Guiding New Venture Explorers – 3

by Simon Bridge and Dr Cecilia Hegarty

Ten principle for new venture explorers

The previous instalment introduced the concept of effectuation as the approach followed by many successful entrepreneurs. While this concept may have been formulated by Saras Sarasvathy from her research into people who had started businesses, she has suggested that it is not limited to the business field.[i].

It does seem to have been the approach taken by many explorers seeking a way through unknown territory. They cannot plan their route in advance because there are too many unknowns. So when they start they look for a promising path to take them in the direction they want to go but they are open to apparently better opportunities when they discover them, and they know that they may not discover them until they get started. Additionally, because there is no certain way through, they know that they should not commit more than they can afford to lose to a route which has not yet been proven.

Therefore they try to decide which is the most attractive path to take initially from where they are, but they remain open to others and stay flexible so that with relative ease they can go round any obstacles they encounter, or switch paths, or even goals, if that seems more attractive and/or appropriate.

Based on a view that an effectuation approach is a viable alternative to the causal business plan approach, this instalment suggests ten principles to guide new venture explorers:

1.    An enterprise is a goal-realisation device.

What is your goal – what are you hoping to achieve? Is a new enterprise/venture likely to help you to achieve it? If not why are you thinking of one?

2.    Don’t commit more than you can afford to lose.
Business plans encourage you to commit the investment that the full venture seems to need – even if you can’t afford it. Then, if it doesn’t work, you are sunk. Instead only commit what you can afford to lose and, if more if more in needed, look for partners to share the cost or other ways of doing it.

Principles are not inviolable laws, they can be ignored but are still sensible advice and this principle is no different. Sensible explorers did not go further than the point from which they had enough supplies to get back if they didn’t find their goal. Some ignored that principle and by luck some of them succeeded – but others died as a result.

3.    Start from where you are.

Build on the foundation of your experience, knowledge, skills, contacts and interests – instead of trying something completely new to you.

4.    Carry out reality checks and plans

Do carry out some quick reality checks to see if your idea could work, and do give some thought to how you might do it, at least initially.

5.    The only reliable test is a real one.

However the only real test of an idea is to do it and see. If you are producing something to sell the only reliable way to see if it will sell is to produce it, if necessary on a trial basis, and see if it does sell. Asking hypothetical questions of people, such as ‘would you buy this if I were to produce it?’ has been shown to be very unreliable[ii].

6.    Get some momentum.

If you really want to succeed, get started – because then you will be doing something and will have more incentive to keep going. It has been said of rock-climbing that the best way to tackle the harder climbs (assuming you do have rock-climbing skills) is not to stand back and look at the rock first but to get started. Looking at the whole of the rock can discourage you because then all the difficulties become apparent, whereas once you have started you have to keep going and address any difficulties one by one.

7.    Act for uncertainty and respond to the unforeseen.

The future is not pre-ordained so cannot reliably be predicted. It is uncertain, so proceed accordingly, balanced so that you can react should the unexpected happens – as it will.

Be ready to respond. Most opportunities, and obstacles, won’t become apparent until you have started. So don’t start with a single, fixed, pre-determined path in mind. Instead act like an explorer. Look for, and explore likely directions, and don’t necessarily expect the first one you try to be the best. So keep your eyes open for opportunities, and obstacles, because if you don’t look you won’t see them – to your detriment.

(NB It is said that oil prospectors expect to drill several wells before finding a productive one and for explorers finding a route which doesn’t work is part of finding the best one. This is to be expected as part of a successful exploration and should not necessarily be thought of as failure.)

8.    Build, and use, relevant social capital.

Social capital comes from your social contacts. It is like financial capital in that you can only use as much as you have acquired. It is also like vitamins in food in that there are different varieties of it, each of which has a different use.

The following are some of the relevant varieties of social capital – so try to build a stock of the sorts you need:

·  People who encourage and support you. (If you want to be happy – chose happy friends).

·  People who can give you relevant information, advice and guidance.

·  People who can introduce you to other relevant people, such as to potential customers or suppliers.

·  People who can vouch for you – who can, for instance, provide references and referrals.

9.    Acquire the relevant skills, or find a partner with them.

Those skills might include book-keeping and money management, selling, and producing.

10.  Produce a formal business plan only when you need one.

The business plan can be a useful tool – for some situations within business. The ten principles are a useful tool for guiding exploration. Add as many tools as you can to your tool box, learn how to use then, and use the most appropriate one in each situation.

In the next instalment this exploration approach will be compared to the business plan-based approach to highlight the pros and cons of each and when it might be appropriate to use them.

[i] S. D. Sarasvathy and S. Venkataraman, ‘Entrepreneurship as Method: Open Questions for an Entrepreneurial Future’, Entrepreneurship Theory and Practice, Vol.35/1, January 2011

[ii] Philip Graves, Consumer.ology, (London: Nicholas Brealey Publishing, 2010)

Alternatively, you can contact Simon and Cecilia here