What leaders, managers and professionals should learn form expert entrepreneurs
The Corporate Principles are here to answer the question: "What to do next?"
The 5 Corporate Principles
The 5 Corporate Principles
Effectuation is a set of (5) decision-making principles expert entrepreneurs are observed to employ in situations of true uncertainty.
BIRD IN HAND principle
- start with your means -
We love the bird in hand principle. It is so opposite to what most working for a corporate feel and think. If you fully grasp the full potential of this principle, you will start to see that a corporate might well be the best place to be as an entrepreneur. The entire corporate is one big candy shop! Entrepreneurs have been standing outside of corporates for years, feeling really jealous. Jealous about all the means available within a corporate setting! Take a moment to imagine what one could create if only you had these means available…
How could you even assess all the means??
Simple, ask yourself:
Who are we?
- What are our values?
- What are our beliefs?
- What do we think should be our role in society?
- What value do we want to create in the future?
- Why do we think this matters?
- What matters to me?
What do we know?
- What are our core activities?
- What is that we have superior knowledge about?
- What do we consider our core competences?
- What assets do we own?
Who do we know?
- Who do we consider network partners with whom we can co-create new business models with?
- Who do we consider to be our most demanding clients?
- Who do do we know, that knows… well you’ll probably got it.
What do I have?
- Do we have slack production capacity that I can use?
- Is there a budget?
- What are the current sales channels can we use?
- What R&D resources can we utilize?
- Is there an empty floor available in one of our buildings?
Massive load of means… Means with which you can be creative with to dream up all sorts of creative and imagined. These ends should be inspiring and connected to the current strategy and mission of the organization in order to increase the odds of being able to move on to the next step. Of course, you should always challenge the status quo, make sure you connect with the people whose minds you want to influence to shift paradigms…
AFFORDABLE LOSS principle
- The future can’t be predicted -
In most corporates, the people we ask to develop and write new business development plans are the ones with the greatest ideas. This results in corporate templates that have been designed with the utmost care.
Most important questions to be answered:
- What will you create EXACTLY?
- What will it cost?
- When will we break-even?
- What will the ROI be?
- How about EBIT?
- What revenues do you expect in the upcoming five years?
To those who apply Effectuation, the questions above are not very brilliant…to put it mildly. We live in a world that changes faster than we can learn. It’s only when we can admit that we can’t predict the future that we stand a chance at becoming in control. The simple notion that the future can’t be predicted forces us to start shifting from ‘linear home run philosophies’ towards organic and preferably validated learning. In other words, smaller bets/investments allow us to gain insight by moving forward in an affordable way. While it was once thought that the entrepreneurs were the insane risk-takers, it turns out that it was really all the corporate predictors that were taking all the risks. An enormous crisis is usually a consequence of taking such risks.
Apply the affordable loss principle and ask yourself:
- Can we afford (financially) what we are investing in this initiative?
- Are we aware of the possible negative impact a disaster would have on our current business image?
- How could we decrease the potential risk we are taking and while still moving forward?
CRAZY QUILT principle
- form partnerships -
The crazy quilt symbolizes a collaboration between partners. Every partner is represented as a unique peace of cloth. These pieces of cloth are sewed into a quilt by a thread symbolizing the pre-commitment each partner offers one another.
Two of the most important reasons for corporates NOT to pursue an opportunity in an unpredictable market is either not having the means or not willing to invest them because they don’t want to take the risks and uncertainties that are perceived to come with the package.
What the bird in hand and the affordable loss principles teach us is how to handle perceived risks and that we should start with available means and be creative with them. Nevertheless, the conclusion can still be the same. It’s too risky and contains too many uncertainties for the corporate.
In these cases, entrepreneurs turn to collaboration for solutions, which is described by this crazy quilt principle. Looking for quilting partners in your network offers you launching customers as well as partners that contribute means to limit investments and offer experience with the aspects that might make the next step less unpredictable and uncertain. In other words, the crazy quilt principle offers you an approach to further improve and build value propositions while limiting the downside of the risk involved. This eventually leads to an affordable next step with minimal uncertainty.
A very practical principle, especially for corporates that have a low risk-taking propensity and an diverse network of possible quilting partners.
