Effectuation Elements of Entrepreneurial Expertise - Essay Example

? Executive Summary The paper seeks to reflect upon the fundamental issues which became an important milestone in this module. Indeed, the module has inundated me with much information on the subject of entrepreneurship. It is seen that entrepreneurship should never be regarded in the conventional sense. It is basically a scientific process that should be keenly considered in order to succeed. In this regard, the paper will explore the concept of effectuation and how these principles can be used to the success of entrepreneurship. As such, it is fundamental to realize the imperative nature of entrepreneurship and how the scientific process can be used to enhance its efficiency. The module has therefore illuminated me with sufficient knowledge that can make me a better entrepreneur. It is further seen that entrepreneurship is certainly inundated with several challenges and the entrepreneur must always be prepared for such situations. In a way, the module is an important step to anyone who aspires to be a better entrepreneur. Reflective Learning Report Introduction Indeed, the module has been very illuminative and has sufficiently inundated me with much knowledge on the imperatives of entrepreneurship and how to succeed as an entrepreneur. Time and again, it is assumed that entrepreneurship is a field which anybody can venture without much knowledge on the workings of business. However, it should be realized that a difference certainly exists between entrepreneurship and success in entrepreneurship. Not all new ventures will always succeed. In most cases, people fail to succeed because of certain little mistakes and inconsistencies conducted in the course of the practice. In this regard, challenges emerge and the venture might be doomed. In this regard, the module has greatly furnished me with a lot of important knowledge on how to improve myself as an entrepreneur and to apply the skills learnt in real practice. While challenges are always part and parcel of any venture, a well-equipped entrepreneur will always be prepared and in a better position to address the challenges. Effectuation entrepreneurship Effectuation entrepreneurship is one of the areas which have illuminated me with very critical information on how a business manager should address different situations facing the business. It is imperative to note that business operations will always experience varying situations which require the entrepreneurs to make timely and relevant decisions. For instance, when a new competitor has ventured into the market and the prospects of the business are threatened, the entrepreneur should make very critical decisions that can ensure the survival of the business despite the looming challenges (Sarasvathy, 2008). Effectuation is essentially a set of principles used in decision making by expert entrepreneurs which dictate that proper decisions have to be employed in situations of uncertainty. It is basically contrasted to causality which involves making decision based on prediction. It is imperative for the entrepreneur to build much known capabilities for possible ends and ensure success for the venture. As an entrepreneur, I would greatly apply the principles of effectuation in making decisions within my business. It should be realized that the success of any business largely depends upon the quality of the decisions. In this regard, the entrepreneur should be in the position to make very proper decisions which will ensure success. Effectual thinking is basically concerned with imagining possible new ends and seeking ways and means of reaching such ends (Bassi, 2011). It is basically a scientific process which is used to achieve goals in the organization. The focus in this regard is the fact that entrepreneurs must always have a sense of purpose in the organization. Entrepreneurship should not simply be a matter of managing the business and hoping for the best. Rather, it is a question of setting high goals and seeking the best strategies of realizing the goals (Sarasvathy, 2008). In the feasibility study report, some of the principles in this regard are put into action in real decision making. The entrepreneurs are very cautious before investing into the US but ultimately calculate all the challenges and risks involved before seeking to venture into the market. The knowledge gathered in operating from Europe is effectively used as a way of venturing into the American market (Ellis, 2010). More importantly, the entrepreneurs are much aware of the challenges inherent in America and are therefore sufficiently equipped before making the final steps. As an entrepreneur, I would greatly apply effectual thinking in my venture as a way of making proper decisions that can propel the business to greater heights. I would combine the use of scientific approach with the theoretical approach in making appropriate decisions in the business (Hisrich & Peters, 2002). Bird at Hand principle The Bird at hand principle is one of the most important aspects I have learnt in relation to decision making in business. In this regard, it is seen that business ideas are not simply made without taking consideration of important factors. Such factors include who I am, what I know and whom I know. By answering these questions, I can definitely place myself in the right position to make a proper decision. Ina way, most business ideas and decisions fail because people simply copy and implement ideas which have been successful elsewhere without taking consideration of these important questions. In relation to “who I am,” I am now in a better position to realize my strengths and weaknesses and therefore make decisions in line with such factors (Blekman & Olof, 2011). Similarly, I am very particular o what I know since my entrepreneurial