“What is Effectuation? Effectuation 101”

Originally posted in our November 2022 Top of Mind Newsletter.

Effectuation, or as we at ELI, like to say, “go in order to know,” is a crucial feature of an entrepreneurial mindset. For decades, MBA students and budding entrepreneurs have learned to analyze market research, create a business plan, and look for ways to predict all outcomes for a future endeavor. But for most entrepreneurs making a go of it on their own, the exact opposite logic is often applied. The theory of effectuation, developed by researcher Saras Sarasvathy, has opened the door to understanding this logic.

Most successful entrepreneurs take action quickly, reducing the risk factor by often experimenting with their existing means. In this overview of effectuation, we learn of a worldview and four guiding principles that most “expert entrepreneurs” take. By embracing and practicing these principles and the underlying worldview, entrepreneurs enter into an effectual cycle. By instilling these principles in their early startup, entrepreneurs also enable their teams to enter the cycle, further reducing risk to the venture. This model is something anyone can embrace and has immense value even beyond a startup.

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