What is effectuation?

Effectuation is a logic of thinking that helps entrepreneurs in starting businesses because it provides a way to control a future that is uncertain.

A study of successful entrepreneurs who have founded companies worth $200M to $6.5B revealed exciting findings on how these founders achieved their goals.

Before we get started, copy the Effectual Entrepreneurship template to your Google Drive and start developing the right frame of mind for success.

How do I use effectuation in my business?

Entrepreneurs have learned that their most interesting and successful businesses are built with a lot of unknown and unknowable factors. However, they still create using specific techniques to minimize prediction and shape the future. You should too! Learn about and use the five principles of effectual logic below.

• Bird in Hand: Before you build a new business, start by defining your means and answer questions to understand who you are, what you know, what your resources are and how your resources match your business needs. Then, imagine business opportunities that fit your means.

• Affordable Loss: Understand the level of risk you are comfortable with taking and truly define what you can afford to lose at each step, instead of taking all-or-nothing chances.

• Lemonade: Try to minimize “what-if” planning to deal with worst-case scenarios, use “bad” news and surprises as potential clues to create new markets. When life gives you lemons…

• Patchwork Quilt: Build partnerships and relationships with mentors who want to work with you early to reduce the unknowable and get support when you need it most.

• Pilot in the Plane: Focus on activities you can control with the knowledge that you will get your desired outcome. An effectual worldview is based on the belief that the future cannot be found or predicted, it is made.

Why is effectuation important for entrepreneurs?

Effectuation can help you with three main areas. It will help you create ideas into sellable products or services with proven customers. It will also encourage you to search for and select partners or mentors that can support you in your business.

Pro Tip

Practicing effectuation will help you create a set of techniques to make decisions on what to do next in any scenario, so put it to the test and practice, practice, practice!