HOW DO ENTREPRENEURS THINK AND ACT? - SESSION 2

1. www.solvayentrepreneurs.be HOW DO ENTREPRENEURS THINK AND ACT? SESSION 2 (out of 10) ENTREPRENEURIAL THINKING AND ACTING This session is part of a 10-weeks course given to master students of the SOLVAY BRUSSELS SCHOOL OF ECONOMICS AND MANAGEMENT by professor Olivier WITMEUR.

2. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR 2 •  How do entrepreneurs think and act? •  Are they different from “managers”? •  The difference between risk and uncertainty. QUESTIONS AGENDA RESOURCES •  Introduction to Effectuation •  Wafels & Dinges case •  What makes entrepreneurs entrepreneurial (Sarasvathy) Desired Outcomes of the Session

3. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR How To Navigate In Turbulent Times? 3 VOLATILITY Nature, dynamics and speed of change. A U C V AMBIGUITY Haziness of reality, potential for misreads, and the mixed meanings of conditions. COMPLEXITY Multiplex of forces, confounding of issues and causes-and-effects confusion. UNCERTAINTY Lack of predictability and prospects for surprises.

4. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR ELEMENTS OF ENTREPRENEURIAL LOGIC: INTRODUCTION TO EFFECTUATION #1

5. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Managerial Approach based on optimization Selecting between given means to achieve a predefined goal 5 How to optimize the use of the resources? Given Goal Resource 1 Resource 2 Resource 3 Resource 4 Resource 5 Typical tools & techniques: project management, leadership, controlling, quantitative methods…

6. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR A more creative approach based on planning Generating new means to achieve pre-determined goals 6 How to write a ‘case’ or a plan to ask for more resources. Resource 1 Resource 2 Resource 3 (needed) (needed) Typical tools & techniques: strategic and financial planning Given Goals

7. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Entrepreneurial Thinking Imagining possible new ends using a given set of means 7 How to exploit one opportunity inside the opportunity space? Resource 1 Resource 2 Resource 3 Resource 4 Resource 5 Possible goal 1 Possible goal 2 Possible goal 3 … … Opportunity Space Typical tools & techniques: co-creation, creativity, enrolment, lean entrepreneurship, bootstrapping….

8. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Introducing Effectuation: The logic of expert entrepreneurs 8 The word effectual (entrepreneurial approach) is the inverse of causal (managerial approach). In general, in MBA programs across the world, students are taught causal or predictive reasoning in every functional area of business. Saras Sarasvathy, India

9. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Causation vs. Effectuation 9 CAUSATION EFFECTUATION (Cre-Action) Planned approach Top-Down Managerial logic Prediction based: To the extent we can predict the future, we can control it. Emergent approach Bottom-up Entrepreneurial logic Control based: To the extent we can control the future, we don’t need to predict it. Effects are predicted Need to manage the causes Causes are given Need to manage the effects à For predictable situations à For uncertain situations

10. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.“ - F. Scott Fitzgerald

11. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Principle #1: Bird in Hand 11 Start with who you are, what you know and whom you know … Not with pre-set/given goals (based on prediction) Typical entrepreneurial resources •  Expertize, skills… •  Social capital •  Psychological capital: hope, optimism, self efficacy and resilience

12. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Principle #2: Affordable loss 12 Invest what you can afford to lose (extreme case = 0€) … Not expected (risk adjusted) return

13. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Principle #3: Crazy Quilt 13 Build a network of self-selected stakeholders … Not competitive analysis and transactional relationships with first-best partners. Co-Creation Customers Suppliers Channels Financial partners Employees Sponsors … Committed stakeholders network Crazy quilt, not puzzle.

14. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Principle #4: Lemonade principle 14 Embrace and leverage surprises (they can present new opportunities) …Not avoid them

15. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Nils Bergvist 15 Question •  What would you do?

16. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR About Nils 16 Swedish Environmental engineer Worked 8 years in the mining industry in Kiruna (in Northern Sweden) Passion for wildlife and sports

17. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Ice Hotel 17

18. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Principle #5: Pilot-in-the-plane 18 The future comes from what people do … No inevitable trends à Control vs Plan

19. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR The Dynamics of the Entrepreneurial Network 19 Who I am? What I can do? Whom I know? My affordable loss? Who may be involved? Additional resources Iterative opportunity co-construction New Goals The venture grows step by step. Dead end My Goals? Multiple techniques help to deal with these cycles: Design Thinking, Lean Startup, Business Model Generation, Staged Financing… To be continued.

20. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Managerial vs. Entrepreneurial Thinking (stylized facts) 20 Effectual Causal Low Low High High Expert Entrepreneurs Experienced VCs Angels Corporate Managers Novice VCs Bankers Novice entrepreneurs

21. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR From Causation to Effectuation…and vice-versa 21 TIME AND EXPERIENCE LOGIC Causal Effectual Novice entrepreneur Expert entrepreneur Start-up firm Large firm Shift in logic necessitated by firm growth Entrepreneurs do not always manage to bridge this gap Moderating effect of resources

22. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Wafels & Dinges 22 Question •  What would you do next? •  What is your logic?

23. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR 23 Don’t wait/look for the perfect opportunity. Just start!

25. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR A real passion for entrepreneurship education and entrepreneurs. •  Student entrepreneurs: 2x •  Full time entrepreneur: once, in a team of 5 •  Coach: 500+ projects over the last 20 years •  (Advisory) Board member in multiple new ventures •  Policy making: 2x •  Director of Solvay Entrepreneurs •  PhD in entrepreneurship in 2008 •  … never as an investor My wife (as Colombo), no kids, one dog (Vicky). 25 Olivier Witmeur (Belgian, 46)

26. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Solvay entrepreneurs is the entrepreneurship center of the Université Libre de Bruxelles. We support entrepreneurs through the development of their venture, from an idea to a successful and sustainable business. 26 Solvay Entrepreneurs

27. Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR Let’s keep in touch! 272014%©%Olivier%Witmeur FOLLOW US ON LinkedIn.com/company/ Solvay-Entrepreneurs in Facebook.com/ SolvayEntrepreneurs f Twitter.com/ SolvayStart t SolvayEntrepreneurs.be www YouTube.com/user/ SolvayEntrepreneurs Foursquare.com/ SolvayStart