- leverage contingencies -
In an unfamiliar and rapidly changing market, learning faster than your competitor is key. When moving forward under uncertainty, you will come across quite a few surprises. Some positive, often wrongly perceived as luck, and some negative with even the potential to kill your entire project. In our opinion, you should never kill a project. If there is a lemon that convinces you to do so, slice the lemon and juice it. Study the juice and understand what the lemon is trying to teach you. It should offer you directions to change course and not simply abandon ship.
A lot of people will tell you to fail forward fast, fail often and that failure is a good thing as it offers you a learning experience. We believe that we should rethink what we consider failure. Failure is only failure in our opinion, when the fat lady has stopped singing. Failure is only true failure when we stop moving forward and don’t do anything with what was learned. Apple has tried to bring something that we could consider an iPad almost half a century ago and that didn’t work at the time. We think this learning experience taught Jobs to have an App Store in place. The introduction should never have been considered to be a failure but it should be seen as an experiment that offered learning possibilities. There are a lot of science based organizations in the world and even they don’t experiment in the market, only safely in the labs…
If the world offers you lemons, make lemonade. Learn from surprises and adapt.
Accountability is a good thing because it makes us persevere, it makes us strive to complete tasks but it also keeps us from adapting ideas that are less than brilliant. We have passed the tipping point of accountability. We are too much focused on achieving the short term results and financial incentives and that has killed adaptability and learning. We have to rethink the balance between accountability and learning in most corporates. The shareholders are mostly share-traders and are simply in it for the short-term trading possibilities where most other stakeholders are in it for the long-term. We need to refocus and aim for the long-term when operating in an unpredictable, uncertain and rapidly changing market. This translates to experimentation, collaboration and learning. This will increase your chances for survival and offers you the opportunity to really make a difference.
PILOT IN THE PLANE principle
- don’t predict, co-create -
Albert Einstein defined INSANITY as: “Doing the same thing over and over again and expecting different results”. If we keep applying causal linear thinking in situations where the future can’t be predicted, we will never become successful. We need to understand that the world has changed. We can’t keep up with the speed of change if we don’t change our approach and mindset.
We need to transform from passengers in a corporate plane, in which others are responsible for our comfort and future, to pilots taking charge and co-creating the future. Effectuators, the pilots in the plane, apply all the knowledge that is handed to you through this website and the services we offer you through Effectuation-Intelligence. If you don’t act upon it, nothing will change. The only thing that will change is your success-rate, and that won’t be for the better. As the world becomes more volatile, transparent and in a constant state of flux, applying the effectuation principles will only become more and more important.
It’s all up to you
What you do in the next couple of hours is crucial.
Please join the movement, share the insights and, most importantly, ACT upon them.
It offers organizations with a solution to the challenges that rigid planning cannot fix. This page provides an overview of many of the challenges that can be solved through Corporate Effectuation. When you read about challenges and obstacles that are faced by your organization, please connect with us at one of our meet-ups or contact us directly.
We support and facilitate the transfer of that knowledge to your business.
Are you facing one or more of these challenges?
- How to raise and nurture entrepreneurial action throughout the organization?
- What can be done to activate the potential for innovation slumbering within the firm?
- Which surrounding conditions boost innovation power?
- Which constraints should be eliminated?
- How can smart people be supported in cooperating throughout and beyond the company?
- Which measures would increase the odds for radical innovation?
- How does one get moving – low in risk and in investment?
- How to actively create (not merely find) entrepreneurial opportunities for new products, services and even markets?
Don’t hesitate to contact us!
It’s these situations in which the decision habits of experienced entrepreneurs, known as “effectuation”, outperform causal management logic. We support managers in becoming capable to act by using pre-existing means and networks to shape rough and unpredictable environments through entrepreneurial action.
Do you recognize one or more of these challenges:
- The environment is constantly changing – how to deal with it?
- Short on time, resources and budget – how to stay capable of acting?
- Our markets are on the decline – how can we create new opportunities?
- How can we make better use of the entrepreneurial potential slumbering in our organization?
- How can we leverage perceived constraints – surprises and unplanned events?
- Forecasting does not work – nevertheless, how can we lead the way both courageously and responsibly?
