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Overcoming Conventional Resource Constraints in New Ventures

I was invited by Startup Canada to write an article for their inaugural Thought Book (2014). It is really about non-conventional entrepreneurial thinking models - specifically effectuation and bricolage. These modes of thinking can be useful for getting a start-up venture in motion when you don't have all the resources you desire. Of course, that is one of the defining attributes of entrepreneurship (see my article #2E1: "A Stipulative Definition of Entrepreneurship").

A critical factor for growth-oriented entrepreneurial ventures (‘GOEVs’) to succeed in transformative development is the ability to marshal resources. Characteristically, a GOEV’s resources available to realize their mission are insufficient at start-up and difficult to acquire. Yet, key resources (especially human and financial capital) are essential to make an enterprise’s business model work. So the ability to access them over time and engage & sustain their commitment ‘to the cause’ will often separate winners from wannabes. This article describes two thinking approaches to overcoming key resource challenges in small start-ups: effectuation and bricolage.

Effectuation: Conventional thinking about successful entrepreneurship uses a cause-and-effect paradigm whereby a business model establishes the desired effect or ‘ends’ (mission, goals, objectives), uses ‘causal’ logic (strategies, plans, decisions) to design the ‘means’ to achieve them, and then attempts to acquire the requisite resources to support the predetermined strategy & plan. This thinking is suitable for businesses whose future outcomes are predictable. But this assumption is often not valid for start-ups and early-stage ventures whose outcomes (e.g. technical feasibility, market awareness of need/want) may be unknowable, let alone predictable. Dr. Saras Sarasvathy discovered a different thinking approach (“effectuation”) that describes what real expert/successful entrepreneurs do to cope with these situations – and it is sort of a reverse model. They start with the ‘means’ available or controllable by the entrepreneur/team and imagines the viable possibilities that might be achieved using just these means and focuses on creating sellable products/services to developed committed customers, initiating a new market. This approach is like the first gear on a manual transmission – it is designed to get the ‘vehicle’ moving. Other key concepts in the effectuation model include: a risk-management strategy for opportunity pursuit (“affordable loss” – risk little/fail quickly); forming alliances to leverage the available ‘means’ (e.g. customers as collaborators in product development); pivoting when surprises occur (making lemonade out of lemons); and, focusing on controllable activities (rather than attempting to predict an uncertain future) with the understanding desirable outcomes are likely to occur in the long-term if they stick to experimenting and learning.

Bricolage: “Making do with what is at hand”, is another approach to dealing with scarce resources. In entrepreneurship, it typically involves four steps: (i) committing to generating beneficial action with the existing resources rather than contemplating what might be possible “if only …”; (ii) refusing to accept conventional limitations (“this is the ways things have always been done”) by creating work-arounds or experimental solutions; (iii) accessing all resources at one’s disposal which means taking a comprehensive inventory of what and who we know that can help; and, (iv) re-using, repurposing, or recombining resources in new, often unintended ways (see the Post-in Note example in the article).

The article provides evidence that these approaches do work and also provides a list 12 of possible applications. Reader may also be interested in article #2E6 which provides a deeper dive into bricolage.

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