venture will depend on the decisions I make. As such, I understand the scope of my knowledge and I cannot therefore seek to implement an idea I cannot sufficiently manage. More importantly, I am much concerned with whom I know since a business is not really an isolated entity. It operates within a system characterized by other people and situations and this greatly influences the nature of decisions I will make. In the Lansdowne study report, the entrepreneurs seem to have sufficiently addressed the three questions before venturing into the American market. They laid out their resources in order to have a clear understanding of themselves. They have further conducted much research into the American market and this has inundated them with a lot of relevant information on how to succeed in the new market. Indeed, this principle is basically a matter of idea versus opportunity in the business. It is seen that one motivation of entrepreneurs is actually the need to make money. However, it soon realized that making money is always a necessary condition which has to be complemented by other reasons such as the desire for independence and the aspiration to fulfill some needs in the market. More importantly, an entrepreneur will always realize that they are more driven by a sense of accomplishment which pushes them to strive for the higher. One challenge most entrepreneurs face is the determination of whether an idea is good or bad. Many successful entrepreneurs will confirm that the only sure way to determine whether such an idea is god is to go ahead and implement it. As an entrepreneur I would be a risk taker and this will make me implement decisions which I feel can be appropriate for the business. In any case risk taking is one of the core principles that govern entrepreneurship (Sarasvathy, 2008). Before venturing into any line of operation, I would ask myself a series of questions. One question is whether the venture is doable. In this regard, I would seek to know the technical and market feasibility of such an operation in order to determine whether it can effectively pick. In the same way, I would seek to know whether the venture is worth doing. This would basically regard the financial feasibility of the whole process and whether it can justify the investment placed. I would inquire whether I can do it. This would give me an insight into whether I need other people and how to organize my business in terms of personnel. Lastly, I would need to know whether I am really committed to the whole business. This is a ways of gauging my motivation and establishing my driving force. The Lansdowne study report indicates a clear application of this principle in a proper way and this contributes the proper planning process realized in the organization. As a potential entrepreneur this knowledge will greatly assist me in making decision in the future. Indeed, success in business requires that one is sufficiently versed in all the important questions which should be answered appropriately. Affordable loss principle In the context of effectuation, the focus is on how much an entrepreneur is willing to lose and sacrifice in order to find creative ways and new means of reaching ends. On the other hand, the causal entrepreneur usually calculates in advance the amount of money they need and the effort and ways of raising that money. The effectuator is not really concerned with that. He focuses on the extent to which he is willing to lose to ensure the venture secedes. The effectuator selects the options which will yield more options in the future. An effectuator will therefore seek to bring all the relevant people on board and leverage all the slack resources for the success of the venture. In this regard, the entrepreneur makes decisions based on acceptable levels of risks instead of mere guessing on the inherent risks. In such a way most of the barriers that normally hinder proper decision making are eliminated. The causal decision makers are normally much concerned with risks and will not therefore see many opportunities. Indeed, I have personally aspired to be my own boss. This principle will therefore provide me with a basis for realizing my goal in the future. I am therefore willing to take away 60 percent of my monthly income in order to try and work out a business idea. Given the worst case scenario where the venture fails to succeed, I would be out of job in addition to having lost my savings for the two years. However, I shall be determined to make take that risk and lose everything as a way of seeking to realize my goals. It is basically a matter of making decision and seeking to achieve goals. Based on the affordable loss principle, I would seek to bring my ideas into the market using all the means I can assemble. This would involve seeking help from other stakeholders. One important point of consideration is however the fact that I would never take any risks in situations where such risks are not really justified. As an effectuator, my personal strengths, values, aspirations and other commitments will strongly come into play and I would strive to strike a balance between these factors and the subjective risks which I can have control over. It should be noted that the extent of affordable loss varies from one entrepreneur to another and should never be taken as a uniform affair. It largely depends on the personal qualities of the individuals and the extent of the sacrifices they are willing to make in order to ensure success for the business. In addition, people are normally driven into business in order to realize different set of objectives. While every entrepreneur might be driven by the profit motive, such motives usually differ on several accounts and this results into people making different levels of sacrifices to realize their goals (Saarinen, TinnilaI & Tseng, 2006). The