From the children’s tale of gold-from-straw Rumpelstiltskin, to today’s news about technologies that convert byproducts into profit, there’s a special allure to creating genuinely new ventures.
That’s exactly what Yan Cheung did. In 1990, on a shoestring budget, she launched what has become Nine Dragons Paper Holdings Limited, a company famous for its wild success shipping the United States’ paper waste back to China’s paper-starved cardboard factories.
As Ms. Cheung’s story joined the canon of entrepreneurial lore, her business thinking caught the attention of the nascent science of entrepreneurship known as Effectuation. According to Effectuation.org, “it’s a set of heuristics that describe how people make decisions and take action in situations of true uncertainty. It has transformed what many believe is an inborn skill or art into a learnable and teachable mindset. It's way of thinking through the problems that all entrepreneurs face.”
This summer, Willamette welcomed Stuart Read, Ph.D., one of the pre-eminent researchers of Effectuation, to its faculty as Professor of Strategic Management.
Practitioner. Researcher. Instructor.
Professor Read has nearly 20 years of industry experience in the private sector, having participated in the creation of six high technology start-up firms. Four were acquired by industry leaders. Two are publicly traded.
While at IMD in Lausanne Switzerland, Professor Read delivered executive education for top managers in large multinational firms. His research has been recognized in a variety of disciplines from Marketing to Finance, Policy to Economics.
“There’s always some element of Effectuation in my classes, especially with strategy. It’s most applicable in instances of great uncertainty, say, where you’re creating a new market or company,” says Professor Read.
A simple set of principles.
Rooted in the thought processes of some of today’s most successful entrepreneurs, five maxims shape Effectuation’s core:
- Take action with what you have readily available: who you are, what you know, and who you know.
Evaluate opportunities based on whether the downside is acceptable.
Embrace surprises that arise from uncertain situations, allowing goals to adjust dynamically.
Form partnerships with those who are committed to jointly creating the future--product, firm, market--with you.
Focus on activities within your control, knowing that the future is neither found nor predicted, but made.
Not contradictory. Complementary.
At first glance, it may appear that Effectuation contradicts the traditional tenets of an MBA program where a specific goal defines the means needed to reach it. Effectual reasoning starts with one’s means, and uncovers appropriate goals while deploying them.
In fact, the two are complementary. Effectuation helps smaller businesses gain traction and grow. After the start-up phase, as the business stabilizes, the tenets of Effectuation yield to the best practices of established enterprise. To Professor Read, that’s OK: “Effectuation and the traditional, trusted practices of management can co-exist. They’re valuable in different contexts. Determining the optimal time for the transition from one to the other will take more research.”
Students already find the principles of Effectuation at work in Willamette’s Angel Fund course. “The entire investing fund uses Effectuation as a strategy to invest in new ventures. It’s not that they’re investing in effectual people, they’re using Effectuation as a heuristic for managing the fund and making those investment decisions,” says Professor Read.
The ubiquitous element in all his classes.
Regardless of the class or program, Professor Read sets the same high expectations for all of his students. “That’s easy enough in my classes, but I encourage students to set high expectations for themselves, too. As we discuss in ‘Emerging Technologies,’ we couldn’t live without the Internet, even though it clearly has a dark side. I tell my students that they must aspire to more than putting technology to good use. It’s their responsibility to figure out how to deal with the bad parts, too.”
He’s far nicer than the fairy tale’s spinner of gold, and a welcome addition to our faculty. Welcome, Professor Read.
-Mike Russell, Content Strategist at Pivotal Writing