Saturday, November 19, 2016

The Entrepreneurial Learning Curve in a Context of Effectuation

This week I came across the concept of entrepreneurial effectuation in a MOOC taught through Coursera by Phillipe Silberzahn.  A key concept behind "effectuation" is that rather than conduct thorough market studies to develop a very detailed strategy and business plan, entrepreneurs tend to launch themselves into the unknown (and sometimes the unknowable) in order to co-create new products and services by working closely with stakeholders, viewing clients almost as partners in the co-creation of new markets.

I wanted to try to elaborate on the learning aspect of this approach, which isn't emphasized in the MOOC.

In the traditional entrepreneurial approach, a great deal of learning happens in the planning phase, as she searches for all the data available about the existing market for the types of services or products she wants to provide, and the data she finds might actually redirect her ambitions towards specific services and products, abandoning an initial idea based on the data collected.  Learning in the planning phase has a huge impact on the strategy eventually being deployed and the nature of the business plan to be implemented.

In the context of effectuation, market research is assumed to have limited value and could constrain the entrepreneur's creativity and ability to develop new markets.  Instead, the critical factor for success is the entrepreneur's ability to learn from its early efforts and evolve the approach, developing the services and products over time and continuously learning and improving.

I would argue that an entrepreneur is therefore engaged in intensive action learning in the early phases of her adventure.  While the intensity of the learning may diminish as the "successful approach" emerges, the learning habit remains and continues to serve the enterprise well over time.

I don't think the entrepreneur has to completely abandon the traditional approach.  There is value in developing a tentative business plan and learning from other's failures and successes in the market she is interested in.  The key is to acknowledge the plan's weaknesses in terms of the assumptions being made and inadequacies of historical market data.  In addition, keep track of ideas that might have been too quickly dismissed by the narrow analysis of the current market.  Effectuation promotes the creation of new markets which could not have been easily predicted by traditional market analysis.

In short, here are a few steps to follow to integrate a strong action learning approach in the entrepreneurial adventure:

1. Develop a plan, but don't treat it as set in stone.  Psychologically, it can be useful to have done some work, to feel a little more prepared, even if the unknown and the ability to create a new path, develop a new market is precisely what attracts the entrepreneurs.

2. Plan for regular reviews, plan to pause and learn, with your key stakeholders.  It's easy to get pulled in all kinds of directions and try many different routes but at some point decisions have to be made about which path is truly going to be successful.

3. Don't become complacent when success is on hand.  Keep learning, improving, creating.

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