lOMoARcPSD|15781725
Entrepreneurship lecture notes + summary “ (Strategyzer) value proposition design”
Lecture 3
Effectuation
• Creating your own future goal with resources you have in the present.
Two different approaches
Causal approach: search & select
• Market: Visionary individuals serving latent (=present) markets
• Logic: Analysis -> Selecting the most lucrative opportunity
• Process: Static – surprises bad!
Causation: Decision-making rooted in prediction
Effectual approach: Create & transform
• Market: Consequence of people doing what they think worthwhile
• Logic: Local possibilities transformed into opportunities
• Process: Dynamic interaction between stakeholders –
surprises good!
Effectuation: Decision-making principles that help entrepreneurs shape &
control their future.
The role of uncertainty
Causation: “If I can predict the future, I can control it”
Effectuation: “If I can control the future, I do not need to predict it”
5 core principles effectuation
1
, lOMoARcPSD|15781725
1. Bird in the hand
Start with what you have, own resources and create goal.
Causal reasoning
• Start with goal, and accumulate resources to tackle the goal
• E.g. Start with recipe of a dish and look for ingredients to make the
dish. Effectuation
• Start with resources, create goals out of those.
• Be open to inputs from others to improve your goal.
• “Surprises” offer you new insights into how to best get to the goal.
• E.g. Start with ingredients and create dish of them.
The means for an entrepreneur
• Who am I?
• What do I know?
• Whom do I know?
Example ‘Where opportunities come from? They are not magical or visionary, but they are
transformed from things that, by large, we already have’
- Transform via deleting/supplementing
- Transform via (de)composing (creating bag out of a seatbelt)
2
, lOMoARcPSD|15781725
- Transform via axaptation (creating Viagra out of failed paracetamol pill)
- Transform via re-weighting (changing where something isn’t good?)
2. Crazy Quilt Principle
Causation:
• Competitive analysis
Effectuation:
• Focus on building partnerships, by interacting with others, you create
more opportunities.
o Find right partners, see what they can offer you and what you can offer them.
3. Affordable loss
Causation
• Expected return.
o Choose opportunity based on potential return (ROI)
Effectuation
• Affordable loss. Choose what you’re willing to invest into a certain idea.
o What are you willing to lose?
o Make decisions on what the entrepreneur can afford to lose.
Maximize upward potentional (causation) -> Minimize downside risk (effectuation)
4. Lemons
Causation
• Avoid surprises
Effectuation
3
, lOMoARcPSD|15781725
• Leverage surprises. Welcome surprises. They give clues on how to improve
your product or target markets.
o “When life gives you lemons, make lemonade” -> Lemonade Principle
5. Pilot in the plane principle
Worldview -> Pilot in the plane principle
Causation
• “If I can predict the future, I can control
it” Effectuation
• “If I can control the future, I do not need to predict it”
o You control the future to the extend this is possible.
-> Important regarding effectuation!
4
Entrepreneurship lecture notes + summary “ (Strategyzer) value proposition design”
Lecture 3
Effectuation
• Creating your own future goal with resources you have in the present.
Two different approaches
Causal approach: search & select
• Market: Visionary individuals serving latent (=present) markets
• Logic: Analysis -> Selecting the most lucrative opportunity
• Process: Static – surprises bad!
Causation: Decision-making rooted in prediction
Effectual approach: Create & transform
• Market: Consequence of people doing what they think worthwhile
• Logic: Local possibilities transformed into opportunities
• Process: Dynamic interaction between stakeholders –
surprises good!
Effectuation: Decision-making principles that help entrepreneurs shape &
control their future.
The role of uncertainty
Causation: “If I can predict the future, I can control it”
Effectuation: “If I can control the future, I do not need to predict it”
5 core principles effectuation
1
, lOMoARcPSD|15781725
1. Bird in the hand
Start with what you have, own resources and create goal.
Causal reasoning
• Start with goal, and accumulate resources to tackle the goal
• E.g. Start with recipe of a dish and look for ingredients to make the
dish. Effectuation
• Start with resources, create goals out of those.
• Be open to inputs from others to improve your goal.
• “Surprises” offer you new insights into how to best get to the goal.
• E.g. Start with ingredients and create dish of them.
The means for an entrepreneur
• Who am I?
• What do I know?
• Whom do I know?
Example ‘Where opportunities come from? They are not magical or visionary, but they are
transformed from things that, by large, we already have’
- Transform via deleting/supplementing
- Transform via (de)composing (creating bag out of a seatbelt)
2
, lOMoARcPSD|15781725
- Transform via axaptation (creating Viagra out of failed paracetamol pill)
- Transform via re-weighting (changing where something isn’t good?)
2. Crazy Quilt Principle
Causation:
• Competitive analysis
Effectuation:
• Focus on building partnerships, by interacting with others, you create
more opportunities.
o Find right partners, see what they can offer you and what you can offer them.
3. Affordable loss
Causation
• Expected return.
o Choose opportunity based on potential return (ROI)
Effectuation
• Affordable loss. Choose what you’re willing to invest into a certain idea.
o What are you willing to lose?
o Make decisions on what the entrepreneur can afford to lose.
Maximize upward potentional (causation) -> Minimize downside risk (effectuation)
4. Lemons
Causation
• Avoid surprises
Effectuation
3
, lOMoARcPSD|15781725
• Leverage surprises. Welcome surprises. They give clues on how to improve
your product or target markets.
o “When life gives you lemons, make lemonade” -> Lemonade Principle
5. Pilot in the plane principle
Worldview -> Pilot in the plane principle
Causation
• “If I can predict the future, I can control
it” Effectuation
• “If I can control the future, I do not need to predict it”
o You control the future to the extend this is possible.
-> Important regarding effectuation!
4
