What leaders, managers and professionals should learn form expert entrepreneurs
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Understanding how to apply effectuation in a corporate setting
The Corporate Principles are here to answer the question: "What to do next?"
The 5 Corporate Principles
The 5 Corporate Principles
Effectuation is a set of (5) decision-making principles expert entrepreneurs are observed to employ in situations of true uncertainty.
BIRD IN HAND principle
- start with your means -
We love the bird in hand principle. It is so opposite to what most working for a corporate feel and think. If you fully grasp the full potential of this principle, you will start to see that a corporate might well be the best place to be as an entrepreneur. The entire corporate is one big candy shop! Entrepreneurs have been standing outside of corporates for years, feeling really jealous. Jealous about all the means available within a corporate setting! Take a moment to imagine what one could create if only you had these means available…
How could you even assess all the means??
Simple, ask yourself:
Who are we?
- What are our values?
- What are our beliefs?
- What do we think should be our role in society?
- What value do we want to create in the future?
- Why do we think this matters?
- What matters to me?
What do we know?
- What are our core activities?
- What is that we have superior knowledge about?
- What do we consider our core competences?
- What assets do we own?
Who do we know?
- Who do we consider network partners with whom we can co-create new business models with?
- Who do we consider to be our most demanding clients?
- Who do do we know, that knows… well you’ll probably got it.
What do I have?
- Do we have slack production capacity that I can use?
- Is there a budget?
- What are the current sales channels can we use?
- What R&D resources can we utilize?
- Is there an empty floor available in one of our buildings?
Massive load of means… Means with which you can be creative with to dream up all sorts of creative and imagined. These ends should be inspiring and connected to the current strategy and mission of the organization in order to increase the odds of being able to move on to the next step. Of course, you should always challenge the status quo, make sure you connect with the people whose minds you want to influence to shift paradigms…
AFFORDABLE LOSS principle
- The future can’t be predicted -
In most corporates, the people we ask to develop and write new business development plans are the ones with the greatest ideas. This results in corporate templates that have been designed with the utmost care.
Most important questions to be answered:
- What will you create EXACTLY?
- What will it cost?
- When will we break-even?
- What will the ROI be?
- How about EBIT?
- What revenues do you expect in the upcoming five years?
To those who apply Effectuation, the questions above are not very brilliant…to put it mildly. We live in a world that changes faster than we can learn. It’s only when we can admit that we can’t predict the future that we stand a chance at becoming in control. The simple notion that the future can’t be predicted forces us to start shifting from ‘linear home run philosophies’ towards organic and preferably validated learning. In other words, smaller bets/investments allow us to gain insight by moving forward in an affordable way. While it was once thought that the entrepreneurs were the insane risk-takers, it turns out that it was really all the corporate predictors that were taking all the risks. An enormous crisis is usually a consequence of taking such risks.
Apply the affordable loss principle and ask yourself:
- Can we afford (financially) what we are investing in this initiative?
- Are we aware of the possible negative impact a disaster would have on our current business image?
- How could we decrease the potential risk we are taking and while still moving forward?
CRAZY QUILT principle
- form partnerships -
The crazy quilt symbolizes a collaboration between partners. Every partner is represented as a unique peace of cloth. These pieces of cloth are sewed into a quilt by a thread symbolizing the pre-commitment each partner offers one another.
Two of the most important reasons for corporates NOT to pursue an opportunity in an unpredictable market is either not having the means or not willing to invest them because they don’t want to take the risks and uncertainties that are perceived to come with the package.
What the bird in hand and the affordable loss principles teach us is how to handle perceived risks and that we should start with available means and be creative with them. Nevertheless, the conclusion can still be the same. It’s too risky and contains too many uncertainties for the corporate.
In these cases, entrepreneurs turn to collaboration for solutions, which is described by this crazy quilt principle. Looking for quilting partners in your network offers you launching customers as well as partners that contribute means to limit investments and offer experience with the aspects that might make the next step less unpredictable and uncertain. In other words, the crazy quilt principle offers you an approach to further improve and build value propositions while limiting the downside of the risk involved. This eventually leads to an affordable next step with minimal uncertainty.
A very practical principle, especially for corporates that have a low risk-taking propensity and an diverse network of possible quilting partners.
LEMONADE principle
- leverage contingencies -
In an unfamiliar and rapidly changing market, learning faster than your competitor is key. When moving forward under uncertainty, you will come across quite a few surprises. Some positive, often wrongly perceived as luck, and some negative with even the potential to kill your entire project. In our opinion, you should never kill a project. If there is a lemon that convinces you to do so, slice the lemon and juice it. Study the juice and understand what the lemon is trying to teach you. It should offer you directions to change course and not simply abandon ship.
A lot of people will tell you to fail forward fast, fail often and that failure is a good thing as it offers you a learning experience. We believe that we should rethink what we consider failure. Failure is only failure in our opinion, when the fat lady has stopped singing. Failure is only true failure when we stop moving forward and don’t do anything with what was learned. Apple has tried to bring something that we could consider an iPad almost half a century ago and that didn’t work at the time. We think this learning experience taught Jobs to have an App Store in place. The introduction should never have been considered to be a failure but it should be seen as an experiment that offered learning possibilities. There are a lot of science based organizations in the world and even they don’t experiment in the market, only safely in the labs…
If the world offers you lemons, make lemonade. Learn from surprises and adapt.
Accountability is a good thing because it makes us persevere, it makes us strive to complete tasks but it also keeps us from adapting ideas that are less than brilliant. We have passed the tipping point of accountability. We are too much focused on achieving the short term results and financial incentives and that has killed adaptability and learning. We have to rethink the balance between accountability and learning in most corporates. The shareholders are mostly share-traders and are simply in it for the short-term trading possibilities where most other stakeholders are in it for the long-term. We need to refocus and aim for the long-term when operating in an unpredictable, uncertain and rapidly changing market. This translates to experimentation, collaboration and learning. This will increase your chances for survival and offers you the opportunity to really make a difference.
PILOT IN THE PLANE principle
- don’t predict, co-create -
Albert Einstein defined INSANITY as: “Doing the same thing over and over again and expecting different results”. If we keep applying causal linear thinking in situations where the future can’t be predicted, we will never become successful. We need to understand that the world has changed. We can’t keep up with the speed of change if we don’t change our approach and mindset.
We need to transform from passengers in a corporate plane, in which others are responsible for our comfort and future, to pilots taking charge and co-creating the future. Effectuators, the pilots in the plane, apply all the knowledge that is handed to you through this website and the services we offer you through Effectuation-Intelligence. If you don’t act upon it, nothing will change. The only thing that will change is your success-rate, and that won’t be for the better. As the world becomes more volatile, transparent and in a constant state of flux, applying the effectuation principles will only become more and more important.
It’s all up to you
What you do in the next couple of hours is crucial.
Please join the movement, share the insights and, most importantly, ACT upon them.
