Chapter 2
Entrepreneurial Mind Set
How Entrepreneur think?
• Perception of opportunity.
• Keeps on going for new patterns.
They think differently and make decision in uncertain environment.
1) Effectuation:
Effectuation is a process that starts with what one has, who they are, what they
know and whom they know and select among possible outcomes.
What one has ------------- Select one possible outcome (Opportunities)
Casual process: Casual process starts with a desired outcome and focus on the
means to generate that outcome.
Desired outcome ---------- Means to generate.
Principles of Effectuation:
Patchwork Quilts Principle
Means driven actions that emphasize on creation of something new with existing
means, rather discovering new ways to achieve given goals.
Affordable Loss Principle:
What one is willing to loose rather than expected returns of project.
Bird in Hand Principle:
Negotiating with all stakeholders who are willing to make actual commitment to
the project and determine the goal in the enterprise.
The Lemonade Principle.
This prescribe leveraging surprise for benefit rather than to avoid them,
overcome them, and adopt to them.
The Pilot in the Plan Principle:
Relying on and working with people as the prime driver of opportunity and not
limiting Entrepreneurial efforts to exploit factors external to the individual.
Above principles help Entrepreneur to navigate the environment as well as shape
it and exploit the unexpected events.
2) Cognitive Adaptability:
dynamism
Extent to -- Flexibility -----Generate decisions - Environmental changes &
actions
Self regulation
Engagement
“Extent to dynamism, flexibility, self regulation, engagement that generate
decision about environmental changes & action”
Ability of cognitive adoptability helps in learning new tasks, pursue the
opportunities and manage the firm in an uncertain environment.
Questions to assess cognitive adoptability includes,
1. Comprehension question
2. Connection tasks
3. Strategic tasks
4. Reflection tasks.
Benefits:
1. Adoption to new situation
2. Creativity
3. Communicate one’s reasoning behind a response
4. Uncertain environments give birth to opportunities.
3) Learning From Business Failure:
Business failure occurs when a fall in revenue or rise in expense is of such
magnitude that firm become insolvent and unable to attract new debts and equity
funding and cannot operate under current ownership.
Most common reason is insufficient experience.
Loss of business may also generate negative emotional response i-e grief which
is a feeling of anger, disbelief, guilt, self blame, distress and anxiety.
Learning from failure occurs when feedback information generate Entrepreneurial
knowledge.
Grief affects information processing and ability to learn from negative events.
Grief Recovery Process:
Recovery: Recovery starts when there is no longer negative emotional
response.
Process: There are two process involved.
1. Loss orientation:
An approach to grief recovery that involves working through and processing
some aspects of loss experience and as result of this breaking emotional bonds
to the object loss.
2. Restoration: (Try to buildup again)
An approach to grief recovery based on both avoidance and proactive ness
towards secondary sources of stress arising from a major loss.
A dual process for grief.
No one approach is best and it requires an oscillation.
Implications:
1. Reduces feeling of shame & embarrassment.
2. Speeds up recovery process.
3. Reduces stress and assist in treatment.
4. Gives comfort to Entrepreneur.
5. Makes Entrepreneur knowledge.
MANAGERIAL VS ENTREPRENEUR DECISION MAKING.
Managers are helping hands and are working under Entrepreneur.
Managerial Entrepreneurial
Strategic Orientation:
Presence & generation of opportunity
Efficient use of resources and resources denote constraints
strategic thinking.
Commitment to opportunity:
Information gathering & return on Opportunity and go for window of
resources (Long term commitment) opportunity and adjust resources
accordingly. (Short term commitment)
Commitment of Resources:
Commitment of resources to a large Commitment of small amount of
scale, continental and having in depth resources in a multistep manner with
analysis first whether investment can minimal risk at each step. (Multi stage
be easily reversed. (Full Commitment) commitment)
Control of resources:
Focus on ownership, accumulation of Less concerned about ownership and
further resources and effectiveness. control of resources and more concern
with access to others resources.
Management Structure:
Formulized hierarchical clear roles and Multiple informal networks, few lawyers
responsibilities and highly reutilized of bureaucracy, quick decision making.
work.
Reward Philosophy:
Rewards are typically determined by Compensate employees on the basis of
amount of resources that the manager their contribution towards generation
or employee contracts. and exploitation of opportunity.
Growth Orientation:
Slow study and manageable growth. Great desire to grow at a rapid speed.
Culture:
Interesting ideas, that revolves around Encourage employees to generate
centrally controlled resources and ideas, experimentation and creativity
limited opportunity reorganization. with focus on opportunity.