6 Principle for Entrepreneurship

Can you teach someone how to be an entrepreneur?

In theory, I think yes.

I had a great professor at business school, Saras D. Sarasvathy.

She’s a feisty little Indian woman who smiles a lot and likes single-malt Scotch.

She is also one of the world’s leading researchers on what makes successful entrepreneurs.

Quick note: I would love if you shared this newsletter with just one person. Of course, more than one even better. I have a goal of 5,000 subscribers and am roughly halfway there. Your help in working toward my goal means a lot.

Quick story:

Doug Lebda, founder and CEO of Lendingtree

Doug was a student at Darden (where I went for my MBA) when he got the idea to start Lendingtree. He actually dropped out of school, started it, then came back years later to finish.

He credits Saras A LOT with helping him.

So much he comes back every year to speak in her class.

All while being the CEO of a publicly traded company and being worth $300 million.

That’s how much Saras’ teachings impacted him.

What’s so special?

I promise this is not a post about Saras.

It’s a post about her system: “Effectuation.”

It will change how you build innovative businesses.

Before effectuation, you had these startup techniques:

• Lean (“Ask customers their problems”). It produces “small” ideas. Yuck!

• Waterfall (“Build a big vision & customers will come”) common to VC. It’s too risky.

But Effectuation is playing Jazz in the world of business – all improvisation! You use available means to take action and let the big vision emerge over time.

Here’s how it works with the 6 principles of Effectuation:

1. Bird in hand Principle

First, list your resources.

• Who you are - your personality and abilities

• What you know - education and skills

• Who you know - your network

Explore viable ideas using those strengths. Then, get started building something ASAP!

2. Lemonade Principle

You WANT mistakes as quickly as possible.

What?! Mistakes are actually a GIFT!

They make you learn quickly. Each piece of bad news or failure gives a clue that you use to create new markets! When business gives you lemons, make lemonade.

3. Affordable Loss Principle

Each step in startup building has bigger “bets” as conviction grows. Unlike all-or-nothing bets like VC, you’re running many small experiments.

If they work? Great!

If they don’t, you learn how to do better. And live to fight another day!

4. Crazy Quilt Principle

Only choose partners willing to put skin in the game. These people become part of your “crazy quilt” of unique resources that win. The people and organizations unwilling to be all-in? You have no room for them!

5. Pilot in the Plane Principle

You focus on activities you can control. Don’t worry about things out of your control.

You believe that the future is unknowable. You create tomorrow solely through your entrepreneurial work!

6. Effectual Cycle

These principles tie together in a cycle that’s BACKWARDS from what others do.

Capabilities -> initial actions and experiments.

Your experiments maximize learning -> conviction.

And goals (especially audacious ones) emerge! All done in a low-risk way.

The other day I shared a post “6 Business Ideas For You”.

Maybe you try effectuating on one of those. Or something totally different.

Whatever you do, go crush it.

Mark

P.S.

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