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by • September 25, 2014 • Tools & frameworksComments (4)396

I prefer Effectuation to Lean Startup (sorta)

Lean Startup punts on the question of how to choose an idea by claiming that first, the founder “has a vision”. But where does it come from? And what makes a good vision as opposed to a bad one?

Effectuation, on the other hand, directly tackles the question of the idea. If you haven’t heard of it, it’s based on the only proper academic study into what makes repeatably successful entrepreneurs successful. Here’s the low-down:

Effectuation’s goal: A reliable path to a good business (but probably not a billion dollar one).

Core assumption: Much of the “common wisdom” surrounding entrepreneurship is just myth based on a few high-profile outliers; the data shows a better path.

In a nutshell: Successful entrepreneurs don’t pick an arbitrary vision and then figure out how to get there; instead, they look at the resources they already have—people, partners, skills, expertise, credibility—and figure out how to use them to attack an opportunity that isn’t fatally risky and which they can go after right now.

Vision vs. Effectuation

 
To look for Effectual ideas, ask yourself which resources you have:

  • Who are the people who would help you, even for a small (but important) favour?
  • Which companies take you seriously enough that they might partner?
  • Which industries do you know or have credibility in?
  • Which important skills do you have (or have access to)?

Now, which opportunities or goals might you go after by combining those resources? They’ll look very different from the sort of ideas you get when you sit down to “think of a startup idea”, because they’re anchored in you.

There’s more to Effectuation, including shifting goals, multiple simultaneous goals, and a propensity toward early partnerships. The authors are a bit academic, but there are some real jewels in there. The comparison is a bit unfair, since Lean Startup and Effectuation solve different problems, but I’m currently finding the latter to be a more critical piece of building a business than the MVP-style stuff we typically bang on about.

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4 Responses to I prefer Effectuation to Lean Startup (sorta)

  1. Bob Jansen says:

    I’ve used Effectuation as a tool to explain Entrepreneurship to Corporate people and that works really well. The five principles for Effectuation are easy to explain, remember and understand. Lean Startup is a nice tool to manage risks on a day to day basis.

    • robfitz says:

      Ya, I can see that.

      I’ve been thinking of effectuation as “what should I do next?” and lean startup as “now that I’m doing it, how can I do it more effectively?”

  2. Patrick Lauruol says:

    Maybe effectuation can be summarised simply as the meeting point between David Allen’s GTD methods (always questioning ourselves what to focus upon next) and Lean (minimising waste, which for entrepreneurs means learning what works to deliver value profitably)?

    Reminds me of the oft bandied example of an entrepreneur being someone who jumps out of a plane and builds a parachute on the way down… :)

  3. Sean Murphy says:

    I find it extremely compelling; I think she has captured what most successful bootstrappers do, which is to start from where they are with what they have, sell what they can, build long term business relationships, and focus on delivering value. The best short introduction remains Sarasvathy’s 2001 paper What Makes Entrepreneurs Entrepreneuial http://www.effectuation.org/paper/what-makes-entrepreneurs-entrepreneurial which I have blogged about at http://www.skmurphy.com/blog/2010/02/07/saras-sarasvathys-effectual-reasoning-model-for-expert-entrepreneurs/ These two quotes from her concluding paragraphs capture a crucial element of entrepreneurship–establishing enduring relationships-that is all too often ignored:

    “Expert entrepreneurs [...] are actually in the business of creating the future, which entails having to work together with a wide variety of people over long periods of time. [They fill their future] with enduring human relationships that outlive failures and create successes over time.
    [...]
    This is largely ignored in our entrepreneurship curricula which tend to focus on market research, business planning, new venture financing and legal issues. As far as I know no entrepreneurship programs offer courses in creating and managing lasting relationships or stable stakeholder networks, nor on failure management.”

    She also co-authored a very readable textbook http://www.amazon.com/Effectual-Entrepreneurship-Stuart-Read/dp/0415586445 and a very dense but extremely insightful one http://www.amazon.com/Effectuation-Elements-Entrepreneurial-Expertise-Entrepreneurship/dp/1848445725/