What Makes Entrepreneurs Entrepreneurial?

What Makes Entrepreneurs Entrepreneurial?

April 16th, 2006 by Matt Inglot

A comment from helpful reader Siddiq on my Barriers to Entrepreneurship post points out Effectuation – a very interesting site studying entrepreneurship. And on that interesting site is an interesting article titled “What Makes Entrepreneurs Entrepreneurial?“.

The article aims to analyze the thought process of the entrepreneur and distinguish this unique breed from a regular manager. It is based around the concept of “Effectual Reasoning” which is defined to be the inverse of “Casual Reasoning”. The main distinguishing factor is that instead of the casusal reasoning approach of “thinking of the best way to solve a problem given a set of means”, effectual reasoning “thinks of goals that can be acheived given a set of means”.

“All entrepreneurs begin with three categories of means: (1) Who they are – their traits, tastes and abilities; (2) What they know – their education, training, expertise, and experience; and, (3) Whom they know – their social and professional networks. Using these means, the entrepreneurs begin to imagine and implement possible effects that can be created with them. Most often, they start very small with the means that are closest at hand, and move almost directly into action without elaborate planning.” Saras D. Sarasvathy, University of Washington

 

I can identify with this personally, and the stories of other entrepreneurs come to mind too when I read this description. In my case I began with my programming abilities which I started developing as a hobby back in the 7th grade. This coding obsession placed me at first in the software industry with CustomBar, but as time went on I found greater successes in applying the solid software development principles I had learned and practiced to web programming. As I went through successful and unsuccessful ventures, I learned the value of utilizing my social network (Tilted Pixel’s customers are almost all referals), the importance of experimentation (”ready, fire, aim”), and found myself applying everything I had learned in my previous experiences for greater and greater success.

The article highlights some other very interesting points:

  • Rather than formal market research, entrepreneurs are far more likely to just Do It – selling the product/idea on a small scale, analyzing the results, and then figuring out what works. I find this principle of “ready, fire, aim” highly effective and it has been preached to me multiple times by successful entrepreneurs.
  • The building of strategic partnerships at the onset is important for obtaining support, commitment, and entering the market with little capital.
  • Far from being unexpected, surprises are an integral part of the landscape. Successful entrepreneurs leverage these surprises rather than attempting to avoid them.
  • Predictable markets can be a bad things for entrepreneurs, as someone else can always predict them better.
  • Effectual reasoning enables failures to occur sooner and for the costs to be spread-out in a way that avoids devastation (see strategic partnerships). This is illustrated in the article with the story of U-Haul.

The full 9 page article is available in PDF and perfect for taking along to read on a subway or coffee break.

 

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