EFFECTUATION - PUTERI HANNAH (WEEK 5)

                                                            Figure 1 A theory for Entrepreneurs

Effectuation is an idea with a sense of purpose – a desire to improve the state of the world and the lives of individuals. Yes, effectuation is something that can be used in companies. While mainly used in entrepreneurship, it can still be applied in small to big companies (Five Questions About Effectuation, 2024). This is a good thing, since effectuation is a method to make decisions in times of uncertainty. 

The primary distinction between other approaches and the effectuation is "how you think about goals and means" (Morales, 2020). Effective entrepreneurs use means, whereas causal entrepreneurs begin with clear goals and then look for ways to achieve them. Moving on to the next question, effectual approach and traditional approach are not mutually exclusive, they may co-exist. To decide which approach to use, we must look at the pre-existing information that is available for us to analyse.

Effectuation really depends on the meaning of “planning”.  In the effectual approach, it depends on the available resources, which is the key for setting goals. Effectuation is all about embracing uncertainty. Finally, effectuation and lean startup are indeed compatible. While Lean Startup concentrates on rapidly evaluating theories and verifying assumptions using minimum viable products (MVPs) and customer feedback, effectuation offers a framework for making decisions and taking action in uncertain environments (Morales, 2020).

Reference:

Five questions about effectuation. (2024, February 26). carlosmorales.de. https://www.carlosmorales.de/five-questions-about-effectuation/#:~:text=Yes%2C%20effectuation%20can%20be%20%E2%80%93%20and%20is%20actually,decisions%20in%20situations%20with%20high%20levels%20of%20uncertainty.

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