Entrepreneurship has become very vital in this 21st century. And it seems everyone is embracing becoming an entrepreneur quite well. However, this isn’t the case. Due to the nature and role of business development, there is a need to give the topic a more critical and important look.
The various challenges regarding unemployment can be well reduced only if there is a vibrant entrepreneurial ecosystem. A lot of seminars are being organized in this regard. Especially to inculcate in the younger generations the zeal to be business owners and cause a change in the society.
As a matter of fact, although conferences and seminars are being organized to propagate entrepreneurship. But the big question mark is often the ideas and the capital to start a business. This necessitated Prof Saras Saravathy to conduct a study on serial and successful entrepreneurs. The research was on the mechanisms and tricks used by experienced entrepreneurs to achieve such gross and magnificent success. The deductions made from this experiment led to the derivation of 5 The Principles of Effectuation.
What is Effectuation?
According to Prof Saras Saravahty, “Effectuation is the methodology in which entrepreneurs interact with their ecosystem and co-create ideas, products, services, firms, and markets.
Below is a detailed elaboration on her 5 principles on becoming a successful entrepreneur with the Power of Effectuation.
5 Steps To Becoming A Serial Entrepreneur: The Power Of Effectuation
1. Bird in Hand Principle
This principle is one of the principles developed by Prof. Saras Saravathy to help aspiring entrepreneurs to become successful.
According to her research, the Bird in hand principle is one of the core ideology behind successful business people.
This principle is suitable for aspiring entrepreneurs who don’t have a business idea. When starting a business, the entrepreneur needs to reflect on their current situation. Such as who they are, what they know and whom they know. What capabilities do you carry? Which available resources at that particular moment can help?
With the bird in hand principle, you try to find an inbuilt capacity, your strengths and weaknesses. Based on this, you can divert your energy towards that capability.
After discovering who you are, you then look at the opportunities and resources available at that particular instant. And to capitalize on that to make the most out of it. This is a zero – capital stage.
Think on this…
You have the vision of becoming one of the world’s best writers. You would have to start from somewhere like writing down your thoughts in a diary. It is very vital to discover yourself in order to use your capabilities to create business ideas and products.
A typical business example is you yearn to start a venture. You do some soul searching. And end up with an inventory of what you know, whom you know and the few resources you have. You may decide to partner with a friend who has knowledge in a certain aspect of the business.
This move reduces the cost of having to employ someone else to do it. You could then decide to use the GH¢1,000 Ghana, to make the minimum required to get you started. Instead of chasing after the GH¢10,000 budget, you made.
Such a small start enables you to learn with less damaging effects. It is better to lose GH¢1,000 than to blow off GH¢10,000 of bank loan.
This last point leads us to the next principle as espoused by Prof, Sarasvathy.
2. Affordable loss principle
This is another brilliant principle of Prof. Saras Saravathy. The affordable loss principle has to do with investing as much as you can lose. And what you are willing to lose. This stage requires that you pump in as much capital as you are willing to lose. This also includes resources such as time and energy into the business
What are you willing to lose?
You invest resources and energy towards the realization of your goal only if you would be okay with losing them. But also stand the chance of gaining something more.
These resources channelled into the business should lead to the accumulation of profit. You lose something to gain something better, that is how this principle works. When you invest in a business (buying shares, etc), you will no longer have that money in your possession. The money you lost should lead to the accumulation of greater benefits and profits.
That is how this principle works. You must be comfortable with losing the resources invested in your new venture first.
3. Crazy – Quit principle
Channeling part of your entrepreneurial energy to build relationships is a great way to create success. The Crazy Quilt Principle brings to the fore the importance of helpful partnerships.
Think about this. You interact with people who buy into your ideas. And are willing to contribute and commit capital to ensure the expansion of your business idea. These people should share the same vision as yours.
As you build your business, build partnerships
With the network, you can build joint partnerships with people for a pool of resources to ensure mutual benefit and the growth of the business. As the saying goes “Two heads are better than one”.
It is imperative for every upcoming entrepreneur to build networks with people for the expansion of their business ideas.
You could also get potential customers out of this network. Personal branding is pivotal in attracting investors and customers which in the long run will aid in booming your business.
4. Lemonade principle
The lemonade principle has to do with leveraging on situations. This includes failures and mistakes. It highlights the need to create solutions and to grow your business using what may not be desirable. Or using what was not expected to happen. It calls on any would-be entrepreneur to take advantage of happenings “Making Lemonade out of lemons”.
Let me emphasize that a successful entrepreneur is one who sees an opportunity out of a problem. Instead of lamenting over the issue.
When a problem arises, that is when people become more innovative and creative. For example, entrepreneurs are leveraging COVID – 19 to create business ideas that will not only help curb the situation but also make a profit at the same time.
It becomes very necessary as an entrepreneur to be open-minded in order to visualize an opportunity out of a problem. Being flexible to even changing your business model or even business idea when need be. Such characteristic is priceless.
That is how entrepreneurs build firms and produce goods and services to satisfy the needs of the society and country as a whole.
Learn to make the very best out of every situation and your ventures will grow.
5. Pilot in the Plane principle
The Pilot in the plane principle comes after you have successfully come 5th but is by no means less important. In fact, it may be the embodying spirit of the principles of effectuation.
With this principle, the entrepreneur becomes the one who takes control and becomes the captain of the ship directing the way things should go.
This principle requires that you co-create products, goods and services out of the opportunities that come your way. Here, you control the means and factors of production. That is what to produce, when to produce, how to produce and whom to produce.
You must have a strategic plan as to the timeframe within which you will produce those quality goods. Also, you must have the necessary and appropriate resources for the production of goods and services.
You should also have a targeted population to whom those products will be beneficial. Hence, you become the master planner and brain behind the production of goods and services as well as determining the prices of your goods and services.
You are in charge, you are responsible.
In essence, the pilot in the plane puts the entrepreneur at the centre of affairs. You are in charge. As much as life sometimes goes its own ways and things can get out of plan, you must use all resources to create control within your own field of control. On the other side, you need to understand that some things are simply out of control but your job is to do your job very well to create success.
The above-elaborated points are the 5 principles outlined by Prof. Saras Saravathy on how to use the Power of Effectuation to become a successful entrepreneur. She came out with these findings from groundbreaking research on a number of entrepreneurs.
In summary, it is imperative for every business starter to use the Bird in hand principle to discover yourself. As time goes on and the business idea begins to flourish with the necessary partnership and inputs. Then you can move on to materialize your goal.
Therefore, there is always a way for aspiring entrepreneurs with no business idea. Or start-up capital to start their business and expand their business in due time.