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Entrepreneruship- Effectuation & Lean Start up
This document discusses entrepreneurship and how entrepreneurs think. It contrasts the causal logic typically used by managers with the effectual logic used by entrepreneurs. Effectual logic focuses on an entrepreneur's means rather than predetermined goals, leveraging contingencies and forming partnerships. The document also discusses lean startup methodology, which emphasizes validated learning about customers through short development cycles of hypotheses, experiments and measuring data. Entrepreneurs play a key role in bringing new firms and markets, but may need managers to help large firms scale over time.
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Entrepreneruship- Effectuation & Lean Start up
- 1. Sachidananda Benegal N SRaghavan Center for Entrepreneurial Learning 4/24/2014 1(c) Sachidananda Benegal
- 2. • A fewquestions: – 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. Who is anentrepreneur? 4/24/2014 3(c) Sachidananda Benegal
- 4. They vary in... PurposeScale GeographyValue Creativity Goal Vision Dream Networks Technology etc... 4/24/2014 4(c) Sachidananda Benegal
- 5. HOW DOES ANDENTREPRENEUR THINK? 4/24/2014 5(c) Sachidananda Benegal
- 6. Causal Logic ispredictive 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. The Problem Space Ref:Presentation of Prof Saras 4/24/2014 7(c) Sachidananda Benegal
- 8. Classic Causation Modelfrom 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. Effectuation Principles: 1. Birdin 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. Who I am? WhatI 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. How is thisdifferent from how Managers think? 4/24/2014 11(c) Sachidananda Benegal
- 12. How is thisdifferent 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. CAN WE THENSAY WE DON’T NEED MANAGERS? 4/24/2014 13(c) Sachidananda Benegal
- 14. Firm Life-Cycle andEntrepreneur’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. LEAN STARTUP 4/24/2014 15(c)Sachidananda Benegal
- 16. Lean Start-up: ASpecial 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. Traditional Product Development Unitof Progress: Advance to Next Stage Waterfall Requirements Specification Design Implementation Verification Maintenance Problem: known Solution: known 4/24/2014 17(c) Sachidananda Benegal
- 18. Agile Product Development Unitof Progress: A line of Working Code Problem: known Solution: unknown “Product Owner” or in-house customer 4/24/2014 18(c) Sachidananda Benegal
- 19. Product Development atLean 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. Minimize TOTAL timethrough the loop LEARN BUILD MEASURE IDEAS CODE DATA 4/24/2014 20(c) Sachidananda Benegal
- 21. And much more... 4/24/201421(c) Sachidananda Benegal
- 22. 4/24/2014 22(c) SachidanandaBenegal I own right over none of the images used here – copyright is still with the owners
- 23. Reference: • effectuation.org • Presentationsby: – Prof Saras Saraswathy – Eric Ries 4/24/2014 23(c) Sachidananda Benegal