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HOW DO ENTREPRENEURS THINK AND ACT?

SESSION 2 (out of 10)

ENTREPRENEURIAL
THINKING AND
ACTING

This session is part of a 10-weeks course


given to master students of the SOLVAY
BRUSSELS SCHOOL OF ECONOMICS
AND MANAGEMENT by professor Olivier
WITMEUR.

www.solvayentrepreneurs.be

Desired Outcomes of the Session

QUESTIONS

AGENDA

How do entrepreneurs think


and act?

Introduction to Effectuation
Wafels & Dinges case

RESOURCES
What makes entrepreneurs
entrepreneurial (Sarasvathy)

Are they different from


managers?
The difference between risk
and uncertainty.

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

How To Navigate In Turbulent Times?

V
U
C
A

VOLATILITY

Nature, dynamics and speed of change.

UNCERTAINTY

Lack of predictability and prospects for surprises.

COMPLEXITY

Multiplex of forces, confounding of issues and


causes-and-effects confusion.

AMBIGUITY

Haziness of reality, potential for misreads, and the


mixed meanings of conditions.

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

#1
ELEMENTS OF ENTREPRENEURIAL LOGIC:

INTRODUCTION TO EFFECTUATION

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

Managerial Approach based on optimization


Selecting between given means to achieve a predefined goal

Resource 1
Resource 2
Resource 3

Given
Goal

Resource 4
Resource 5

How to optimize the use of the resources?

Typical tools & techniques: project management, leadership, controlling, quantitative methods

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

A more creative approach based on planning


Generating new means to achieve pre-determined goals

Resource 1
Resource 2
Given
Goals

Resource 3
(needed)
(needed)

How to write a case or a plan to


ask for more resources.

Typical tools & techniques: strategic and financial planning

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

Entrepreneurial Thinking

Imagining possible new ends using a given set of means


Opportunity Space
Possible goal 1

Resource 1
Resource 2

Possible goal 2

Resource 3

Possible goal 3

Resource 4

Resource 5

How to exploit one opportunity inside the


opportunity space?

Typical tools & techniques: co-creation, creativity, enrolment, lean entrepreneurship, bootstrapping.

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

Introducing Effectuation:
The logic of expert entrepreneurs
The word effectual (entrepreneurial approach) is the inverse of causal (managerial
approach).
In general, in MBA programs across the world, students are taught causal or
predictive reasoning in every functional area of business.

Saras Sarasvathy, India

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

Causation vs. Effectuation


CAUSATION

EFFECTUATION (Cre-Action)

Need to
manage the
causes

Effects are
predicted

Need to
manage the
effects

Causes are
given

Planned approach

Emergent approach

Top-Down

Bottom-up

Managerial logic

Entrepreneurial logic

Prediction based: To the extent we can predict


the future, we can control it.

Control based: To the extent we can control


the future, we dont need to predict it.

For predictable situations

For uncertain situations

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

The test of a first-rate intelligence is the ability


to hold two opposed ideas in the mind at the
same time, and still retain the ability to function.
- F. Scott Fitzgerald

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

Principle #1: Bird in Hand


Start with who you are, what you know and whom you know
Not with pre-set/given goals (based on prediction)

Typical entrepreneurial resources

Expertize, skills

Social capital

Psychological capital: hope, optimism, self efficacy and resilience

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

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Principle #2: Affordable loss


Invest what you can afford to lose (extreme case = 0)
Not expected (risk adjusted) return

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

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Principle #3: Crazy Quilt


Build a network of self-selected stakeholders
Not competitive analysis and transactional relationships with first-best partners.

Committed
stakeholders network

Co-Creation

Customers
Suppliers
Channels
Financial partners
Employees
Sponsors

Crazy quilt, not puzzle.

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Principle #4: Lemonade principle


Embrace and leverage surprises (they can present new opportunities)
Not avoid them

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Nils Bergvist

Question

What would you do?

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About Nils
Swedish
Environmental engineer
Worked 8 years in the mining industry in Kiruna (in Northern
Sweden)
Passion for wildlife and sports

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Ice Hotel

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Principle #5: Pilot-in-the-plane


The future comes from what people do
No inevitable trends

Control vs Plan

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The Dynamics of the Entrepreneurial Network


Iterative opportunity
co-construction

Who I am? What


I can do? Whom
I know?

My Goals?

My affordable
loss?

Additional
resources

Who may be
involved?

Dead end
The venture grows
step by step.

New Goals

Multiple techniques help to deal with these cycles: Design Thinking, Lean Startup,
Business Model Generation, Staged Financing
To be continued.

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

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Managerial vs. Entrepreneurial Thinking


(stylized facts)

High

Expert
Entrepreneurs
Angels

Experienced
VCs

Effectual

Bankers
Novice
entrepreneurs

Novice
VCs
Corporate
Managers

Low

Low

Causal

Entrepreneurship Course Session 2 - 2014 Olivier WITMEUR

High

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From Causation to Effectuationand vice-versa


Causal

LOGIC

Effectual

Novice
entrepreneur

Moderating
effect of
resources

Large
firm

Shift in logic
necessitated by
firm growth

Start-up
firm

Entrepreneurs
do not always
manage to
bridge this gap

Expert
entrepreneur

TIME AND EXPERIENCE

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Wafels & Dinges

Question

What would you do next?


What is your logic?

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Dont wait/look for the


perfect opportunity.
Just start!
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NEVER STOP
WONDERING
&
ASKING!
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Olivier Witmeur (Belgian, 46)


A real passion for entrepreneurship education and entrepreneurs.
Student entrepreneurs: 2x
Full time entrepreneur: once, in a team of 5
Coach: 500+ projects over the last 20 years
(Advisory) Board member in multiple new ventures
Policy making: 2x
Director of Solvay Entrepreneurs
PhD in entrepreneurship in 2008
never as an investor
My wife (as Colombo), no kids, one dog (Vicky).
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Solvay Entrepreneurs
Solvay entrepreneurs is the entrepreneurship center of the Universit Libre de
Bruxelles. We support entrepreneurs through the development of their venture, from
an idea to a successful and sustainable business.

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