What makes entrepreneurs entrepreneurial?

This paper presents the origins, motivations and basic principles of Effectuation, a ‘ logic of thinking, discovered through scientific research, used by expert entrepreneurs to build successful ventures.’. Although not as widely known or followed as methods such as Lean Startup popularized by Eric Ries, Effectuation has a strong and growing contingent of practitioners with the Darden School of Business at the University of Virginia being the leading proponent and teacher through their i.Lab Incubator.

The basic ‘discovery’ by the author is that successful entrepreneurs typically think differently about problems, decisions and actions than how most of us think most of the time (and how we are taught in school). She labels this type of thinking ‘Effectual’ reasoning as opposed to ‘Causal’ reasoning.

Causal reasoning begins with a pre-determined goal and a given set of means, and seeks to identify the optimal – fastest, cheapest, most efficient, etc. – alternative to achieve the given goal.

Effectual reasoning, however, does not begin with a specific goal. Instead, it begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with.

This difference in rationality and reasoning is, the author claims, the source of successful entrepreneur’s success and it can be taught. Indeed, the five key principles listed right on the home page of the Society for Effectual Action are all about mindset and behavior.

The Effectual approach to entrepreneurship, and incubation specifically, is self-admittedly focused on the entrepreneurial thinking process. It addresses mindset and behavior and the underlying problem solving and decision-making reasoning that entrepreneurs do. It is light on process, methods and tools and on measurements and operational specifics. It is a welcome complement to other entrepreneurial and incubation approaches and needs to be included in any innovation system that claims to be comprehensive.

Original Article »

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