Entrepreneruship- Effectuation & Lean Start up
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Transcript of Entrepreneruship- Effectuation & Lean Start up
04/11/2023 (c) Sachidananda Benegal 1
EntrepreneurshipSachidananda Benegal
N S Raghavan Center for Entrepreneurial Learning
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• A few questions:– In context of firms– Equilibrium
• Where do new firms come in!– Is there a role for
entrepreneurship?– What role does an
entrepreneur play?
We all know!
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Who is an entrepreneur?
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They vary in...
PurposeScale
Geography Value
Creativity
Goal
VisionDream
Networks
Technology
etc...
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HOW DOES AND ENTREPRENEUR THINK?
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Causal Logic is predictive
Control of outcomes achieved through
accurate predictions, clear goals,
and avoiding or protecting oneself against the unexpected
To the extent you can predict the future, you can control it
Conventional Wisdom: Causal Logic
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The Problem Space
Ref: Presentation of Prof Saras
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Classic Causation Model from Marketing Textbooks
Process of Effectuation Used by Expert Entrepreneurs
SINGLE CUSTOMER
Segment Definition
Market DefinitionSegmentation
Targeting
Positioning
UnderstandCustomer
Adding Segments/PartnersDef of one of many possible markets
Marketing Process Inversion
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Effectuation Principles:1. Bird in Hand Principle – Start with who you are, what you know and whom you know, and not necessarily with a predetermined goal or a pre-envisioned opportunity
2. Affordable Loss – Invest only what you can afford to loose
3. Crazy Quilt – Create an expanding network of self-selected stakeholders, each of whom commits only what he or she can afford to loose. Focus on partnerships rather than on competitors.4. Lemonade – Be open to surprises and leverage them. Treat them as useful inputs rather than hindrances to be avoided.
5. Pilot in the Plane – Co-create the future with things within your control and with self-selected partners
If you use these principles you can shape your future and transform your environment in ways that matter to you and your stakeholders.
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Who I am?What I know?
Whom I know?What Can I Do? Interaction with
others
Effectual Stakeholder
Commitments
Who we are?What we know?
Whom we know?
New means
Expanding cycle of resources
What can we do?
(Affordable loss)
New Goals
Actual course of action possible
Converging cycle of constraints
New Markets and New Firms
The process!
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How is this different from how Managers think?
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How is this different from how Managers think?
Effectual Causal
Start with your means
Focus on your downside risk
Leverage Contingencies
Form Partnerships
Control Vs Predict
Pre-set goals and opportunities
Expected Returns
Avoiding Surprises
Competitive analysis
Inevitable trends
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CAN WE THEN SAY WE DON’T NEED MANAGERS?
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Firm Life-Cycle and Entrepreneur’s CareerCausal
Tethered to goalsand predictive
EffectualTethered to meansand non-predictive Time
Expert entrepreneurs do not always manage to bridge this gap
ExpertEntrepreneur
StartupFirm
LargeFirm
Nov
ice
Entr
epre
neur
Resources
Low
High
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LEAN STARTUP
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Lean Start-up: A Special Case!
Lean Manufacturing +
Toyota Production System+
Agile Development
Recollect the Notion of: Uncertainty
How it different from Risk?
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Traditional Product DevelopmentUnit of Progress: Advance to Next Stage
Waterfall
Requirements
Specification
Design
Implementation
Verification
Maintenance
Problem: known
Solution: known
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Agile Product DevelopmentUnit of Progress: A line of Working Code
Problem: known
Solution: unknown
“Product Owner” or in-house customer
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Product Development at Lean StartupUnit of Progress: Validated Learning About Customers ($$$)
Problem: unknown
Solution: unknown
Customer Development
Hypotheses,Experiments,Insights
Data,Feedback,
Insights
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Minimize TOTAL time through the loop
LEARN BUILD
MEASURE
IDEAS
CODEDATA
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And much more...
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I own right over none of the images used here – copyright is still with the owners
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Reference:• effectuation.org• Presentations by:
– Prof Saras Saraswathy– Eric Ries