Effectuation theory

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Effectuation theory in application:

One of the most organic and powerful tools of entrepreneurship is the use of effectuation theory for people willing to start a business or want to implement them in their family business. The traditional style of entrepreneurship teaches one to rely more on resources outside the domain of one's reach, for example approaching the banks for loans on high interest rates, putting up a big business plan which needs investment which one cannot afford. The new theory of effectuation states that one must look into one's own resources and the "birds in hand" to reduce or eliminate reliance on the financial sector. Thus participants will be introduced to five organic principles which they will have to implement in their business model for increasing their chances of success.

Components of Effectuation theory:
The crazy quilt principle Expert entrepreneurs build partnerships with self-selecting stakeholders. By obtaining pre-commitments from these key partners early on in the venture, experts reduce uncertainty and co-create the new market with its interested participants.
The bird in hand principle When expert entrepreneurs set out to build a new venture, they start with their means: who I am, what I know, and whom I know. Then, the entrepreneurs imagine possibilities that originate from their means.
The affordable loss principle Expert entrepreneurs limit risk by understanding what they can afford to lose at each step, instead of seeking large all-or-nothing opportunities. They choose goals and actions where there is upside even if the downside ends up happening.
The Lemonade principle Expert entrepreneurs invite the surprise factor. Instead of making "what-if" scenarios to deal with worst-case scenarios, experts interpret "bad" news and surprises as potential clues to create new markets.
The pilot in the plane principle By focusing on activities within their control, expert entrepre-neurs know their actions will result in the desired outcomes. An effectual worldview is rooted in the belief that the future is neither found nor predicted, but rather made.