Effectuation and the Entrepreneurial Mindset

Entrepreneurs are making it up as they go along!

Our goal is to teach business skills needed to build a new startup at the Delft Centre for Entrepreneurship and develop an entrepreneurial approach to addressing urgent societal and environmental challenges, often called an entrepreneurial mindset. But what exactly do people mean by this, and how can a mindset be taught?

University of Virginia Darden professor Saras Sarasvathy’s much-cited 2001 paper “What Makes Entrepreneurs Entrepreneurial” examined not those attributes we, somewhat stereotypically, assume successful entrepreneurs possess but instead looked at what they do.

She did this by giving a group of leading entrepreneurs a short business case to solve. From this study, she ascertained thought processes and patterns of behaviour that successful entrepreneurs held in common. The now-famous five principles of effectuation were thus identified:

Bird in Hand Principle - Start with the means available.

Affordable Loss Principle - Set affordable loss; don’t focus on expected profits.

Lemonade Principle - Look to leverage surprises, even unwelcome ones.

Crazy-Quilt Principle - Form partnerships with willing stakeholders

Pilot in the Plane Principle - Control the controllable.

The core of effectuation theory is, in practice, a common-sense set of principles on how to reduce uncertainty and risk. It can be learned by anyone and can be applied to many different contexts and startups.  It is a more scientific guide to a successful entrepreneurial mindset and it is helpful to learn it.

Just start with what you have, risk what you can afford, be open to pleasant surprises, and seek relationships with other

(Santos, 2014)

There are loads of papers and websites dedicated to the theory and practice of effectuation. An excellent place to start is with Saras Sarasvathy’s own organisation that promotes the research and teaching of effectuation: https://www.effectuation.org/

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