EFFECTUATION - LEE YANG QING (TP071206)

Effectuation in Action

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

Effectuation is the effectual approach that people use to explore possibilities based on the resources available and leveraging contingencies which can be applied in various contexts. It definitely can be used in companies or in entrepreneurship. It is especially relevant in the entrepreneurial setting where uncertainty and resource constraints are more prevalent (Silva&Oliveira, 2023).

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

Effectuation differs from previous frameworks in that it places more emphasis on reasoning from available resources towards innovative outcomes rather than upfront planning and causal reasoning. The effectuation framework differs from its entrepreneurial equivalents mostly because of these characteristics. Promoted as a "new way of thinking," effectuation is meant to complement modern innovation management approaches including agile project management, lean startup methodologies, and design thinking (Mansoori & Lackéus, 2019). Additionally, effectuation is thought to provide organisational innovation with competitive benefits by promoting strategy creation, strengthening organisational ambidexterity, and acting as a dynamic capability. Furthermore, studies indicate that female entrepreneurs may use effectuation more successfully than their male counterparts, especially in nations with low gender inequality.

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

The effectuation and traditional approach will be different in several dimensions but they are not necessarily mutually exclusive. They are 2 different mindsets and logic which can be used in different contexts. Effectuation is more suitable when people tackle with higher levels of uncertainty and resource constraints, while traditional approaches are more appropriate when the future is more predictable and resources are more available (Koguta et al., 2023).

4. Does effectuation mean: “not planning”?

No, effectuation is not “not planning”. It involves a different method of planning, which emphasizes on utilizing contingencies and creating new opportunities, instead of predicting and planning a specific goal (Hassni, 2022). The effectual entrepreneurship will always engage themselves in ongoing cycles of action, evaluation and adaptation, continuously shaping and refining their plans based on the method available and the emerging opportunity.

5. Are Effectuation and Lean Startup compatible?

The effectuation and Lean Startup are compatible and they share some underlying principles. Both of them emphasize experimentation, customer feedback and iterative learning which are more tangible elements (Philippi et al., 2023). Lean Startup emphasize the “build-measure-learn” cycle and focuses on minimising waste and validating assumptions via continuous experimentation. Effectuation provides a complementary perspective by focusing on the advantages of leveraging available resources, working together with stakeholders and leveraging contingencies. These two approaches can be combined or separated with effectuation guiding the overall entrepreneurial process and Lean Startup principles can be applied to the iterative development and validation of products and services.

Effectuation flow chart(Santos, 2015)

REFERENCES

Da Silva, A. D. F., & De Oliveira Lima, E. (2023, August 8). Effectuation and identity in entrepreneurship: A systematic review. https://www.redalyc.org/journal/5707/570772776020/html/

Koguta, C. S., De Mello, R. D. C., & Skorupskib, R. (2023). Combining effectuation and causation approaches in entrepreneurship: A 20+ years review. https://www.redalyc.org/journal/5615/561575359004/html/

Mansoori, Y., & Lackéus, M. (2019). Comparing effectuation to discovery-driven planning, prescriptive entrepreneurship, business planning, lean startup, and design thinking. Small Business Economics, 54(3), 791–818. https://doi.org/10.1007/s11187-019-00153-w

Philippi, S., Kabous, L., & Hinz, A. (2023). Effectuation and Lean Startup in Swiss start-ups: an integrative analysis. Proceedings of the . . . European Conference on Entrepreneurship and Innovation/Proceedings of the . . . European Conference on Innovation and Entrepreneurship, 18(2), 730–738. https://doi.org/10.34190/ecie.18.2.1751

Zakia Hassni. (2022, January 17). What is effectuation?  https://zakiahassni.wordpress.com/what-is-effectuation-3/

Santos, R. D. (2015, October 20). Effectuation – The best theory of entrepreneurship you actually follow, whether you’ve heard of it or not. Necrophone. https://necrophone.com/2014/01/20/effectuation-the-best-theory-of-entrepreneurship-you-actually-follow-whether-youve-heard-of-it-or-not/