Week 6 - Effectuation.

 

-Alhussain Ali TP078072

 

Effectuation, transcends its origins in entrepreneurship and offers valuable insights for application in established companies. In organizational situations, it encourages creativity, strategic adaptability, and adaptive decision-making.

 

The fundamental difference between effectuation and conventional methods is the paradigms they use to make decisions. Effectuation places a high value on embracing uncertainty, establishing collaborations, and making the most of the resources at hand. Traditional methods, on the other hand, frequently focus on goal-setting and forward-looking planning.

 

Effectuation and causal approaches complement one other in certain situations and are not mutually exclusive. Although effectuation is great at navigating ambiguity and finding new opportunities, causal techniques might be a better fit when it comes to executing organized tactics or scaling operations.

 

Effectuation stresses flexible planning within reasonable loss limitations rather than advocating for a lack of planning. Entrepreneurs that use effectuation regularly evaluate risks, take lessons from their experiences, and modify their plans of action.

 

Effectuation and Lean Startup methodologies share common ground in their emphasis on experimentation and iterative learning. Lean Startup prioritizes quick prototyping, customer validation, and waste reduction whereas Effectuation concentrates on partnerships and resource leveraging. Businesses can combine elements of the two strategies to improve their ventures.

 

 

Reference:

 

Morales, DR. C. (2020, April 28). Effectuation in five questions. Www.linkedin.com. https://www.linkedin.com/pulse/effectuation-five-questions-dr-carlos-morales/

Abdullah Mahmoud TP077275

The concept of effectuation, which is from entrepreneurship, can also be used in both mature and young firms, and the process through which these are undertaken will enhance their creative capacity, strategic agility, and flexible decision-making. Its core divergence from traditional methods lies in decision-making paradigms: checkbox, collaborative and resource utilization approach which not only helps with goals setting, but also coming up with ideas and planning.

The effectual and causal approaches go hand in hand and can be used sequentially to address the different expectations. The first effectuation connotes unstructuredness and seeing around the emerging curve but the next results in causal effect and deals with structured actions or big operations.

In effectuation approach the robust planning within reasonable risk setting, where the entrepreneurs are constantly evaluating risks, learning from the experiences, and modifying their plans accordingly forms a vital part.

The effectuation principle is also similar to experimentation and iterative learning which are known as the features of lean start-ups principles. While Lean Startup is on fast prototyping and customer validation, effectuation which is on the other side that focuses on partnerships and resource utilization for innovation.

Reference:

Di Stefano, G., Peteraf, M., & Verona, G. (2014).

https://www.researchgate.net/publication/260287768_The_Organizational_Drivetrain_A_Road_To_Integration_Of_Dynamic_Capabilities_Research

-Ahmed AbdulAziz Omar Baflah (TP078277)

Effectuation is a logic of thinking for making decisions under uncertainty. Effectuation is best suited for situations where there is high level of uncertainty which may lead to the future being unpredictable, companies also face situations in which no previous records can assist in upcoming situations, leading to the use of effectuation. A prime example can be when iPhone released their first product. Most approaches in entrepreneurship focus on starting with goals, while effectuation in entrepreneurship focuses on creating goals using what is available, allowing an entrepreneur to use uncertainty to their advantage. Despite that, casual approach is just as valuable as effectuation, solely due to the fact that decision making is purely situational (Morales, 2020).
When starting an idea and creating a plan, the plan will undergo a number of transformations, depending on the current circumstances which may lead to it being completely different from the original idea, the change is unpredictable. This process resonates with the principles of effectuation. Effectuation and Lean startup both aim to produce experience, while effectuation  starts with the means, lean startup starts with an idea (Morales, 2020). If both point of views are merged, effectuation mindset can improve the effectiveness of lean startup approach to opportunity assessment and development to the business (Sebastiao, 2014).

References

Morales, C. (2020, April 28). Effectuation in five questions. Retrieved from linkedin: https://www.linkedin.com/pulse/effectuation-five-questions-dr-carlos-morales/

Sebastiao, H. (2014, June 13). How Effectuation + Lean Startup = Lean Entrepreneurial Thinking & Acting (LETA). Retrieved from linkedin: https://www.linkedin.com/pulse/20140612225801-11777433-how-effectuation-lean-startup-lean-entrepreneurial-thinking-acting-leta/

 

  -ALI HUSSEIN M. AHMAD (TP077707)

-Effectuation principles are applicable not only in entrepreneurship but also within companies. This structured approach to decision-making, emphasizing resource leveraging and partnerships, fosters innovation and adaptability in established organizational settings, promoting agile responses to dynamic market conditions.

