How do I build my Business?

Some Ideas and Approaches

K. Kumar
Indian Institute of Management Bangalore

Empowering Women and People with

Disabilities through Entrepreneurship
Education
Australia Award Fellowship Program

University of Sydney
30 November2015
(C) K. Kumar 2015

Successful
Entrepreneurship
Customer
Needs

Personal
Satisfaction

Economic
Feasibility

Successful Entrepreneurship
(Stevenson and Spence, 2007)

(C) K. Kumar 2015

Venture Formula
Idea = anything + you
Opportunity = idea + action
Action = f(Interaction) on Money, Product,
Partners
Viable Venture = Opportunity +
Commitment
(C) K. Kumar 2015

Causal and Effectual Logic

Effectual Logic helps in dealing with

uncertainty surrounding new ventures
(C) K. Kumar 2015

Principles of Effectuation*
Patchwork quilt
versus jigsaw puzzle

Affordable loss
versus expected return

Bird-in-hand
versus opportunity cost analysis; or competitive
analyses

Lemonade
versus avoiding contingencies, but leveraging them

Pilot-in-the-plane
Non-predictive control

*Source: Saras Sarasvathy

(C) K. Kumar 2015

What is learnable in
entrepreneurship?
Study the Expert
Entrepreneurs helped identify 5 principles

Pilot in
Bird
Affordable
Lemonade
Crazy-Quilt
in Hand
thePrinciple
Loss
Plane
Principle
Principle
Principle
Control
--Leverage
-Form
Start
- Set
vs
partnerships
with
PredictionIf
affordable
contingencies
your means.
Form
loss
you partnerships
Embrace
Evaluate
can
Don't
control
wait
surprises
for
with
the
perfect
opportunities
that
people
arise
and
opportunity.
from
organizations
based
uncertain
Start
on whether
situations,
willing
takingtothe
action,
topredict
make
downside
remaining
based
awhat
realis
on
flexible
commitment
acceptable,
what
rather
you have
rather
to
than
jointly
readily
tethered
than
creating
on
the
to
something,
you
dont
need
the
future
would
look
like.
the future--product,
available:
attractiveness
existing
goals.
who of
you
the
are,
firm,
predicted
what
market--with
you
upside.
know,you.
andDon't
who you
worry
know.
so much about
competitive analyses and strategic planning.
(C) K. Kumar 2015

Causal vs Effectual
View of future
Future can be reliably predicted
Future cannot be reliably predicted
because of uncertainty

(C) K. Kumar 2015

Causal vs Effectual
Where to start
With given goals and readily available
means
Subject to resource constraints (WWW)

(C) K. Kumar 2015

Causal vs Effectual

Basis for taking action

Focus on optimal scenarios
Do the doable (and then start pushing it)
Seek feedback and learn from mistakes.
Iterate.

(C) K. Kumar 2015

Causal vs Effectual

Attitude towards risk

Expected return
Affordable loss (where failure is
survivable)

(C) K. Kumar 2015

Causal vs Effectual

Attitude towards others

Competitive or transactional
Co-creational (with customers, suppliers,
or competitors)

(C) K. Kumar 2015

Causal vs Effectual

Attitude towards unexpected

Avoid surprises
Leverage surprises as sources of new
opportunities and innovation

(C) K. Kumar 2015

Causal vs Effectual

Underlying logic
To the extent we can predict the future
we can control it
To the extent we can control the future
we need not predict it

(C) K. Kumar 2015

Managerial Questions for Facing

Uncertainty
Risky
Situation

Uncertain
Situation

Managerial
Question

1. Where to
start?

Set a goal

Assess your
means

Have you
made an
inventory of
your means?

2. Basis for
action

Should

Can

Have you
played around
with
possibilities?

3. Attitude
towards risk,
return and
resources

Calculate
expected
return

Set
affordable
loss

Have you
come to grips
with worst
case scenario

(C) K. Kumar 2015

Managerial Questions for Facing

Uncertainty
Risky
Situation

Uncertain
Situation

Managerial
Question

4. Attitude
toward
others

Perform
competitive
analysis

Form
partnerships

Who can and who

wants to help you
create the
opportunity?

5. Attitude
toward the
unexpecte
d

Avoid
surprises

Leverage
surprises

Are you creating

corridors for
positive surprises?

6. Attitude
towards
future

Predictive

Effectual

Is your
environment stable
enough so that you
can rely on past
data to formulate
future actions?
How will you know
? Measure?

(C) K. Kumar 2015

References

(C) K. Kumar 2015

References
Sarasvathy, S (2009). What makes
entrepreneurs entrepreneurial?
University of Virginia Note (UVA-ENT0065)
Slides Courtesy- Saras Sarasvathy,
Suresh Bhagavatula and B.S.
Sachidananda

(C) K. Kumar 2015