How to become an effectual entrepreneur?

April 23, 2018

 

        There are many successful entrepreneurs around us and entrepreneurship has been playing a crucial and popular role especially in our generation. Needless to say, we have known many entrepreneurs in our whole lives such as Steve Jobs, Elon Musk, Mark Zuckerberg, Jack Ma, and their important innovations especially. We sometimes question ourselves, how did they become so famous and successful in their entrepreneurial career path? What drives them to be one? And what did they do to be an expert?

 

Mythical Entrepreneurs

 

If we are to define entrepreneurship, we have to focus beyond considering entrepreneurs as special persons with particular personality characteristics. It is not that they possess superhuman abilities like Superman or Captain America. And not that they were born with specific skills and innate abilities or have genetically inherited them from their parents. Steve Jobs once said that “Everything around you that you call life was made up by people that were no smarter than you. And you can change it, you can influence it”. This is practically summing up the idea that anyone who wants to be an entrepreneur can (learn to) be an entrepreneur if they are passionate about it. But of course, it might require some techniques and principles.

 

People choose to follow an entrepreneurial career path based on several reasons. It could simply be that traditional way of being an employee is not really their ideal job. Or the desire to change the world and do things differently with their unconventional thoughts and ideas. Nonetheless, we need to notice the fact that entrepreneurship is not a shortcut to flexibility or success in life, but rather a longer and harder approach while being flexible. Though, in return, we get to shape our lives or the world around us in a way we want it to be. So, even if we could say that anyone can (learn to) be an entrepreneur, there is a twist and not everyone choose to be one.

 

The Not-so Fairy tale journey

 

Normally, we would think the journey of entrepreneurial adventure to be a fairy tale one, which in essence means, they search for a potential opportunity which no one has thought previously, plan a business proposal, raise funds from venture capitalists (VCs), produce and sell products, make profits and then finally retire in paradise. Well, unsurprisingly, not every entrepreneur has a fairy tale journey sponsored with vast investments by VCs. In this kind of event, they use specific techniques to stand on their own in building new ventures. They do what they can with what they have and what is available to them, rather than wandering around, waiting for an opportunity to be found and holding themselves back from fears, restrictions and constraints. It is undeniably true that having certain traits and personalities for instance, motivated, creative, confident, open-minded and so on could aid a person in his entrepreneurial career path one way or another. Yet, these are not the centre to success in entrepreneurship.

 

Secret tips for newbies

 

An enormous body of academic research on entrepreneurs has provided us some guidelines that we could apply ourselves in our journey of building an enterprise. Researches show that in real life, an expert entrepreneur usually follows a systematic approach called the “effectual process”. Effectuation is a method of thinking which can aid an entrepreneurial newbie to control a future under unpredictable circumstances besides lowering the rates of failure from the barriers that will emerge in the beginning of a new venture. This logic is based on five principles namely (1) Bird in Hand Principle, (2) Affordable Loss Principle, (3) Crazy Quilt Principle, (4) Lemonade Principle, and lastly, (5) Pilot-in-the-Plane Principle.

 

Ø  BIRD IN HAND: Stock up your resources

When entrepreneurs build a new enterprise, they often initiate with “Bird in Hand” Principle which is starting with their means. The means here are referring to resources, not particularly money, but could be classified into three categories of “Who I am, What I know and Who I know”. Entrepreneurs use these means to structure creative ideas and possibilities, then take action to result with desirable goals.

 

 

Ø  AFFORDABLE LOSS: Expect your failure

It is normal for a traditional businessman to expect and set an amount of returned profits. However, in simple words, an expert entrepreneur usually thinks of what she could afford and willing to lose in running her innovations and estimate the downside risk rather than expecting or maximising returns. By setting an amount of affordable loss, she is also preventing herself from relying too much on financial needs. But instead, focusing more on non-financial contributions such as her knowledge, reputation, time and emotional commitments which could allow her to risk little and fail cheap.

 

Ø  CRAZY QUILT: The beauty of partnerships

Trying to develop partnerships with stakeholders, suppliers and customers (the Crazy Quilt Principle) would be the follow up plan for an expert entrepreneur. Obviously forming partnerships is one of the most important aspects in any business, including entrepreneurial role. Strategically partnering with the competitors could be beneficial for an enterprise not only in the start-up stage but also as the business grows. Entrepreneurs can spread risks using these collaborations and obtaining additional pre-commitments from their stakeholders could assist in setting a lower level of affordable loss and insecurity rather than operating one by themselves. Besides, this idea of expansion in partnerships or the means under “Who I Know” in the first principle could lead to either following a planned market or creating a new market. Thus, effectual entrepreneurs naturally allow their partners or customers to intervene their plans rather than sticking to one idea in making radical decisions.

 

Ø  LEMONADE: Trying different things is never a bad idea

Following the “Lemonade Principle”, an expert entrepreneur is always looking out for opportunities and open up to learning. Unlike normal managers or businessmen, she would embrace surprises and change them into potential profitable assets which could be used in creating further opportunities rather than seeing them as a destructive object. This could also be called “Leverage Contingencies Principle” of the effectual logic. Researches have revealed that some products that we are using today were emerged from unintentional and unplanned notions. For example, have you ever wondered how potato crisps were invented? I, myself, was surprised when I first read about the legend behind this invention. It all began from a customer complaint back in 1853, when a chef named “George Crum” was complained that the French fries he was serving were too thick and soggy. So, he cut the potatoes as thin as possible to frustrate the complainers. But instead, he surprisingly pleased the consumers and the invention of potato chips went worldwide!

 

Ø  PILOT-IN-THE-PLANE: Keep your work organized

Finally, the “Pilot-in-the-Plane” principle is telling that effectual entrepreneurs recognize the value of being in control as it allows them to prioritise things, choose their own partners and set their own schedules. Anthony Robbins believed that “You can’t always control the wind, but you can control your sails.”   Nevertheless, it does not necessarily mean that they can or seek to control everything. Customers, actions of competitors, economy, etc. are the segments that cannot be controlled. Additionally, they do not wait for opportunities to be found, thereby create them by exerting control over the controllable activities while using a certain amount of prediction at the same time. In reality, the first four principles could be repeated. Practicing all principles in cohesion could aid an entrepreneur to control the controllable to exert control on the uncontrollable elements.

 

It is more common and suitable for expert entrepreneurs of using the effectual reasoning in the early stages of a new enterprise since it allows them to be more creative and innovative even under uncertain situations. Still, not every businessperson follows the effectual logic and even the ones who practise it, do not apply all the principles. There is more than one way in approaching to becoming an expert entrepreneur, depending on different circumstances as well. With all the principles and skillsets working hand-in-hand, the new venture that an entrepreneur starts would lead to a sweet success.

 

 

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