how do entrepreneurs think and act? - session 2

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HOW DO ENTREPRENEURS THINK AND ACT?

SESSION 2 (out of 10)

ENTREPRENEURIAL THINKING AND ACTING

This session is part of a 10-weeks course given to master students of the SOLVAY BRUSSELS SCHOOL OF ECONOMICS AND MANAGEMENT by professor Olivier WITMEUR.

Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR 2

•  How do entrepreneurs think and act?

•  Are they different from “managers”?

•  The difference between risk and uncertainty.

QUESTIONS AGENDA RESOURCES •  Introduction to Effectuation

•  Wafels & Dinges case

•  What makes entrepreneurs entrepreneurial (Sarasvathy)

Desired Outcomes of the Session

Entrepreneurship Course – Session 2 - 2014 © Olivier WITMEUR

How To Navigate In Turbulent Times?

3

VOLATILITY Nature, dynamics and speed of change.

A

U

C

V

AMBIGUITY Haziness of reality, potential for misreads, and the mixed meanings of conditions.

COMPLEXITY Multiplex of forces, confounding of issues and causes-and-effects confusion.

UNCERTAINTY Lack of predictability and prospects for surprises.


ELEMENTS OF ENTREPRENEURIAL LOGIC: INTRODUCTION TO EFFECTUATION

#1


Managerial Approach based on optimization Selecting between given means to achieve a predefined goal

5

How to optimize the use of the resources?

Given Goal

Resource 1

Resource 2

Resource 3

Resource 4

Resource 5

Typical tools & techniques: project management, leadership, controlling, quantitative methods…


A more creative approach based on planning Generating new means to achieve pre-determined goals

6

How to write a ‘case’ or a plan to ask for more resources.

Resource 1

Resource 2

Resource 3

(needed)

(needed)

Typical tools & techniques: strategic and financial planning

Given Goals


Entrepreneurial Thinking Imagining possible new ends using a given set of means

7

How to exploit one opportunity inside the opportunity space?

Resource 1

Resource 2

Resource 3

Resource 4

Resource 5

Possible goal 1

Possible goal 2

Possible goal 3

…

…

Opportunity Space

Typical tools & techniques: co-creation, creativity, enrolment, lean entrepreneurship, bootstrapping….


Introducing Effectuation: The logic of expert entrepreneurs

8

The word effectual (entrepreneurial approach) is the inverse of causal (managerial approach).

In general, in MBA programs across the world, students are taught causal or predictive reasoning in every functional area of business.

Saras Sarasvathy, India


Causation vs. Effectuation

9

CAUSATION EFFECTUATION (Cre-Action)

Planned approach

Top-Down

Managerial logic

Prediction based: To the extent we can predict the future, we can control it.

Emergent approach

Bottom-up

Entrepreneurial logic

Control based: To the extent we can control the future, we don’t need to predict it.

Effects are predicted

Need to manage the

causes

Causes are given

Need to manage the

effects

à For predictable situations à For uncertain situations


“The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the

same time, and still retain the ability to function.“

- F. Scott Fitzgerald


Principle #1: Bird in Hand

11

Start with who you are, what you know and whom you know

… Not with pre-set/given goals (based on prediction)

Typical entrepreneurial resources

•  Expertize, skills…

•  Social capital

•  Psychological capital: hope, optimism, self efficacy and resilience


Principle #2: Affordable loss

12

Invest what you can afford to lose (extreme case = 0€)

… Not expected (risk adjusted) return


Principle #3: Crazy Quilt

13

Build a network of self-selected stakeholders

… Not competitive analysis and transactional relationships with first-best partners.

Co-Creation Customers Suppliers Channels

Financial partners Employees Sponsors

…

Committed stakeholders network

Crazy quilt, not puzzle.


Principle #4: Lemonade principle

14

Embrace and leverage surprises (they can present new opportunities)

…Not avoid them


Nils Bergvist

15

Question •  What would you do?


About Nils

16

Swedish

Environmental engineer

Worked 8 years in the mining industry in Kiruna (in Northern

Sweden)

Passion for wildlife and sports


Ice Hotel

17


Principle #5: Pilot-in-the-plane

18

The future comes from what people do

… No inevitable trends

à Control vs Plan


The Dynamics of the Entrepreneurial Network

19

Who I am? What I can do? Whom

I know?

My affordable loss?

Who may be involved?

Additional resources

Iterative opportunity co-construction

New Goals The venture grows

step by step.

Dead end

My Goals?

Multiple techniques help to deal with these cycles: Design Thinking, Lean Startup, Business Model Generation, Staged Financing… To be continued.


Managerial vs. Entrepreneurial Thinking (stylized facts)

20

Effectual

Causal Low

Low High

High Expert Entrepreneurs

Experienced VCs

Angels

Corporate Managers

Novice VCs

Bankers

Novice entrepreneurs


From Causation to Effectuation…and vice-versa

21

TIME AND EXPERIENCE

LOGIC

Causal

Effectual

Novice entrepreneur

Expert entrepreneur

Start-up firm

Large firm

Shift in logic necessitated by firm growth

Entrepreneurs do not always manage to bridge this gap

Moderating effect of

resources


Wafels & Dinges

22

Question •  What would you do next? •  What is your logic?


Don’t wait/look for the perfect opportunity.

Just start!


NEVER STOP WONDERING

& ASKING!


A real passion for entrepreneurship education and entrepreneurs.

•  Student entrepreneurs: 2x

•  Full time entrepreneur: once, in a team of 5

•  Coach: 500+ projects over the last 20 years

•  (Advisory) Board member in multiple new ventures

•  Policy making: 2x

•  Director of Solvay Entrepreneurs

•  PhD in entrepreneurship in 2008

•  … never as an investor

My wife (as Colombo), no kids, one dog (Vicky).

25

Olivier Witmeur (Belgian, 46)


Solvay entrepreneurs is the entrepreneurship center of the Université Libre de

Bruxelles. We support entrepreneurs through the development of their venture, from

an idea to a successful and sustainable business.

26

Solvay Entrepreneurs


Let’s keep in touch!

27 2014%©%Olivier%Witmeur

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