have to go outside the box twice
ReadingWhat makes entrepreneurs entrepreneurial?
Saras Sarasvathy
• We seeks to answer the question – is there such a think as entrepreneurial thinking?
• If there is, is it applicable only to entrepreneurs?
• How is it different from the thinking process of managers?
• The conclusion is Effectual vs. Causal reasoning, but can it be learned?
Setting the framework How Entrepreneurs Think
Causal vs. Effectual Thinking
Causal Thinking = Managerial Thinking Choosing best means to achieve a predetermined goal
Saras Sarasvathy, Harvard Business Review
Managerial Thinking – Causal ReasoningDistinguishing Characteristic:
Selecting between given means to achieve a pre-determined goal
GivenGoal
M1
M2
M3
M4
M5 Given Means
Causal Thinking = Managerial Thinking Choosing best means to achieve a
predetermined goal
Strategic Thinking = Creative Thinking Generating new means to reach predetermined
goal
Setting the framework How Entrepreneurs Think
Strategic vs. Effectual Thinking
Strategic Thinking – Creative Causal ReasoningDistinguishing Characteristic:Generating new means to achieve pre-determined goals
GivenGoals
M1
M2
M3
M4
M5
New meansare generated
Causal Thinking = Managerial Thinking Choosing best means to achieve a predetermined goal
Strategic Thinking = Creative Causal Thinking Generating new means to reach predetermined goal
Effectual Thinking = Entrepreneurial Thinking Imagining possible new ends using a given set of
means
Saras Sarasvathy, Harvard Business Review
Setting the framework How Entrepreneurs Think
Effectual Thinking
Entrepreneurial Thinking – Effectual Reasoning
Distinguishing Characteristic:Imagining possible new ends
using a given set of means
M1
M2
M3
M4
M5
E1
E2
E3
E4
E5
Given Means
Saras Sarasvathy, Harvard Business Review
Imagine New Ends
Market Definition Classic Causation Model from Marketing Textbooks
Process of Effectuation Used by Expert Entrepreneurs
THE CUSTOMER
Segmentation(using relevant variables such as age, income, etc.)
Targeting(based on evaluation criteria
such as expected return)Positioning
(through marketstrategies)
CustomerIdentification
(through Who am I?What do I know? Whom do I know?)
Customer Definition(through strategic partnerships & “selling”)
Adding Segments/Strategic Partners
Definition of one of several possible markets
Classic Causation Model from Marketing Textbooks
Customer
Preliminary Prototype $ 250M
Initial Focus Group Study $ 250M
Market Segment Study $ 100 M
Gets you to the start line
Advertising & PR $ 11MM
Gets you to the market
Sale often ”pull through” to get to customer
Initial cost $ 11.6MM
Customer
Preliminary Prototype $ 250KInitial Focus Group Study $ 250KMarket Segment Study$ 100KGets you to the start line
Advertising & PR $ 11M
Gets you to the market
Introduction of new means to reach goal•Partnerships•New outlets•MLM Channel•eCommerce
Strategic, Creative Thinking Generating new means to reach customer
Initial cost $ 11.6MM + or -
Efficacious Thinking Entrepreneurial Thinking Imagining new ends, new means
Customer
Industry Knowledge
Patterns of ChangeSkill SetsSocial Networks
Phantom Sale against defined pain \ cure
Customer in Hand Initial customer acquisition on special terms (early adopter, point of sale, etc.)
Initial cost $ 19.61
Pain Identification
Customer benefit need
Pure Entrepreneurial Thinking – Efficacy
Distinguishing Characteristic:Imagining possible new ends
using new means
M1
M2
M3
M4
M5
Create New MeansApologies to Saras Sarasvathy
Harvard Business Review
Imagine New Ends
Thinking like an entrepreneur
Causal Thinking
Strategic Thinking
Effectual Thinking
USC Entrepreneurial Thinking
Efficacy
Types of Thinking Ends Means
Causal (Linear) Given Given
Strategic (Creative) Given Create some new
Effectual Create Given
new
Efficacy Imagine Create New New Ends Means
Tom O’MaliaOrfalea Chair for Entrepreneurial
Lloyd Greif CenterMarshall School of BusinessUniversity of Southern CaliforniaBridge Hall OneLos Angeles, CA 90089-0801