TOPIC 5 - Effectuation (TP070991)

1. Can effectuation also be used in companies? Or is it useful only for entrepreneurship? 

Yes, effectuation not only useful for entrepreneurship but also in companies. First of all, you need to understand that efffectuation is a concept of doing business where people take risk to seek a potential market in a highly unknownable environment. (Morales, 2020) In simple words, it is a strategy for any parties that make a business plan without knowing the current market demand, and this is usual in the business world which we called it as supply create demand. Every company needs effectuation mindset to avoid the business being replace or decrease. For example, the invention of touchscreen smartphone in 2007 by Apple has cause Nokia company that don't want to jump out from its comfort zone and remain old button-based mobile phone, gradually exiting the industry. (Kaur, 2023) Therefore, based on this case study, the effectual reasoning is crucial for company to survive and mantain big market share. 

2. What is the key difference between effectuation and other approaches in entrepreneurship? 

For effectual entrepreneurs, they do decision making for a uncertain condition, which mean they have limited resources or case study that they can refer to get a actual asnwer. (Morales, 2020)Therefore, they will ussually consider how much they are able to loss and try to minimize it to make sure they have afford the failure. (Yixin et al., 2022)

On the other hand, causal approaches make rational decision in neoclassical economics and maximize its expected profit to acheive their goal. Not only that, but this approach typically combine all the resources into one solution which differs from the effectual approach that use fewer resources to generate multiple routes.(Yixin et al., 2022)

3. Are the effectual approach and the traditional (causal) approach mutually exclusive? 

No, both of them can co-exist in the same time. Due to the reason that business world is complicated, there is a need for the business owner to identify which approach they should use in the current scenario. It has been shown that effectual approach provide more effextice result for company that has high growth context, while causal is use by lower growth text approach. As a result, there is no best approach, you can only pick the suitable way based on your specific problem. (Morales, 2020)

4. Does effectuation mean: “not planning”? 

No, when executing the effectual approach , the people are still need to do planning. It is only focus on the specific goal that have enough resources to perform. Therefore, it couldn't say as not planning. (Morales, 2020)

5. Are Effectuation and Lean Startup compatible? 

Yes, effectuation and lean startup are indeed compatible in many ways. For effectuation, it is focus on finding idea during the pre-startup session if the risk are low, where people try to coming out oppotunity from limited resources. While the lean startup help to create a shorten development cycles and manage startup phase, so that the customer can get the product faster. Both of it support a enterpreneur concept and make sure it achievable.(Morales, 2020)

References

Morales, C. (2020, April 28). Effectuation in five questions. https://www.linkedin.com/pulse/effectuation-five-questions-dr-carlos-morales/

Kaur, D. (2023, July 20). Do you remember the first smartphones? Tech Wire Asia. https://techwireasia.com/07/2023/the-first-two-smartphones-in-the-world/

Yixin, L., Wenhong, Z., & Xu, Z. (2022). How to coordinate causation and effectuation in the entrepreneurial process? Foreign Economics & Management, 2022, 44(10). https://qks.shufe.edu.cn/mv_html/j00002/202210/202fa975-e4d5-4aa7-b5dd-fd71d4b4eb3c_WEB.html