- What are viable alternatives to setting fixed goals and developing sophisticated plans?
- How can management be organized in uncharted territory?
- Can management be built on existing resources and success – and not on perceived weaknesses?
- How can entrepreneurial effectuation be combined with causal management logic?
Please contact us!
We argue for a third, control-based option, which follows the logic: “if we can control it, we don´t need to predict it”. When businesses are faced with situations where reliable predictions of the future are simply not possible, control-based strategies may be the optimal option. Control-based strategies have at least three advantages: reduced cost of prediction, reduced cost of failure and – perhaps most important – creativity and entrepreneurship as main elements in strategizing.
Do you face one or more of these challenges:
- What to do next – lack of valid predictions?
- How can future outcomes be created without predicting the future?
- What can be done, when “nothing can be done” (according to causal analysis)?
- How can the cost of strategy failures be reduced?
- How can strategy be developed by doing the possible (instead of just thinking the desirable)?
Please contact us and let us meet.
These individual qualities and characteristics must be brought together in order to achieve successful teamwork. Moreover, the leader must also bring their knowledge, abilities and personality to the table. The task grows even more complex when team constellations change often. We suggest that effectuation should be used as an additional tool for successful leadership.
Are these your challenges:
- Teams consist of a set of diverse individuals that have to be led to successful teamwork – how should we manage diversity?
- How can our leaders be trained in using the resources of their teams effectively?
- Team constellations tend to change often – how should we approach this issue?
- The project is tight on time, resources and budget – how can our leaders put these to effective use with their teams?
- How can our leaders induce innovative thinking in a team?
- How can our leaders make better use of the entrepreneurial potential in our teams?
- What are viable alternatives to setting fixed goals and developing sophisticated plans for effective teamwork?
- How can leadership be organized in uncharted territory?
Are you faced with these challenges? Contact us so we can discuss the ways you can overcome these challenges!
We support managers in defining and implementing these changes in a responsible and sustainable manner.
Are you faced with any of these challenges:
- How to determine the innovation level of a project in an uncertain environment?
- Which traditional change management elements are counterproductive when doing projects in an unpredictable environment?
- How can the projects be set up in an effectual, non-predictive manner?
- How can customers and partners be engaged in effectual project management?
- How can the performance of explorative R&D projects be assessed
If you are faced with any of these challenges, please get in touch with us!
Recent research findings discovered a number of elements which clearly distinguish between entrepreneurial and managerial reasoning. These elements are independent from traits and personality and can thus be learned and applied by anyone. We question myths and promote facts about entrepreneurial reasoning and support organizations in becoming more entrepreneurial.
Do you find any of the following questions challenging and difficult to answer?
- What makes entrepreneurs entrepreneurial?
- (How) can entrepreneurial reasoning be taught and fostered in existing organizations?
- How can people be encouraged to be entrepreneurial?
- Which structural and organizational factors constrain intrapreneurship? How can they be overcome?
- What does it take to implement entrepreneurial (effectual) cells within given structures?
- How can intrapreneurship be balanced with the need for continuity and stability within an organization?
Don’t hesitate to contact us!
In most corporates, professionals that want to develop a career are forced into leadership positions. The result: losing an excellent professional and gaining a mediocre manager. This should change due to the fact that we are dependent on the impact knowledge workers (i.e. the professionals in an organization) have while lacking formal hierarchical authority.
Professionals have to be well connected in order to have an early stage impact within the organization’s value chain and also be well connected outside of the organization to be able to assess the need for adaptability and sense for co-creation opportunities to ensure sustainability and success. Of course, this differs per level within each organization. For instance, two different programs are offered at Rabobank. One is focused on the mid-level professionals that need to increase their impact on co-creation within the current value chains, and the other program is for senior/executive-level professionals who are focused on the orchestration of value, which is at a more strategic level.
If the list above seems to be an oversimplification that could never lead to higher levels of people-engagement, guess again. If you have ever doubted your role within your organization, one of the reasons will be on the list. It was taken from a Forbes blog which described how some of your talents will be obsolete in the coming year. However, we prefer to look at things a bit of a more positive and constructive angle. While we interpret it playfully, it is something that we take dead serious.