lemonade principle The lemonade principle is another important concept I have gained from this module. Indeed, as an entrepreneur it is quite important to be aware that uncertainties and other unfavorable situations will always arise in the course of operations. In this regard, the entrepreneur should never be focused on one direction without availing himself for other options (Sarasvathy, 2008). Any business environment in the present world is certainly competitive and very uncertain. In this regard, I would greatly be flexible in my undertakings and I would avail myself for the changing situations. While it is always important to set specific goal and strive towards them using a set of plans, it is further imperative to ensure that you are not simply tied down by those goals. The business world is very dynamic. Opportunities and challenges usually come unannounced and this calls for a radical change of plans, in order to suite the situations. The ability to adjust is therefore one of the important concepts I have learned from this course. For instance, in case of a contingency beyond expectations, it is important to make changes to the plans in place. More importantly as an entrepreneur I will always have a backup plan in any business idea I undertake. Decisions are normally bound to fail and such back up plans come in handy in situations where an entrepreneur would be thrown of balance (Forbat, 2007). It is important for the entrepreneur to appreciate their start up process and never disguise themselves as big. Most entrepreneurs usually assume that they can lose customers if they appear to beat an early stage of operation. In this case, they disguise their operations in order to appear as big ventures. His is a very wrong move that can be very risky for the business (2008). It is therefore important to appreciate the early status of the venture and work gradually towards big operations. While it will be difficult to net better clients at the early stage, the business will establish a strong and proper foundation which will be very important for the future. The lemonade principle essentially derives from the common adage that “when given lemons, makes lemonade.” This is a good way f appreciating your present situation and seeking to make use of it. Indeed, every challenge in the business should always be used as an opportunity. In the Lansdowne case, it is seen that the business decision to venture into the American market is faced with a lot of challenges and uncertainties which have to be met before the whole process can succeed. However, the entrepreneurs in this case used these challenges as an opportunity to position the business even better and establish better links and prospects. The inherent uncertainties and challenges do not drive them away from this market. They know that competition will be stiff. However, this grants them the opportunity to ensure quality and efficiency in operations in order to succeed in the market. As an entrepreneur this principle will certainly drive my decision making process. I will always set goals and objectives within which I will work (Bradberry, 2011). However, these goals will never be an impediment to greater decisions. I will ensure flexibility and greatly focus on adjusting myself to the different situations that might arise in the course of business. It is further realized that every uncertainty comes with a set of surprises which the entrepreneur is always forced to endure. I would be much willing to embrace these surprises and use them as a ways of developing the business. I will always focus on making the best out of any worst situation I face. In reality, I have gathered important information from this principle which will be critical for my business development (Morris, 2008). Crazy Guilt principle I have leant that many entrepreneurs are normally driven by goals other than means. According to this principle, the focus of the effectuator should be an effort to create something new using the existing means other than focusing on creating new ways to achieve a set of goals. It is often seen that people fail to exploit what is within their means (Wickham, 2006). As an entrepreneur, I would greatly strive to utilize the existing means and ways in order to create something new for the clients. Instead of jumping into finding new ways and strategies which can always be expensive, it is therefore important to utilize the available resources. It is important to realize that for a startup venture, limitations of resources will make some of the goals very hard to accomplish. In this case, the entrepreneur should always ensure to fully utilize whatever the industry can provide before finding new ways of operations. By fully exploiting the available resources, it becomes much easy to have a perfect understanding of the industry and this will definitely be useful in the course of operations (Wickham, 2006). It is always important and prudent for the entrepreneur to discover new ways of doing things in the market. However, the feasibility and efficiency of such new ways can only be gauged though a comparison with the existing means. In this case, the entrepreneur should first understand the challenges inherent in the industry and clearly understand where changes should be made before seeking to address them. This will further grant him time to position himself better in the market. Another important aspect I learnt from this principle is the importance of building proper partnerships with self-selecting stakeholders in the industry. In the Lansdowne case, the entrepreneurs actually realized that it was very difficult to establish a successful venture in the United States without first building proper relationships. Indeed, I would also focus on ensuring that I operate within the industry and establish connections with relevant