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Summary Everything you need to know for Fundamentals of Entrepreneurship final
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Chapter 16: The lemonade principle; Leverage surpriseTraditional models suggest the entrepreneurs should envision where they want to go, set goals, and
do fairly extensive planning to reach them before venturing into a new business. However, while
these activities offer some benefits easy to overlook the cost. You are missing out on upside
opportunity that surprises can present.
Instead of looking at the unexpected as a problem look at it as a new building block- resource- for
a new enterprise.
Lemonade principle: the unexpected is not a cost but a resource that, in the right hands, may
become something valuable.
Surprises may be few/many, come early/take time etc. but in whatever form they take, they can be
used as inputs into new ventures. Entrepreneurs can exploit them by building their venture to use
them.
Understanding different types of contingencies
Contingency can be thought of as something that is a mere possibility, something that may or may
not happen. pure chance, something that happens without a specific cause.
Three types of contingencies
- Unexpected people
o Accidental interactions with other people. Either you might meet a particular person
by pure chance, or the content of your interaction with someone is unexpected and
perhaps feels a bit random.
- Unexpected events
o When an entrepreneur has turned the event into something novel and valuable, for
example 2009 financial crisis turn this event into something useful.
- Unexpected information
o The unexpected arrival of new information.
When surprises initially look positive, people often refer to them as ‘’serendipitous’’ events good
things that happen by accident.
If at first glance they appear negative, people often refer to them as examples of ‘’Murphy’s Law’’,
the notion that anything that can go wrong will go wrong.
Leveraging contingency: the process
The entrepreneurs had to leverage the direction of the venture, they had to behave in a certain way
in response to the contingency.
There are several generic ways to think about how to handle contingencies; consider two common
ways and then a third entrepreneurial, way:
- Adaptive response
o Changing yourself to fit the contingency (thinking inside the box)
- Heroic response
o Changing the world into a state that you prefer (thinking outside the box)
- Entrepreneurial response
o Using contingencies as resources, as inputs into your entrepreneurial endeavors.
Instead of adapting to or overcoming the contingencies the world throws at you, you
see contingencies as assets with which you may be able to do something creative.
(the box has changed and then doing something creative with this new box
colloquial vox is seen as an input to the venture.
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,Contingency leveraging is about seizing the unique possibilities that may arise from the interaction
between the entrepreneur and the particular contingency.
Process of leveraging contingencies
Two keys to being more creative when solving problems:
- Consider a lot of solutions
- Change the way the problem is framed (instead of looking at the contingency as a problem
look at is as an opportunity.
Making surprises work for you
There are several things you can do to improve the odds you will experience contingencies that can
be leveraged in positive ways:
- Social networking
- Openness to experiences
- Opportunity framing
- Have confidence in your own abilities
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, Chapter 10: The bird-in-hand principle; Start with what you have
Bird-in-hand principle: working with the means at your disposal.
Effectual entrepreneurs start with means, fundamental question: what effects can I create given who
I am, who I know and what I know?
Causal entrepreneurs start with goals, for example ‘’ I want to make 10 million before I’m 30’’. Often
these goals and the question how to achieve them leads to the formation of a vision that will induce
the stakeholders who possess those resources to come on board.
What do we mean by ‘’start with your means’’?
There are 3 categories of means available to all of us:
- Who we are
o Traits, abilities, attributes
- What we know
o Expertise and experience
- Who we know
o Social networks
Any course of action needs to have the possibility of becoming valuable, but rather than select on an
expected upside, she prioritizes them according to which possibility is associated with the most
acceptable downside.
The entrepreneur’s decision about what to pursue is also co-determined by stakeholders willing to
commit resources.
Understanding that goals exist in hierarchies leads to two important insights:
- Higher level goals, ‘wanting to be a millionaire at 30’’, do not tell you what you should do on
the first day of your new venture.
- Tying yourself down to specific lower-level goals, ‘’starting an upscale restaurant in a high-
income neighborhood’’, focuses entrepreneurial actions on pursuing resources you currently
do not possess.
Some advantages of being means-driven rather than goal-driven:
- You are not chasing investors
- You are not waiting for the perfect opportunity or the perfect set of resources
- You are working with your strengths without having to overcome your weaknesses first
- You attract co-creative stakeholders, who want to shape goals, not just provide resources
- You are increasing the possible slate of stakeholders who can self-select into your venture.
- You are increasing the probability of innovative surprises
- You are increasing the likelihood of finding or creating opportunities that are a better fit for
you
- You are decreasing the cost of possible failure, as you only risk means that are affordable to
lose, and by doing that:
- You are increasing the likelihood that failures will be learning experiences that you can
recover from faster and build on when you are ready to try again.
- You are forcing yourself to get creative with meager resources, including slack resources and
even waste.
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