TOPIC 5 - The Basics of Venturing - Effectuation in Action - TSANG DA XIN (TP071168)




BY:TSANG DA XIN (TP071168)

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

-  Based on my research, effectuation is not just used in companies but also applicable to other sectors. First of all, the definition of effectuation means an idea with a sense of purpose - the desire to improve the state of the world and the lives of individuals. Companies of different sectors can apply this principle by utilizing their current assets, skills, and networks to solve problems.

 What is the key difference between effect
uation and other approaches in entrepreneurship? 

-  The main key difference is the way they approach risk. For effectuation , they mainly use the affordable loss principle. Entrepreneurs only risk what they can afford to lose at each step while on the other hand for casual reasoning, they often utilize expected returns to earn profits by calculating the potential profits and the likelihood of success.

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

-  The effectual approach and traditional (casual) approach in terms of entrepreneurship are not mutually exclusive.  For example: During the initial stages of a venture, when market conditions, traditions, and product fit are uncertain, entrepreneurs often have to utilize effectuation to navigate across unknown territories. Once they approach or reach the growth stage, the business has grown to becomes more stable, and they may start to benefit from the traditional causal approach. They use casual logic to optimize processes, focus on efficiency, or expand into new markets.

 Does effectuation mean: “not planning”? 

- This means it involves a type of planning that is more adaptable and responsive to changing circumstances than traditional, predictive planning methods. For example, iterative planning, planning is more about setting immediate next steps rather than detailed long-term strategies. Next is flexibility, which allows entrepreneurs to pivot. redefine their goals based on what they learn and who they meet along the way.

Are Effectuation and Lean Startup compatible?

-  Yes, both effectuation and lean startup are compatible. They are compatible because they both prioritize flexibility, learning from experience, and adapting to uncertainty and rapid changes. Not only that, this is also an approach to customer feedback and iterative product development. Entrepreneurs can also navigate the uncertainties of new ventures more effectively, making most of the limited resources while staying attuned to customer needs.


REFERENCES (APA STYLE)

  • Matalamäki, Marko & Vuorinen, Tero & Varamäki, Elina & Sorama, Kirsti. (2017). Business Growth in Established Companies; Roles of Effectuation and Causation. Journal of Enterprising Culture. 25. 123-148. 10.1142/S0218495817500054. 
  • Mansoori, Yashar & Lackéus, Martin. (2017). Comparing Effectuation to Five Other Entrepreneurial Methods Along Nine Conceptual Dimensions. 10.13140/RG.2.2.23134.33601. 
  • Alaghemand, Smaeil. (2022). Re: Is there a difference between Effectuation and Lean StartUp Methods?. Retrieved from: https://www.researchgate.net/post/Is_there_a_difference_between_Effectuation_and_Lean_StartUp_Methods/6202726cf9278f24727625db/citation/download. 
  • Sebastiao, H., PhD. (2014, June 12). How Effectuation + Lean Startup = Lean Entrepreneurial Thinking & Acting (LETA). https://www.linkedin.com/pulse/20140612225801-11777433-how-effectuation-lean-startup-lean-entrepreneurial-thinking-acting-leta/






 

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