Travelling through an unfamiliar territory to learn something is EXPLORATION. The mind must inquire, dwell, and discuss in detail to find answers. A person should get out of the comfortable path in order to explore the unknown, uncertain & risky terrains. Unlike Entrepreneurs, job seekers usually travel the path that is frequently travelled but an entrepreneur explores & finds paths that have been never travelled or less travelled. A person gains immense knowledge & wisdom based on the spectrum of exploration and receives far more than expected.
Exploration paves the way for INNOVATION & CREATIVITY. It becomes imperative for an entrepreneur to explore new ideas, methods, processes, behaviours, boundaries & what not? When an entrepreneur stops exploring, the grave is dug. Entrepreneurship does not come with a customised manual, each profits by their own exploration to do things. Find the Industry/Vertical that you connect the most & explore on it- U might be pleasantly surprised through your journey what you can stumble upon. Exploration makes the mind question objectively without any biases & thereby derives at an answer from intuition, reasoning & logic.
A StartUp entrepreneur can reason out in 2 ways- Effectual & Causal. Causal reasoning is structured whereas Effectual thinking is much more Exploratory & Creative. A StartUp entrepreneur for his new venture tends to lean on effectual reasoning than causal thinking. A cook that enters an unknown kitchen with not known ingredients & comes up with a spectacular meal can be termed as an effectual thinker where imagination, salesmanship, spontaneity & risk taking is much needed. An entrepreneur creates own opportunities by influencing, modifying & managing his actions. The entrepreneur knows his means & by that his goals are formed & achieved by taking in frequent inputs from all the stake holders associated with the StartUp. Causal reasoning depends upon competitive analyses while effectual reasoning is built upon strategic partnerships. Effectual reasoning stresses the leveraging of contingencies for building a StartUp.
The 5 principles of Effectuation
To focus on the “Bird in hand”- come up with solutions here & now with the available resources. The 2nd being “Lemonade”- challenges, obstacles & blunders are bound to happen so the entrepreneur has to be prepared to use it for new & better opportunities. The 3rd principle being “The Crazy Quilt” – the entrepreneur needs to look for new collaborations & partnerships that can bring healthier prospects & markets. The 4th principle being “Affordable Loss”- an entrepreneur should have a reasonable damage scenario both financial & non-financial that he is willing to undergo to experiment. The 5th & the final principle being “Pilot-in -the-Plane” principle asks an entrepreneur to focus on activities within their control. Expert entrepreneurs know their actions will result in desired outcomes rooted in the belief that the future is neither found nor predicted, but rather written by them.
An expert entrepreneur understands that “Means” for achieving potential goals are not “Static” – in fact, these means of various resources can be combined in various combinations to achieve several possibilities.
To understand the principle of “Affordable loss” entrepreneurs need to re-evaluate the cost of their choices that will help them in determining the affordable loss. For example- if the management team of a Start-up is using private vehicles for commuting, they can go in for a carpool. Instead of taking out clients for a dinner meeting they have an in-house dinner meeting. By dropping the costs that could be dropped an entrepreneur will be able to quantify his affordable loss.
The principle of “Crazy Quilt” ensures that an entrepreneur goes beyond his comfort zone & is able to form collaborations & partnerships in order to strengthen/expand his venture. For example – if an entrepreneur has an opportunity to click for a selfie & spend 2 minutes with a dignitary, he should take this as an opportunity to pitch for his venture & look for collaborations & partnerships rather than just clicking a selfie.
The “Lemonade” principle emphasis on understanding an entrepreneur’s surprise factor. Instead of making “what-if” scenarios to deal with worst-case scenarios, experts interpret “bad” news and surprises as potential clues to create new market.
The future might be uncertain for an entrepreneur but not all uncertainties are similar. Here the entrepreneur needs to be like a Pilot-in -the -Plane- focus on activities that is within his/her control, equate the inputs to desired outcomes & co-create the future.
In a nutshell, Effectuation explains what expert entrepreneurs actually do, by understanding & recognizing the uncertainty of venturing into unknown by reducing uncertainty. Effectuation is a method that has proved to be practical, sensible, inspiring, and inclusive. An entrepreneur needs to start with whatever he has, take affordable risks, be open to pleasant surprises & unpleasant shocks, and seek partnerships/collaborations with others.