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Entrepreneruship- Effectuation & Lean Start up

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A brief overview of effectuation and lean start up methodologies for the enthusiasts

Published in: Business, Technology

Entrepreneruship- Effectuation & Lean Start up

  1. 1. Sachidananda Benegal N S Raghavan Center for Entrepreneurial Learning 4/24/2014 1(c) Sachidananda Benegal
  2. 2. • A few questions: – In context of firms – Equilibrium • Where do new firms come in! – Is there a role for entrepreneurship? – What role does an entrepreneur play? We all know! 4/24/2014 2(c) Sachidananda Benegal
  3. 3. Who is an entrepreneur? 4/24/2014 3(c) Sachidananda Benegal
  4. 4. They vary in... PurposeScale Geography Value Creativity Goal Vision Dream Networks Technology etc... 4/24/2014 4(c) Sachidananda Benegal
  5. 5. HOW DOES AND ENTREPRENEUR THINK? 4/24/2014 5(c) Sachidananda Benegal
  6. 6. Causal Logic is predictive Control of outcomes achieved through accurate predictions, clear goals, and avoiding or protecting oneself against the unexpected To the extent you can predict the future, you can control it Conventional Wisdom: Causal Logic 4/24/2014 6(c) Sachidananda Benegal
  7. 7. The Problem Space Ref: Presentation of Prof Saras 4/24/2014 7(c) Sachidananda Benegal
  8. 8. Classic Causation Model from Marketing Textbooks Process of Effectuation Used by Expert Entrepreneurs SINGLE CUSTOMER Segment Definition Market Definition Segmentation Targeting Positioning Understand Customer Adding Segments/Partners Def of one of many possible markets Marketing Process Inversion 4/24/2014 8(c) Sachidananda Benegal
  9. 9. Effectuation Principles: 1. Bird in Hand Principle – Start with who you are, what you know and whom you know, and not necessarily with a predetermined goal or a pre-envisioned opportunity 2. Affordable Loss – Invest only what you can afford to loose 3. Crazy Quilt – Create an expanding network of self-selected stakeholders, each of whom commits only what he or she can afford to loose. Focus on partnerships rather than on competitors. 4. Lemonade – Be open to surprises and leverage them. Treat them as useful inputs rather than hindrances to be avoided. 5. Pilot in the Plane – Co-create the future with things within your control and with self- selected partners If you use these principles you can shape your future and transform your environment in ways that matter to you and your stakeholders. 4/24/2014 9(c) Sachidananda Benegal
  10. 10. Who I am? What I know? Whom I know? What Can I Do? Interaction with others Effectual Stakeholder Commitments Who we are? What we know? Whom we know? New means Expanding cycle of resources What can we do? (Affordable loss) New Goals Actual course of action possible Converging cycle of constraints New Markets and New Firms The process! 4/24/2014 10(c) Sachidananda Benegal
  11. 11. How is this different from how Managers think? 4/24/2014 11(c) Sachidananda Benegal
  12. 12. How is this different from how Managers think? Effectual Causal Start with your means Focus on your downside risk Leverage Contingencies Form Partnerships Control Vs Predict Pre-set goals and opportunities Expected Returns Avoiding Surprises Competitive analysis Inevitable trends 4/24/2014 12(c) Sachidananda Benegal
  13. 13. CAN WE THEN SAY WE DON’T NEED MANAGERS? 4/24/2014 13(c) Sachidananda Benegal
  14. 14. Firm Life-Cycle and Entrepreneur’s Career Causal Tethered to goals and predictive Effectual Tethered to means and non-predictive Time Expert entrepreneurs do not always manage to bridge this gap Expert Entrepreneur Startup Firm Large Firm NoviceEntrepreneur R e s o u r c e s Low High 4/24/2014 14(c) Sachidananda Benegal
  15. 15. LEAN STARTUP 4/24/2014 15(c) Sachidananda Benegal
  16. 16. Lean Start-up: A Special Case! Lean Manufacturing + Toyota Production System + Agile Development Recollect the Notion of: Uncertainty How it different from Risk? 4/24/2014 16(c) Sachidananda Benegal
  17. 17. Traditional Product Development Unit of Progress: Advance to Next Stage Waterfall Requirements Specification Design Implementation Verification Maintenance Problem: known Solution: known 4/24/2014 17(c) Sachidananda Benegal
  18. 18. Agile Product Development Unit of Progress: A line of Working Code Problem: known Solution: unknown “Product Owner” or in-house customer 4/24/2014 18(c) Sachidananda Benegal
  19. 19. Product Development at Lean Startup Unit of Progress: Validated Learning About Customers ($$$) Problem: unknown Solution: unknown Customer Development Hypotheses, Experiments, Insights Data, Feedback, Insights 4/24/2014 19(c) Sachidananda Benegal
  20. 20. Minimize TOTAL time through the loop LEARN BUILD MEASURE IDEAS CODE DATA 4/24/2014 20(c) Sachidananda Benegal
  21. 21. And much more... 4/24/2014 21(c) Sachidananda Benegal
  22. 22. 4/24/2014 22(c) Sachidananda Benegal I own right over none of the images used here – copyright is still with the owners
  23. 23. Reference: • effectuation.org • Presentations by: – Prof Saras Saraswathy – Eric Ries 4/24/2014 23(c) Sachidananda Benegal

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