Month: January 2018

Part Four || Indian Startup Ecosystem and Effectuation

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The Indian startup ecosystem is heavily reliant on traditional entrepreneurship models. However, according to Saras Sarasvathy, it is important for startups to incorporate both the effectuation and causation methods to achieve growth. She cites a few Indian companies that are successful in using effectuation principles.

While many startups in India look to Silicon Valley for inspiration, Sarasvathy advises entrepreneurs to also consider effectuation principles. This does not mean abandoning the old methods that have worked in the past. It simply means using different approaches to achieve better results.

One example of an Indian company that has successfully used effectuation principles is Husk Power Systems. The company provides renewable energy to rural areas using prepaid meters, which makes it affordable for people living in those areas. As the company expanded, it partnered with other companies and innovators, using the bird in hand principle.

While many startups in India look to Silicon Valley for inspiration, Sarasvathy advises entrepreneurs to also consider effectuation principles. This does not mean abandoning the old methods that have worked in the past. It simply means using different approaches to achieve better results.

One example of an Indian company that has successfully used effectuation principles is Husk Power Systems. The company provides renewable energy to rural areas using prepaid meters, which makes it affordable for people living in those areas. As the company expanded, it partnered with other companies and innovators, using the bird in hand principle.

Another example of effectuation success is Kiran Mazumdar-Shaw, the founder of Biocon Limited, a biotechnology company. She initially studied to become a brewmaster but found a breakthrough into entrepreneurship by making yeast for a friend.

According to Sarasvathy’s research on effectuation, it is an efficient and highly effective method of entrepreneurship. The principle of effectuation involves using the resources within one’s control and accumulating more as the business grows. In contrast, causation follows a set of principles or uses specific resources to achieve a goal. Both effectuation and causation can benefit the Indian startup ecosystem. By adopting effectuation principles, Indian startups can potentially achieve better results and contribute to the growth of the economy.

Part One || Part Two || Part Three

Part Three || Women and Effectuation

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Women and Effectuation: Breaking Barriers in Entrepreneurship by Prof Saras Sarasvathy

In the United States, 30% of businesses owned by women are small businesses. Prof. Saras Sarasvathy discusses the challenges faced by female entrepreneurs and the role of effectuation in overcoming these challenges. While various factors limit the growth of women-owned enterprises, there are success stories like Yan Cheung, the founder of Nine Dragon Paper.

Female entrepreneurs face numerous barriers, including social, financial, and cultural factors. Due to historical gender roles, many women lack exposure to entrepreneurship and may have difficulty transitioning into the field. Additionally, women often face discrimination and bias in the corporate world or in partnerships, which may hinder their success. Some women also have a preference for a smaller business, as it allows for more flexibility to balance family and work responsibilities.

To overcome these barriers, education and support for women entrepreneurs are vital. Educating families, spouses, and parents to adjust to the entrepreneurial lifestyle can help women succeed. Also, reducing sexism in the field is necessary to recognize that women are as capable as their male counterparts.

According to Prof. Sarasvathy’s research on expert entrepreneurs, Yan Cheung’s success story demonstrates how women and effectuation principles can lead to success. Cheung used effectuation principles in establishing Nine Dragon Paper, starting with resources she could easily attain, which is the bird-in-hand principle. She invested $5,000, which she could afford to lose, demonstrating the affordable loss principle. Also, she negotiated to recycle cartons and made a deal with a shipping company, which is the crazy quilt principle.

While barriers exist, women entrepreneurs can break through them with education, support, and effectuation principles. Yan Cheung’s story highlights how women can use effectuation principles to achieve success in entrepreneurship.

Part One || Part Two || Part Four

Part Two || Understanding the Principles of Effectuation

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Understanding the Principles of Effectuation by Prof Saras Sarasvathy

Entrepreneurship, just like any other field, comes with its limitations. Some of these limitations include inadequate funding, lack of necessary skills, and limited resources. These challenges, however, can be tackled by adopting a specific approach to entrepreneurship.

Saras Sarasvathy, a renowned scholar, and author of Effectuation: Elements of Entrepreneurial Expertise, explains the difference between effectuation and causation. While causation involves waiting for the right opportunity to start a business, effectuation focuses on using available resources to create opportunities for oneself.

The principles of effectuation guide entrepreneurs to focus on things that they can control. For example, when seeking venture capital to establish a business, an effectual entrepreneur would explore alternative approaches if the initial attempts prove unsuccessful. This could involve seeking out individuals who have the necessary skills or financial resources to support the venture.

Establishing a successful business involves getting people to work with you, even when resources are limited. As such, entrepreneurs must master the art of communication to build partnerships, cooperative work relationships, and mentorship opportunities. However, these relationships take time to cultivate, which is why the ‘crazy quilt’ and ‘pilot in the plane’ concepts are essential.

The lemonade principle emphasizes the importance of being flexible and embracing surprises. Causation can limit an entrepreneur’s ability to adapt to situations as they arise, which is why effectuation is often a more effective approach.

Entrepreneurship comes with its limitations, but adopting an effectual approach can help entrepreneurs navigate these challenges. By focusing on available resources and building partnerships, entrepreneurs can create opportunities for themselves and establish successful businesses. The principles of effectuation, combined with effective communication and flexibility, can help entrepreneurs succeed in the dynamic world of entrepreneurship.

Part One || Part Three || Full Episode

Part One || Effectuation: A Key to Entrepreneurial Success

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Prof Saras Sarasvathy on Effectuation

It all starts with an idea. An idea that starts as a speck within an entrepreneur gathers resources, infrastructure, successes, failures, attitude, lessons, collaborations, and grows into an ecosystem where more ventures thrive and compete. An idea alone is not enough, though. Its realization takes more than a mere business plan. And as they say, it is wiser to learn from the experience of others. These experiences formulated as a series of techniques forms the core of Effectuation.

When Prof. Saras D. Sarasvathy applied for the Tata Scholarship she was asked to read the biography of Jamshedji Tata and write an essay on it. This sparked her Entrepreneurial dreams, and she tried a handful of ventures before she came to the field of Education with all the valuable lessons she had learned. The question of how much of Entrepreneurship is learnable and how much of it is teachable in a classroom led her to her study on Effectuation.

The word Effectuation itself comes from the term Cause and Effect. There is a subtle distinction, though, as Effectuation typically deals with cause and effect in the opposite way. Effectuation is more about defining what you want to achieve, listing the ways to achieve it, and picking the most predictable way to achieve it. Entrepreneurs use effectuation to work with what is in control to create the future rather than predicting the future and controlling the outcome.

Prof. Saras D. Sarasvathy is a scholar and the author of Effectuation: Elements of Entrepreneurial Expertise nominated for the 2009 Terry Book Award by the Academy of Management. She is also Paul Hammaker Professor at The Darden School, University of Virginia, and the Jamuna Raghavan Chair at the Indian Institute of Management, Bangalore. Watch this episode of The PS Show to listen to Prof. Saras Sarasvathy talk about Effectuation and Entrepreneurship, part 1 of a series of talks on Effectuation.

Effectuation is a powerful tool for entrepreneurs looking to start a business. It is a mindset that allows entrepreneurs to focus on what they can control, rather than what they cannot. By using effectuation, entrepreneurs can create the future they want, rather than trying to predict it. With the insights of experts like Prof. Saras D. Sarasvathy, it is clear that effectuation is a key to entrepreneurial success.

Part Two || Part Three || Full Episode