The Entrepreneurial Method

We have been living in the dark (grey?) ages preceding Novum Artificium

In other words, we throw away millions of people

We waste the potential in human nature just as our prescientific ancestors did not realize the potential in nature

But we are beginning to spell out entrepreneurial effectuation just as Bacon began spelling out scientific experimentation

I dont have a brilliant idea

Bird-in-hand principle:
Start with your means and do the doable

I dont have enough money

Affordable loss principle:

Invest only what you can afford to lose

I am not a risk taker

Pilot-in-the-plane principle:
Create the future not bet on it

I am afraid to fail

Lemonade principle:
Embrace and Leverage surprises

I dont know how to make it happen

Who I am What I know Whom I know

What can I do?

(Affordable loss)

Interactions with other people

Effectual stakeholder commitments

Crazy Quilt principle:

Build a network of self-selected stakeholders

Effectual Logic = Non-predictive control

High

Plan
PREDICTION

Persist

Persist Adapt Plan Adapt Co-create

Low

= Non-predictive control

Low
CONTROL

High

How do you control a future you cannot predict? You co-create it through stakeholder commitments

Expert Entrepreneurs Build Markets

Expanding cycle of resources

Actual courses of Action possible

New means

Who I amare We What I know We know Whom I know We know

What can I do? We do?

(Affordable loss)

Interactions with other people

Effectual stakeholder commitments New goals

Actual Means

Converging cycle of constraints

NEW MARKETS AND NEW FIRMS

The Market for Engineering

KBL produced 6 iron ploughs in 1904 They remained unsold for two years

The Market for Electric Bulbs

Year Cost Price Sales Price Quantity 1 1.25 0.40 20-30,000 2 0.70 0.40 50-80,000 3 0.50 0.40 100-300,000 4 0.37 0.40 > 1 Million

The Market for Money

The moment of change

The Entrepreneurial Method

The scientific method is about unleashing the power of nature to develop new means to achieve our ends

It is about finding out about existing worlds

The entrepreneurial method is about unleashing the power of human nature to create new ends as well as new means It is about making new worlds

Markets and Worlds: Made through the Entrepreneurial Method

Not like a jigsaw puzzle

More like a crazy quilt

EFFECTUATION
Elementsof EntrepreneurialExpertise

SARAS D. SARASVATHY

NewHorizonsinEntrepreneursh ip

www.effectuation.org