The Effectuation Principle: The Crazy Quilt -- Why co-creating a business idea with a group of self-selected collaborators helps mitigate business failure

September 3, 2018

"Many ideas grow better when transplanted into another mind than the one where they sprang up" - Oliver Wendell Holmes

 

The effectuation principle, the Crazy Quilt, focuses early stage business entrepreneurs on building meaningful collaborations and partnerships rather than beating competitors.  The Federal Reserve Bank of St. Louis holds events and webinars on exploring innovation. The theme of those resources is that there exist four key elements of innovation: collaboration, ideation, implementation, and value creation. This article focuses on the importance of forming relevant collaborations, that lead to innovation. 

 

 

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Generally, inexperienced entrepreneurs tend to spend far too much time obsessing over competitors, practicing the pitch, and building features into their offering that they think, but do not know people want.  What they should be doing is focusing on two critically important tasks; 1) forming meaningful collaborations, and 2) discovering and/or creating customers.  Experienced entrepreneurs know that while it is good to be aware of your competition, competitors generally fall outside your domain control, whereas finding collaborative partners is something well within your reach. This is most important at the earliest stages of exploring a business idea. Early on, when a business idea is simply an idea, novice entrepreneurs tend to think their idea is great, and as such think the main job they have is to sell the idea. After all, they say to themselves, I just won a pitch competition, I must have a winner on my hands. This way of thinking is misguided, because rather than focusing on the important early stage stuff (forming collaborations, discovering who your customer is, if you even have one, and validating assumptions) they immediately start analyzing perceived competition, in the hopes of being able to differentiate their solution from the pack.

 

Expert entrepreneurs know that their original idea will invariably go through a series of changes, shifts, and iterations before potentially landing on a viable business model. The result in most cases looks nothing like the original idea. They also know that getting other people involved in the business building process helps get people to put a stake in the ground, and these individuals feel part of something. They feel like they are co-creating along with you, the entrepreneur. Therefore, these more experienced entrepreneurs start the business building process without assuming the existence of a predetermined market for their idea.  They accept that they don’t know who their competitors will be, so detailed competitive analyses early on can be wasteful, and have little value. The key early on with a business idea is to learn, not execute. Learning things like whether the problem you are solving is a problem or discovering who your actual customer is, are far more important factors than knowing who your competition is.

 

By getting out into the field and talking with potential stakeholders about your idea leads to some people and organizations voluntarily wanting to work with you on the project. One significant byproduct of getting people to opt in, includes now having access to that person(s) or organizations means and ideas (who they know what they know, and what they have). We reviewed in our first writing on effectuation the importance of starting with what you have – the effectuation principle “Bird-In-Hand.” The ability to get people to voluntarily opt in to work with you, without asking, is a key success metric to building a meaningful network of collaborative partnerships. 

 

Business venturing is difficult to say the least. Having a crazy quilt of self-selected individuals that yearn to work with you and share with you their means helps immeasurably to mitigate the many challenges facing an early stage entrepreneur today.  Finding those that want to self-select into working with you is challenging. One of the ways you can go about finding those that want to work with you is to have a strong sense of purpose, for why you are doing what you are doing. Your purpose statement will not appeal to everyone, that is not the goal. Trying to be everything to everybody is a recipe for failure in business. Sticking to your defined purpose will lead you down a path that crowds out those that are not committed to your idea and drives you toward those that get inspired by your vision, and as a result want to work with you.  When you reach that point your crazy quilt will be taking form, and your chances of success will increase significantly. 

 

 

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