-The crux of difference lies in approach: effectuation emphasizes leveraging existing resources and partnerships to create opportunities, contrasting with other entrepreneurship methodologies that often prioritize prediction and control over outcomes through extensive planning and analysis.

-Effectuation and the traditional (causal) approach aren't mutually exclusive. While effectuation emphasizes leveraging existing resources, the causal approach typically focuses on predicting and controlling outcomes through comprehensive planning and analysis, highlighting complementary aspects of decision-making.

-Effectuation doesn't negate planning but prioritizes action over exhaustive planning. It involves iterative decision-making based on available means and partnerships, allowing entrepreneurs to adapt to emerging opportunities and constraints flexibly while remaining oriented toward action and progress.

-Effectuation and Lean Startup methodologies can align well. Both emphasize action, experimentation, and learning from feedback. Effectuation complements Lean Startup by stressing the importance of leveraging existing resources and partnerships, enhancing the entrepreneurial process's agility and effectiveness.
(Effectuation, 2024)
References:

Effectuation. (2024). What is Effectuation? Effectuation 101. Effectuation.org. https://effectuation.org/effectuation-101

 -Faris Mohammed Ata Abulathou (TP077862)

Effectuation is a way of making decisions when a person is uncertain, it can be applied in businesses and in  entrepreneurship, especially in unpredictable scenarios. The focus on accessible methods rather than preset goals is the primary distinction between effectuation and other entrepreneurial techniques.

In contrast, effectuation starts with what one has and enables objectives to evolve over time, unlike the conventional (causal) method, which starts with a defined goal and then determines the means to attain it. Since decision-making is situational, these methods can coexist and are not mutually exclusive.

Effectuation does not mean “not planning”, because effectuation involves planning based on and adjusting plans as new information emerges

Lastly, Effectuation and Lean Startup work well together. Similar to effectuation, lean startup prioritizes continuous learning and adjustment while working in an unpredictable environment. These methods focus on the action, experimentation, and adaptability, making them complimentary tactics towards entrepreneurship.

 

References:

Morales, D. C. (May 25, 2020). FIVE QUESTIONS ABOUT EFFECTUATION. Neostarter.

https://neostarter.medium.com/five-questions-about-effectuation-a093552044c8

-Basem Ghasan Mansoor Ali (TP076027)

Effectuation is a framework and a method of problem-solving theorized by Dr. Saras Sarasvathy, and besides other entrepreneurship methods, Instead of following a planned process to achieve a future goal, this method involves using available resources and networks (Stilwell, 2023).

Effectuation is often associated with entrepreneurship due to its primary focus on navigating uncertainty and creating new ventures. However, its principles can be used in existing companies to help in innovating and making decisions in difficult situations that contain high levels of uncertainty (Morales, 2020).

The main difference between Effectuation and other approaches to entrepreneurship is that It focuses more on taking direct and reactive action based on the available resources rather than planning carefully, while other methods may include market analysis and planning before starting work (Morales, 2020).

None of effectuation or casual approaches is a replacement for another, in fact, both can be used together in the same industry. The effectuation approach can be used to deal with changing circumstances, while on the other hand, the casual approach can be used for carefully planning and analyzing (Morales, 2020).

Effectuation may seem to not have any planning, But actually, it involves different types of planning compared to casual approaches. While casual approaches often involve deep planning, entrepreneurs that use effectuation study and assign affordable losses, and adapt to unexpected outcomes (Morales, 2020).

Both Effectuation and Lean Startup principles share the same foundation on which they are based, however, The point of difference between the two principles is at the beginning. Effectuation starts with the available resources, while Lean Startup begins with identifying and testing hypotheses (Morales, 2020).

 

References

Morales, D. C. (28 4, 2020). Effectuation in five questions. Retrieved from linkedin: https://www.linkedin.com/pulse/effectuation-five-questions-dr-carlos-morales

Stilwell, B. (13 4, 2023). The 5 Principles of Effectuation: A New Way of Problem-Solving for Veteran Entrepreneurs. Retrieved from Military: https://www.military.com/veteran-jobs/5-principles-of-effectuation-new-way-of-problem-solving-veteran-entrepreneurs.html