When Sarri Gilman, executive director for Leadership Snohomish County, picked up a copy of Inc. magazine, she was struck by a cover story on the topic of how entrepreneurs think.
The research behind the hypothesis proved so intriguing that Gilman invited Ian Ayers, a co-founder of the Society for Effectual Action, to present on the topic at a community education forum in Everett last month.
The workshop was a mix of academic “aha moments” and personal stories from several homegrown entrepreneur panelists who confirmed how their experiences actually mirror some of the patterns described throughout the research.
While many experts have studied the subject of what makes entrepreneurs entrepreneurial, Saras Sarasvathy, who teaches at the University of Virginia’s Darden School of Business, made some interesting discoveries as she explored how — or even “if” — entrepreneurship can be taught.
From a bird’s-eye view it may appear that the majority of successful entrepreneurs simply have a knack for landing on great ideas and then launching them, almost as if it were a function of their DNA. And often they already have some resources to expend.
But what Sarasvathy discovered is that the entrepreneurial mindset can be taught to business people of all types: CEOs, marketing and sales executives, managers, designers. Anyone with the desire to develop creative, problem-solving and opportunity-seeking business skills could benefit from this effectual framework.
The Effectual method tackles entrepreneurship from a different, most intriguing paradigm. Effectual thinking argues that it’s best for an entrepreneur to determine the extent to which they can control the future versus trying to predict the future.
In other words, when you begin with a business plan, conventional thinking — and years of masters in business administration training — has conditioned many of us in business to think that successful ideas will hinge on how well one predicts what’s coming in the future.
Mitigating any uncertainty and risk is often an afterthought, considered after the model is built and future cash flows are projected.
Effectuation is based on thinking and acting upon decisions that most often involve collaboration with stakeholders and sources that an individual already has connections with. Think of it as a patchwork quilt; many ideas, experts, champions and cheerleaders sharing their energy, enthusiasm and resources to get an idea off the ground.
Effectuation promotes interdependence and co-creation. I have had students studying small business essentials with good ideas; what they were lacking was the connection with a student across the room who also had a good idea. As they sat together and shared their business ideas, their ideas morphed from good to great.
There is a combination of five principles at work in effectuation: bird-in-hand, affordable loss, lemonade, patchwork quilt and pilot-in-the-plane. Each principle introduces disciplines that will cultivate a new way of thinking about business opportunity.
Bird-in hand answers the questions relating to means: who I am, what I know and whom I know. This is a critical first step in setting a course. It’s deliberately biased toward relationships — not money!
Affordable loss takes the risk of financial exposure and breaks it into manageable steps. If at any point along the creation continuum there is a negative outcome, this was a calculated risk for that specific step and decision. In other words, you had one decision branch on your tree that needed pruning. No big deal — and, furthermore, don’t take it personally!
The lemonade principle leverages contingencies and looks at any setback as having another potential solution. Or perhaps even a new stand-alone idea with its own value proposition.
The patchwork quilt is all about forming partnerships with self-selecting stakeholders. These individuals are part and parcel to the early conversations that build a market-ready product or service. The sheer number of passionate partners mitigates risk and provides significant upside.
And finally, the pilot-in-the-plane reminds entrepreneurs that control trumps prediction and educated guesses anytime. “An effectual world view is rooted in the belief that the future is neither found nor predicted, but rather made,” said Ayers.
Participants of the workshop were clearly energized and excited about the topic as they networked during their lunch break. Gilman was pleased with the participation and the opportunity to explore new ways of thinking.
“It’s our commitment to bring community together to have conversations about our economic development and vitality as we cultivate connections that drive new ideas,” Gilman said.
In the coming weeks, this column will be dedicated to the stories and insights of those local panelists who presented at the workshop. I’ll also weave in more commentary and insights from presenter Ian Ayers.
Juergen Kneifel is a senior associate faculty member in the Everett Community College business program. Please send your comments to entrepreneurship@everettcc.edu.
Workshop
Leadership Snohomish County will host a community business forum workshop in October on the topic of developing “High Performing Teams.” Watch for more information, or visit the Leadership Snohomish County website at www.leadrshipsc.org.
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