How to turn entrepreneurship effectuation theory into practice

One of the joys of working with students is, of course, seeing them succeed. I recently was a guest at the PhD defense of a student I have been advising. Her thesis was on whether physician entrepreneurship is an example of the effectuation theory of entrepreneurship. Spoiler alert: It is.

I know. Seriously? Effectuation theory?

We need to know a lot more about physician entrepreneurship and physician entrepreneurs, so I was glad to see this addition to the literature and our research corpus.

Saras Sarasvathy’s theory of Effectuation (2001) describes an approach to making decisions and performing actions in entrepreneurship processes, where you identify the next, best step by assessing the resources available in order to achieve your goals, while continuously balancing these goals with your resources and actions.

Effectuation differs from the causal logic, where there is a predetermined goal and the process to achieve it is carefully planned in accordance to a set of given resources. Sarasvathy argues that the causal logic is not suited for entrepreneurship processes that are inherently characterized by uncertainties and risks.

The fundamental world view for effectuation is called the Pilot-in-the-plane, which describes the future as something you can influence by your actions, i.e. you can create your own opportunities.

The four principles of effectuation are:

• Bird-in-Hand: You have to create solutions with the resources available here and now.
• Lemonade principle: Mistakes and surprises are inevitable and can be used to look for new opportunities.
• Crazy Quilt: Entering into new partnerships can bring the project new funds and new directions.
• Affordable loss:?You should only invest as much as you are willing to lose.

The world view and the four principles are used in entrepreneurship processes to plan and execute the next best step and to adjust the project’s direction according to the outcome of your actions.

If you wan to turn this sickcare entrepreneurship theory into action, ask and answer these questions:

• Bird-in-Hand: You have to create solutions with the resources available here and now.
• Do you have the requisite mindset, knowledge, skills, abilities and competencies?
• Lemonade principle: Mistakes and surprises are inevitable and can be used to look for new opportunities.
• How are you testing your business ideas?
• Crazy Quilt: Entering into new partnerships can bring the project new funds and new directions.
• How extensive are your internal external networks and connections to ecosystems?
• Affordable loss:?You should only invest as much as you are willing to lose.
• What is your risk-return profile?
• Pilot-in-the-plane
• Do you have sufficient internal motivation to drive change in the face of substantial headwinds?

One entrepreneurial habit is to learn something every day. The best way to learn something is to teach it. Another way is to mentor someone who can teach you.

Arlen Meyers, MD, MBA is the President and CEO of the Society of Physician Entrepreneurs