partners. It should be stressed that no business operates in isolation. The business environment is full of different players and the business must always be in a position to reach out and make commitments. This is very important in a new market where risks might always pose a challenge. At the initial stages of operations, the entrepreneur should never be worried much about competitive analyses. The focus should be geared towards establishing good partnerships which will indeed create a firm foundation upon which future operations are anchored (Alvarez, 2005). As I seek to venture into the world of entrepreneurship, I strongly believe that this knowledge would be ideal for my operations in the market. I would therefore scan the business environment first and note all the major and minor players. I would then focus on creating partnerships with some of them so that I am anchored on stable ground despite the limited nature of my operations. It is important to realize that such partnerships are always welcome by most industry players since they end up mutually beneficial at the end. It is however important for the entrepreneur to be very keen while establishing such partnerships since some of them might spell doom for the new venture. The crazy guilt principle is therefore an important milestone for me as a potential entrepreneur. Pilot in the plane principle This is a very important principle which places much emphasis on the importance of human capital in any business venture as opposed to other exogenous factors. Indeed, human agency should always be regarded as the primary driver as opportunity. In most cases, entrepreneurs overemphasize on other factors like technology and socio-economic factors in making decisions without giving much focus to this important factor. In this regard, control is seen to be better than prediction as a way of prospecting (Shane, 2008). As an entrepreneur I have leant that I should focus on the activities which I can control and ensure that my activities will enable me to achieve the desired outcomes. As an effectual decision maker, I now strongly believe that I cannot merely sit and wait for the future. In any case, the future is never predicted or found. Instead, it is made through the very actions we do and most of these activities are within our control. In tis regard, much of the future can always be controlled. An entrepreneur should therefore be in charge of the operations and should further be aware that the present activities have a strong bearing on the state of the business in the future. Factors like technology can always have a strong bearing on the state of any venture as long as these factors are applied in the appropriate manner within the business (Acs & Audretsch, 2003). In conclusion, it is seen that the above principles embody non-predictive control techniques. In this case, predictive mechanisms are greatly reduced as a way of making decisions in situations of uncertainty. Using this approach I will always be in a position to see all the opportunities in the business and make appropriate decisions in relation to the business. More importantly, I leant that as an effectuator, my focus should not really be to avoid the occurrence of failure but the realization of success (Price, 2004). In the case of contingencies, I leant that it is imperative to leverage them instead of avoiding them. Uncertainties and other unfavorable situations will always confront everybody. In this case, much emphasis should be placed on limiting these challenges in order to take advantage of the opportunities that always come with such challenges. If I avoid the contingencies, I am likely to miss on the opportunities that lie beneath. In this regard, the course has been very illuminative and has inundated me with a lot of important knowledge on how to make myself a better entrepreneur. References Acs, Z. J., & Audretsch, D. B. (2003). Handbook of entrepreneuship research: an interdisciplinary survey and introduction. Boston: Kluwer Academic. Alvarez, S. A. (2005). Theories of entrepreneuship: alternative assumptions and the study of entrepreneurial action. Boston, Mass.: Now Publishers. Bassi, L. J. (2011). Good company business success in the worthiness era. San Francisco, CA: Berrett-Koehler Publishers. Blekman, T., & Olof, A. (2011). Corporate effectuation: what managers should learn from entrepreneurs!. Den Haag: Academic Service. Bradberry, J. (2011). 6 secrets to startup success how to turn your entrepreneurial passion into a thriving business. New York: American Management Association. Effectuation Elements of Entrepreneurial Expertise. New Horizons in Entrepreneurship.. (2008). New York: Edward Elgar Ltd. Ellis, T. (2010). The new pioneers: sustainable business success through social innovation and social entrepreneurship. Cichester, West Sussex: Wiley. Forbat, J. (2007). Entrepreneurship the seeds of success. Petersfield: Harriman House. Hisrich, R. D., & Peters, M. P. (2002). Entrepreneurship (5th ed.). Boston: McGraw-Hill/Irwin. Morris, M. J. (2008). Starting a successful business start up and grow your own company (6th ed.). London: Kogan Page. Price, R. W. (2004). Roadmap to entrepreneurial success powerful strategies for building a high-profit business. New York: American Management Association. Saarinen, T., TinnilaI?, M., & Tseng, A. (2006). Managing business in a multi-channel world success factors for E-business. Hershey PA: Idea Group Pub.. Sarasvathy, S. D. (2008). Effectuation elements of entrepreneurial expertise. Cheltenham, UK: Edward Elgar. Shane, S. A. (2008). The illusions of entrepreneurship: the costly myths that entrepreneurs, investors, and policy makers live by. New Haven: Yale University Press. Wickham, P. A. (2006). Strategic entrepreneurship (4th ed.). Harlow, England: Financial Times Prentice Hall. Read More