The New Business Venture MGT 2230 Chapter 2 The Entrepreneurial Mindset HOW ENTREPRENUERS THINK Entrepreneurs think

differently when faced with a task or decision environment. Must make decisions in highly uncertain environments where the risk is high and there is considerable emotional investment. Effectuation 1. Causation is the focus on the means to generate the out come and does not focus on the desired outcome. 2. Effectuation Process is the process that starts with what one has (who they are, what they know, and whom they know) and selects among possible outcomes. 3. Patchwork Quilt Principle. Means driven action that emphasizes the creation of something new with existing means rather than discovering new ways to achieve given goals. 4. Affordable Loss Principle. Prescribes committing in advance to what one is willing to lose rather that investing in calculations about expected returns to the project. 5. The Bird in Hand Principle. Involves negotiating with any and all stakeholders who are willing to make actual commitments to the project: determines the goals of the project. 6. Lemonade Principle. Prescribes leveraging surprises for benefits rather than trying to avoid them, overcome them, or adapt to them. This uses unexpected situations as an opportunity instead of dealing with them. 7. The Pilot in the Plane Principle. Urges relying on and working with people as the prime driver of opportunity and not limiting entrepreneurial efforts to exploiting factors, external to the individual. They will focus on aspects of the future you can control; they do not need to predict the future. 8. Entrepreneurial Mindset. Involve the ability to rapidly sense, act, and to mobilize, even under uncertain conditions. Cognitive Adaptability Definition: Describes the extent to which entrepreneurs are dynamic, flexible, self regulating, Engaged in the process of generating multiple decision frameworks focused on sensing and processing changes in their environment. Then acting on them! We can achieve this by asking ourselves a series of questions that relate to: 1. Comprehension Questions. Designed to increase entrepreneurs understanding of the nature of the environment.

2. Connection Tasks. Tasks designed to stimulate entrepreneurs to think about the current situation in terms of similarities and differences with situation previously faced and solved. 3. Strategic Tasks. Designed to stimulate entrepreneurs to think about which strategies are appropriate for solving the problem or pursuing an opportunity. 4. Reflection Tasks. Designed to think about their understanding and feelings as they progress through the entrepreneurial process.

Entrepreneurs Able to Increase Cognitive Adaptability Improve Their Ability to; 1. Adapt to new situations. 2. Be creative. 3. Communicate ones reasoning behind a particular response. Learning from Business Failure Businesses fail. Common because of the newness and inexperience of the venture. There are benefits to take risks even if the potential is failure. Other businesses can learn from an entrepreneurs failure. Some businesses are an extension of the owners personal creativity and it is difficult for them to be objective. Family businesses have an emotional core that makes it difficult to be objective. Grief is a negative emotional response a person feels from the loss of something important. Grief can interfere with the persons ability to learn from the failure. Grief can interfere with the allocation of attention in the processing of information. Grief Recovery Process 1. Loss Orientation. Working through some aspect of the loss breaking the emotional bonds to the object loss. 2. Restoration Orientation. An approach based on both avoidance and proactiveness toward secondary sources of stress arising from a major loss. It also applies how a person attends to their aspects of their life. This enables a person to distract themselves from thinking about the loss while simultaneously maintaining essential activities necessary for restructuring aspects of their lives.

Dual Process for Grief Moving between the two grief processes. Enables a person to obtain the benefits of each while minimizing the cost of maintaining one to long. Feelings and reactions being experienced are normal.

There are both psychological & physiological symptoms of grief. The feelings will diminish as the process moves through the steps. MANAGERIAL VERSUS ENTREPRENURIAL DECISION MAKING This is distinct from traditional management in terms of eight dimensions; (Page 41 Table 2.2) 1. Strategic Orientation. 2. Commitment to Opportunity. 3. Commitment of resources. 4. Control of resources. 5. Management structure. 6. Reward Philosophy. 7. Growth orientation. 8. Entrepreneurial culture.

HOMEWORK Answer the following questions in detail: 1. When you have lost something important, did you predominantly use a loss or restoration orientation? Describe. 2. Were able to move (oscillate) between the two? 3. If you did oscillate, do you believe that it helped you overcome the loss? 4. Did you learn from the experience in the end? Did it make sense?