Friday, 3 May 2019

Entrepreneurs: the means prescribe the ends

Knowing several entrepreneurs, I don't think it is original ideas that entrepreneurs run on. From what I have seen, it is more often often taking an existing idea from another discipline, then leveraging it for all it is worth in their sector. Success is measured pragmatically by dollars in the bank and customer word of mouth.

What is really interesting, is that - according to research by Professor Sarasvathy - entrepreneurs don't plan much. Instead they ensure there is a lot of doing, and a lot of sales - $ in the bank. Sarasvathy (2008) calls this phenomenon effectuation. She studied 45 entrepreneurs and corporate managers to see if there was a difference in how they operated. There was, and the difference is called effectuation. 

To define effectuation, I like Sarasvathy's wording: effectuation "take[s] a set of means as [a] given and focus[es] on selecting between possible effects that can be created with that set of means” (2001, p. 245). Burkman (2012) interviewed Sarasvathy and was told that the entrepreneurs in her research "behaved more like ordinary, time-pressed home cooks, checking what was in the fridge and the cupboards, then figuring out, on the fly, what they could make and how". The means prescribe the ends. This is what most entrepreneurs do. 

Sarasvathy explains that causal processes start from the ends, and work back to the means: causation "take[s] a particular effect as [a] given and focus[es] on selecting between means to create that effect" (Sarasvathy, 2001, p. 245). Causation is what most corporates do. 

We can think of causation as being decision-making problems, and the thought-process used are choice-based. Effectuation is a design process problem which helps us to make something new. As Sarasvathy says, "Causal strategies are useful when the future is predictable, goals are clear, and the environment is independent of our actions; effectual strategies are useful when the future is unpredictable, goals are unclear and the environment is driven by human action. The causal actor begins with an effect he wants to create and asks, ‘What should I do to achieve this particular effect?’ The effectuator begins with her means and asks, ‘What can I do with these means?’ And then again, ‘What else can I do with them?’" (2008, p. xii)

An interesting delineation. 



Sam

References:
  • Burkeman, O. (2012). The Antidote: Happiness for People Who Can't Stand Positive Thinking. Melbourne, Australia: The Text Publishing Company
  • Sarasvathy, S. D. (2008). Effectuation: Elements of Entrepreneurial Expertise (New Horizons in Entrepreneurship). Cheltenham, UK: Edward Elgar
  • Sarasvathy, S. D. (2001). Causation and effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency. Academy of Management Review, 26(2), 243–63. https://doi.org/10.5465/amr.2001.4378020

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