Why aren’t you taking your employees seriously?
They are the ones who know what is going on; what their customers are actually expecting, complaining about and wishing for; and even if they don’t, they will know what your bird in hand is really all about. By engaging them and inspiring them to come up with new business opportunities built from available means and in co-creation with one another, you will see that people engagement is no longer an issue. We start from their personal passions and beliefs and guide them towards solutions that are aligned with the strategic goals of the organization. And if you want to be challenged, challenge them! Take them serious and let us unleash their full potential!
By attending these stimulating and enriching gatherings, you will be provided with a new tool set, principles, a roadmap, and fresh insights that will empower you to increase your impact as an orchestrator of meaningful change, even when you lack formal hierarchical power.
The gatherings include multiple surprise speakers who serve as agents of change. Through their wisdom, experience, and insights, they will challenge you to take a different approach to change, one that will guide you towards your own ‘Destination Unknown’…
Surround yourself with open-minded adventure-seekers who are bored with operational excellence initiatives. Together, you will share insights and ideas that will improve your personal impact when operating in uncertain and unpredictable environments. Awaken your entrepreneurial mind!
It’s our ambition to inspire established companies to adopt and embrace policies and practices that are more entrepreneurial. What is yours?
There’s a popular misconception: To be an entrepreneurial visionary, you need a unique idea and the ability to envision it as a future product. You need to be adept and have the ability to see things that are invisible to others. You need to go big or go home. You must dedicate yourself and your life to your idea. Because only you have heard its call, and because this beautiful, singular, and painstakingly detailed vision burns brightly in your brain.
You are on fire. This big idea is your big chance, hence you code feverishly 24/7, which propels you into the perpetual ramen-profitability of the favela-chic startup lifestyle.
Because you have fallen victim to the Myth of the Visionary, the mistaken idea that visionary entrepreneurs – revered talents like Steve Jobs, Jeff Bezos, Thomas Edison, Henry Ford – are able to envision a future, based on some supposed unique idea, upon which they must simply execute to create a disruptive product.
But that’s a sucker’s bet – a buzz saw that enthusiastic would-be entrepreneurs walk into and emerge, at best, cut up and scarred – but usually, painfully eviscerated watching the remains of their precious idea bleed out in their hands.
This myth manifests itself in entrepreneurs with two types of pernicious behaviors.
Most typically, entrepreneurs, those we call the “inflated”, confidently declare themselves as visionaries. Their primary driving force is nothing more than their firmly held (yet untested) conviction in their own ideas. They scoff at interacting with their customers, willfully ignore market feedback, focus on building product for themselves, not on validating the quality of their ideas, and consider skepticism a debilitating weakness.
They go “stealth” and most of them will fail miserably.
On the opposite end of the spectrum are the “deflated” – those who fail before they start – who flail at generating an impeccable “Big Idea” and therefore view themselves as non-visionary, neither worthy nor capable of creating a great product.
Being a visionary, however, has less to do with any specific idea than with committing to relentless change. The former is trivial; be stubborn and persevere undaunted. The latter is onerous and painful; propel your idea forward as you steward its evolution.
Arguably, the most disruptive aspect of the iPhone is the App Store and the ecosystem of third party apps, which didn’t exist until the summer of 2008. Opening the iPhone to third party developers was something that Steve Jobs vehemently resisted, since he felt such an action would, as Walter Issacson noted in his biography of Jobs, “pollute its integrity.”
Jobs had good reasons for resisting opening up the iPhone – remember, when he launched the iPhone at MacWorld in January 2007, he pitched it as a 3-in-1 device. Equal parts touch control iPod, revolutionary mobile phone, and breakthrough Internet communications device, a product over which hardware, software, and content Jobs and Apple held firm control, having been burned on an earlier collaboration with Motorola and Cingular on the ROKR.
Apple board member Art Levinson, venture capitalist John Doerr, and Apple marketing chief Phil Schiller lobbied Jobs, arguing that that such a powerful platform as the iPhone would benefit from inviting third party app developers to create new services.
