How entrepreneurs outthink everyone else


How entrepreneurs outthink everyone else



Personally, I segment cooks into two groups. People in group 1 (which I am in) decide on what they are going to cook, find a recipe, gather the ingredients, follow the method in the recipe and voila! People in group 2 (my mum is in this one) look at the available ingredients (check the freezer/fridge/pantry) and then create something amazing, developing the ‘recipe’ as they go along.

These two groups of cooks provide a fabulous example of the difference between causal and effectual reasoning. Over many, many years, research has shown us that the vast majority of game-changing entrepreneurial successes, have been the result of effectual reasoning, rather than causal reasoning.

Entrepreneurial innovators typically look at the means at their disposal and then leverage their resources towards stated, but somewhat flexible goals. Causal thinkers typically optimise towards a very specific goal and predict outcomes, evaluating expected returns.

Now of course, I am certainly not suggesting that being entrepreneurial is at all about ‘thinking random stuff up’ based on what means or resources you have available. No matter what sort of innovation process you are following (including tech-centred processes) understanding the specific ‘customer’ problem you are solving is an essential ingredient in the process. And please don’t let the idea of ‘somewhat flexible goals’ and creative input lead you to think that I would ever suggest that innovation is anything other than a very structured, repeatable process.

However, with all of that said, there is indeed enormous value in thinking creatively (using a structured process and tools) about how you could leverage your resources to create new value. Highly successful organisations leverage their core competencies (more on that in an upcoming article – including why most organisations don’t really understand their core competencies, let alone how to leverage them!) in ways which help them to create new value, often to new customers. This can be done equally effectively at more granular levels than organisational ones.

In terms of applying this type of thinking, the rule of thumb is that typically, deploying causal reasoning makes sense when the future is very predictable. However, in circumstances of uncertainty, effectual reasoning has enormous advantages for the entrepreneur or innovator to create value.

If you want to start injecting some effectual reasoning skills into your toolkit, you can start with some really simple thought exercises. For example, imagine I gave you a packet which contained 500 toothpicks and I gave you 3 days to create as much value as you could with them. What could you do? How much value could you create from something as simple as a bunch of toothpicks? Give yourself 5 minutes to come up with a few different ideas – you’ll be amazed! Now, practice that a few times with different things and then think about how you might apply that type of thinking to organisational resources, particularly those which are underutilised!

If you would like to discuss embedding this type of thinking into your team, or anything else strategy/innovation related, I’m always up for a chat!


Related Posts

April 22, 2024

Innovation vs. Parenthood. Episode #3 – Will the arguing ever stop? Or should it?

March 4, 2024

Innovation vs. Parenthood. Episode #2 – ‘Why’?!

January 30, 2024

Innovation vs. Parenthood. Episode #1 – Is anyone in charge?

October 13, 2023

Strategy and the People Trap (and how not to fall in it)