Summary What makes entrepreneurs entrepreneurial?

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Summary - What makes entrepreneurs entrepreneurial?

  • 1 Effectual reasoning: The problem

  • What are the demands of Effectual reasoning?
    Domain-specific skills, training, imagination, spontaneity, risk-taking, and salesmanship.
  • Strategic thinking is causal reasoning involving the creation of additional alternatives to achieve the given goal.
  • What  are the different Forms of Reasoning?
    • Causal reasoning - Managerial thinking
    • Creative Causal reasoning - Strategic thinking
    • Effectual reasoning - Entrepreneurial thinking
  • The word "effectual" is the inverse of "causal". 
  • Effectual reasoning does not begin with a specific goal, but with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations.
  • 2 Effectual reasoning: The process

  • Which three categories of Means do all Entrepreneurs begin with?
    1. Who they are; their traits,  tastes, abilities
    2. What they know; their education, training, expertise, and experience
    3. Whom they know; their social and professional networks
  • Graphically depicts and contrasts the causal marketing process with the effectual one.
  • 3 Effectual reasoning: The principles

  • What are the characteristics of Causal rationality?
    • Focuses on expected Return
    • Depends on Competitive analyses
    • Urges the Exploitation of Pre-existing knowledge and prediction
  • What are the characteristics of Effectual rationality?
    • Emphasizes affordable Loss
    • Built upon Strategic Partnerships
    • Stresses the Leveraging of Contingencies
  • The affordable loss principle: Entrepreneurs tend to find ways to reach the market with minimum expenditure of resources such as time, effort, and money. 
  • The strategic partnership principle: Building partnership helps reduce uncertainty and determines to a great extent which market or markets the company will end up.
  • The leveraging contingencies principle: the ability to turn the unexpected into the profitable. 
  • 4 Effectual reasoning: The logic

  • On what logic is Causal reasoning based?
    To the extent that we can predict the future, we can control it.
  • On what logic is Effectual reasoning based?
    To the extent that we can control the future, we do not need to predict it.
  • Effectual logic is particularly useful and effective in the domains such as the introduction of new products in new markets, an area often reffered to as the suicide quadrant, exactly the area where traditional marketing techniques are ineffective.
  • Effectual logic is people dependent, causal logic is effect dependent.
  • 5 Conclusion

  • Effectual reasoning may not necessarily increase the probability of succes of new enterprises, but it reduces the costs of failure by enabling the failure to occur earlier and at lower levels of investment.
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