Jobs’ initial solution announced at WWDC 2007 was to allow third party developers to develop Web 2.0 applications (with access to iPhone core functionality), which iPhone users could access through Safari. Developer reaction was largely one of irritation. In response, the emergent ‘jailbreak community’ spun up Installer.app and Cydia, which allowed developers to build apps for jailbroken iPhones and for users to download and install third party apps.
Rather than sticking to his initial vision of the iPhone as a defensive market response to the potential of cellphones eating into the fat profits of the iPod market, Jobs made what appears to be a Solomonic product decision by announcing the iPhone SDK in spring 2008. This was his answer to consumers who wanted third party apps for their phone to do things that Apple hadn’t even considered.
Refusing to be held captive by (his own) bad ideas, he altered his vision to capture the best of both worlds, retaining control of iPhone apps with a strict app approval process while allowing third party apps to flourish.
Steve Jobs, like other great entrepreneurs such as Jeff Bezos, Thomas Edison, and Henry Ford, didn’t have a perfect vision of the future. Neither should you.
As Jony Ive observed about Steve Jobs’ impact on Ive’s own ideas, “The ideas that come from me and my team would have been completely irrelevant, nowhere, if Steve hadn’t been here to push us, work with us, and drive through all the resistance to our ideas into products”.
True visionaries are not like the Myth of the Visionary would have us believe, they are not rocks in a stream – stubbornly refusing to be moved – but are more like water flowing around obstacles while synthesizing inputs, making tradeoffs, and learning from the market to create great products with great impact.
Steve Jobs in “The Lost Interviews.”:
“As you evolve that great idea, it changes and grows, it never comes out like it starts because you learn a lot more as you get into the subtleties of it. You also find tremendous trade-offs that you have to make. There are certain things you cannot make electrons do, or plastic or glass or even factories or robots. Designing a product is keeping 5,000 things in your brain – fitting them altogether in new and different ways to get what you want. Every day you discover something new that is a new problem or a new opportunity to fit these things together.”
Take it from him. Don’t fall prey to the Myth of Visionary and assume your idea is either too perfect to alter or too incomplete to start. Pursue the change, not the idea itself.
This blog was written by Cooper and Vlaskovits (March 2013)and if you read closely you will recognize the lemonade principle !
Learn from Jobs: experiment, learn, adapt and above all persevere!
If we don’t want to turn into the next Kodak, we should apply corporate effectuation. learn more
If you don’t believe me, The Raw Story reported May 14 that Tesla (Nasdaq:TSLA) is worth more than Fiat (OTCBB:FIATY), despite the fact that the Italian car-maker is producing 200 times as many cars. While Tesla is an amazing story, its valuation has become frothy, to say the least. Comparing Tesla’s financials to GM or Ford is a near-impossible task. With production is only now starting to ramp up and profitability is still hit or miss on a quarterly basis, comparing anything earnings-related is like comparing apples to oranges. On a price-to-sales basis, Tesla is currently trading at 10.2 times the sales of Ford and GM, which are 0.35 in comparison.
The fact is, we can no longer predict what will happen anymore. Who can tell Tesla will make it and if Fiat will survive? We simply can’t. We should have the guts to admit this and shift our mindset and approach! We need to Orchestrate Kick-ass pandas to make sure we don’t waste the value that is in all corporates. NOW is the time when we should be proactively adapting!
Boston Consulting Group provides us with sufficient proof that the world is changing. We need to develop a new skill set! Next to ‘execution’, we need ‘search’ and ‘build’ skills too. Just check out these three slides, proving that we need to orchestrate adaptability in a corporate setting:
As we see, know and understand, not everyone has this entrepreneurial mindset. Therefore, we aim to make the scientific basis of entrepreneurship understandable, concrete, implementable, feasible and fun.
Time and again we see that organizations become inspired by the ways experienced entrepreneurs think and act. When using the Effectuation mindset, the DNA of businesses is transformed, they become future-oriented, decisive, and executive. This transformation adds value and more opportunities to achieve success in an ever-changing world.
In everything we do, we continue to lead the market and will never stop innovating and enriching ourselves with new insights. Intrinsic curiosity is embedded within our DNA. Our belief in application, vigor, and concretization is our motivation. The positive transformation of people and companies is our evidence.