Effectuation is a way to describe how successful entrepreneurs think. It turns out that successful entrepreneurs think differently about the world than others, and it is by studying these differences that we can learn what makes some entrepreneurs more likely to succeed.
I wrote this post to share some important research on entrepreneurial thinking and the key principles emerging from this research, which make up the foundation of Effectuation. My hope is that I can provide some valuable insights to help fellow entrepreneurs launch their businesses successfully.
I was first introduced to Effectuation in 2003 as an MBA student at Darden, the University of Virginia’s graduate business school. In our first year Strategy class, we were assigned a nine page reading note, titled What Makes Entrepreneurs Entrepreneurial? The author was Saras Sarasvathy, one of the leading thinkers of the Effectuation movement. It was the first work I had read that explored how entrepreneurs think differently, and it was a serious AHA! moment for me. In the note, Saras details how in her ground-breaking entrepreneurial research, she interviewed over 30 highly successful entrepreneurs that had built companies with revenues from $200 million to $6 billion, and had each entrepreneur go through a 17 page problem set over two hours that involved describing how they would bring the same specific product to market. She was observing how these expert entrepreneurs think about starting a venture, and if there were any common threads among them.
It turns out the answer is yes. After rigorous analysis, Saras was able to identify and distill an emerging Entrepreneurial Method — a way of thinking about the world that all these successful entrepreneurs shared — and thus was born a new entrepreneurial school of thought: Effectuation.