Small ideas can lead to big ventures
Saras Sarasvathy, Paul Hammaker Professor of Entrepreneurship at University of Virginia Darden School of Business, was at Flame University, Pune, to conduct a workshop during which she spoke about how one can come up with successful ventures with limited resources
Startups can be tricky. To be able to handle the curveball thrown at you, one needs a lot of support and a strong ability to handle it. Saras Sarasvathy, a leading scholar on the cognitive basis for high-performance entrepreneurship and Paul Hammaker Professor of Entrepreneurship at University of Virginia Darden School of Business, recently conducted a workshop for students, entrepreneurs, educators and faculty at Flame University, Pune. The workshop was part of the inauguration of Flame Centre for Entrepreneurship and Innovation.
Sarasvathy spoke on how effective measures can be taken to run a startup or an entrepreneurship without any hassle. Excerpts from the interview.
What is the concept of Effectuation?
Effectuation is derived from the lessons expert entrepreneurs learn through the experience of founding, running and enduring businesses. It consists of a set of 5 principles that can be applied in the process of starting new ventures. Effectuation eliminates the need to predict the future and instead allows people to co-create and shape the future using things already within their control. Using an effectual approach to building new ventures allows innovation to happen in the case of success while keeping costs of failure low.
What are the things to keep in mind while starting a venture?
A few key lessons from effectual entrepreneurs: Funding is not as crucial as the media makes it out to be. You do not have to have a brilliant new idea to build a great company. Most enduring ventures, including so-called ‘unicorns’, start with mundane ideas. It is the effectual process that helps transform those mundane ideas into highly viable and valuable new products, business models and even new market categories. What is key is working with things already within your control to co-create the future with stakeholders who self-select into the process with you.
How can startups be successful with limited resources?
Both the bird-in-hand principle and the affordable loss principle in effectuation teach you how to work with nothing more than what you already have within your control to create highly successful new ventures. In fact, expert entrepreneurs learn how to bring products to market and build growing companies using almost zero resources. The main way you can do that is to stitch together a growing network of stakeholders each of them investing no more than they can afford to lose. This is called the crazy quilt principle in effectuation.
For a person who comes from a background with zero knowledge on how to run a business what are the things to take into consideration for its smooth functioning?
Don’t start something where you have zero knowledge about it, unless you have a co-founder or other strong stakeholders who know all about it. You can get them on board by allowing them to self-select rather than convincing them in any aggressive manner. Pitching is less important in effectuation than asking effectually.
For fresh graduates or students who want to come up with their own startups what are the ethics they should keep in mind?
Simply do what is doable and worth doing given who you are, what you know and whom you know. Who you are will include things you care about, your values and aspirations as well as your tastes and preferences. Combine that with your skills and knowledge and network and you have all the ingredients you need to start your venture.
How to face challenges while running a startup?
A crucial thing to understand is that both failures and successes occur on a daily basis in entrepreneurship. You cannot succeed if you are afraid to fail sometimes. But you can learn to keep your failures small and fast, learn to outlive them and, most importantly, don’t fail alone. Work with other people who want to work with you.
Share tips on how startups can become successful.
I think overly focusing on success is less useful than understanding how to develop courage, commitment and a co-creative mentality. These will allow you to ‘manage’ rather than ‘avoid’ failures. And effectuation allows you to learn how not to fail in a devastating way. Overly focusing on success often prevents entrepreneurs from succeeding or even attempting to start a venture in the first place.