Effectuation: Innovating like an Entrepreneur

There are a lot of ways to innovate. Googling “how to innovate” elicits over 24 million results. When companies want to explore innovation, they often seek out the wisdom of entrepreneurs. They’ll invite them to speak, share their experiences, and provide tips.

The result? A lot of advice. You’ll get one individual’s take on what made them successful. It’s an “I did this and it worked for me – so you should do it too” approach. While valuable, there are pitfalls in this.

  • It’s incomplete. Entrepreneurs often pick up the story from when they started to gain traction on their idea. Many times, the attempts, missteps, and failures along the way are omitted.

  • It’s individual. Each entrepreneur has their own set of circumstances that influence their outcomes. These are not necessarily applicable to everyone.

  • It’s inconsistent. Each entrepreneur speaks from his/her own perspective. Sometimes their experiences conflict with each other.

So how do you get at what it really takes to develop and launch successful innovations?

The answer is effectuation. Effectuation is the science of how successful entrepreneurs operate. Developed through social science research, it is both an academic discipline and a practical framework for problem solving that results in innovative products, services, processes and solutions. It is based on control rather than prediction.

Before building a business plan or drafting a financial model, successful entrepreneurs put their attention on what they have within their reach – the assets they already have on hand. Then they reach out to others and seek commitments rather than feedback. This dual emphasis on control and commitments is the secret sauce that separates expert entrepreneurs from their novice counterparts. And it ensures truly unique solutions.

How can large corporations with rigid organizational structures gain this entrepreneurial “advantage”? By following the principles of effectuation:

  • The Pilot in the Plane Principle: Start with a mindset of control rather than prediction. Make your own opportunities – don’t go looking for them or attempt to replicate what others have done.

  • The Bird in Hand Principle: Leverage what’s already available to you. Consider who you are, what you know, and whom you know.

  • The Affordable Loss Principle: Failure is inherent in the innovation process. Resourcefulness is a requirement for innovation longevity. Figure out in advance how much you are willing to lose pursuing your idea. Evaluate your opportunities based on this. It will ensure that when you do encounter a bump, it is a mere obstacle rather than a derailer.

  • The Lemonade Principle: Embrace the unpredictable. As long as you remain flexible and willing to change based on the real time market data you receive, you are in control of your goals.

  • Crazy-Quilt Principle: Form partnerships. Find those people already around you who are willing to make a real commitment and collaborate to jointly create something truly innovative. Feedback is plentiful but develop deeper relationships with stakeholders, inviting them to put some skin in the game to advance your idea. By doing so they will be encouraged to bring their assets to bear and will significantly increase your ability to get traction.

Where can Effectuation take you and your organization? Who knows. That's what innovation is all about. So don’t wait – Effectuate.   

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC