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Saras Sarasvathy’s theory of Effectuation (2001) describes an approach to making decisions and performing actions in entrepreneurship processes, where you identify the next, best step by assessing the resources available in order to achieve your goals, while continuously balancing these goals with your resources and actions.
Effectuation differs from the causal logic, where there is a predetermined goal and the process to achieve it is carefully planned in accordance to a set of given resources. Sarasvathy argues that the causal logic is not suited for entrepreneurship processes that are inherently characterized by uncertainties and risks.

The fundamental world view for effectuation is called the Pilot-in-the-plane, which describes the future as something you can influence by your actions, i.e. you can create your own opportunities.

The four principles of effectuation are:

  • Bird-in-Hand: You have to create solutions with the resources available here and now.
  • Lemonade principle: Mistakes and surprises are inevitable and can be used to look for new opportunities.
  • Crazy Quilt: Entering into new partnerships can bring the project new funds and new directions.
  • Affordable loss: You should only invest as much as you are willing to lose.

The world view and the four principles are used in entrepreneurship processes to plan and execute the next best step and to adjust the project’s direction according to the outcome of your actions.

Instructions

Effectuation can be used in teaching to support self-efficacy and process understanding by letting students identify the next, best step for solving the problem they work with by applying Sarasvathy’s worldview and principles for effectuation.

You can either use the effectuation logic as the basic approach for a whole course or you can use one or more principles as the theme of individual, shorter course elements.

Effectuation can be combined with a phased process model, if you want more structure for your course. If you choose to do so please be sure to give your students room to act and make decisions independently in accordance to the effectuation logic.

Read about each principle below and find suggestions for methods for each principle. Remember that it is not a linear process, but rather an iterative process when the students navigate in the entrepreneurial process using the principles and world view.

Examples of use

Read about the course Entrepreneurship and Partnership (IVA, HUM), which is based on Saras Sarasvathy’s principles of Effectuation.

Course plan of a course that uses effectuation as an approach: Entrepreneurship and Partnership, IVA, HUM, UCPH, 2015 (In Danish)

Read about the course Digital Services Innovation (DIKU, SCIENCE) where Sarasvathy theory of Effectuation is used to develop digital services.

Playbook to structure an effectuation process in the course Nature, Environment and Society, IFRO, SCIENCE, UCPH, 2015. (In Danish)

Phases

Create opportunities and perform actions based on the resources available here and now by asking:

  1. Who are you?
  2. What do you know?
  3. Who do you know?

It can be particularly beneficial in interdisciplinary courses to start working with this principle as a competence assessment to help the students become aware of how they can contribute in a collaboration process. Moreover, this exercise can enable the students to create projects that are better connected to their own study backgrounds.

Please note: the effectuation mindset is to be used in an iterative process where the students can apply Sarasvathy’s worldview and principles for effectuation to navigate independently and the teaching process should therefore not be divided into phases in a rigorous structure. However, you can find suggestions for methods below, which can support or inspire the students to use the Bird-in-Hand principle in a entrepreneurship process.

Methods

You can minimize the risk of a project by only investing what you are willing to lose – rather than focusing on what can be achieved if the project succeeds. You should therefore practice how to make decisions and perform actions where you can manage the potential loss if your actions do not get the expected outcome.

According to the effectuation logic you can maintain control by taking small steps in one direction instead of working towards long-term goals with unpredictable outcomes. By approaching decision making this way you can avoid investing time or money that you are not actually willing to lose.

Please note: the effectuation mindset is to be used in an iterative process where the students can apply Sarasvathy’s worldview and principles for effectuation to navigate independently and the teaching process should therefore not be divided into phases in a rigorous structure. However, you can find suggestions for methods below, which can support or inspire the students to use the Bird-in-Hand principle in a entrepreneurship process.

Methods

The effectuation logic also includes the principle of entering into collaborations and partnerships in order to bring new resources into the project. The principle of Crazy quilt emphasizes the value of collaborating with various types of partners who are willing to commit, rather than searching for potential partners who might not be available or motivated. This is also based on the understanding that when engaging with new partners with different and surprising perspectives, one must be open to letting the project change direction as a result of these new partnerships. Sarasvathy calls the type of partnership for Crazy quilt, because it is characterized by brightly colored and quirky patterns.
In a teaching situation the principle means that the students must be able to identify the partners needed to solve a problem and collaborating with them at appropriate times in the process and adjusting the project scope accordingly.

Please note: the effectuation mindset is to be used in an iterative process where the students can apply Sarasvathy’s worldview and principles for effectuation to navigate independently and the teaching process should therefore not be divided into phases in a rigorous structure. However, you can find suggestions for methods below, which can support or inspire the students to use the Bird-in-Hand principle in an entrepreneurial process.

Methods

Detours and mistakes are inevitable elements of entrepreneurship processes, and the students must learn to work with them and identify the opportunities for development and learning that can arise in these situations.

It may be difficult for the students to be open about their detours and mistakes, as they might be afraid that it could negatively influence exam results. To accommodate this you can address this in your teaching and make it acceptable and even expect that the student projects change directions. If possible you can also add learning objectives to the course description about identifying and dealing with unforeseen situations, mistakes and detours in the entrepreneurship process.

Please note: the effectuation mindset is to be used in an iterative process where the students can apply Sarasvathy’s worldview and principles for effectuation to navigate independently and the teaching process should therefore not be divided into phases in a rigorous structure. However, you can find suggestions for methods below, which can support or inspire the students to use the Bird-in-Hand principle in a entrepreneurship process.

Methods

Sources

Sarasvathy, S (2001): What makes entrepreneurs entrepreneurial. The Darden Graduate School of Business Administration

Sarasvathy, S et. al. (2011): Effectual Entrepreneurship. Routledge

www.effectuation.org

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