The Effectuation Principles to build great startups

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The Effectuation Principles to build great startups

Effectuation has 6 principles:

  • 1. Bird in Hand
  • Affordable Loss
  • Lemonade
  • Crazy Quilt
  • Pilot in the Plane
  • Effectual Cycle
I’ve started 8 companies that employ >1,000 people. But… I don’t build startups like everyone else. I use a system called “Effectuation” It will change how you build innovative businesses. (1/x)
First, some history… I’ve used the common startup techniques: · Lean (“Ask customers their problems”). It produces “small” ideas. Yuck! · Waterfall (“Build a big vision & customers will come”) common to VC. It’s too risky. There is a better way…
It’s called Effectuation. Effectuation is playing Jazz in the world of business – all improvisation! You use available means to take action and let the big vision emerge over time. Here’s how it works…
Effectuation has 6 principles: 1. Bird in Hand 2. Affordable Loss 3. Lemonade 4. Crazy Quilt 5. Pilot in the Plane 6. Effectual Cycle Let’s go through each…
1. Bird in hand Principle First, list your resources. a. Who you are- your personality and abilities b. What you know- education and skills c. Who you know- your network Explore viable ideas using those strengths. Then, get started building something ASAP!
2. Lemonade Principle You WANT mistakes as quickly as possible. What?! Mistakes are actually a GIFT! They make you learn quickly. Each piece of bad news or failure gives a clue… … you use to create new markets! When business gives you lemons, make lemonade.
3. Affordable Loss Principle: Each step in startup building has bigger “bets” as conviction grows. Unlike all-or-nothing bets like VC, you’re running many small experiments. If they work? Great! If they don’t, you learn how to do better. And live to fight another day!
4. Crazy Quilt Principle: Only choose partners willing to put skin in the game. These people become part of your “crazy quilt” of unique resources that win. The people and organizations unwilling to be all-in? You have no room for them!
5. Pilot in the Plane Principle: You focus on activities you can control. Don’t worry about things out of your control. You believe that the future is unknowable. You create tomorrow solely through your entrepreneurial work!
I first found these principles by watching smart entrepreneurs. Once I’d found it the hard way, I learned professor Saras D. Sarasvathy had already defined Effectuation! Even still @gocodeup @dura_software @drylinepartners @redrunnercoffee and others – All from Effectuation!
Tl;dr: Effectuation is a lower-risk but high upside way to do startups. Using these 6 principles: -Start with what you can do -Make repeated small bets -Rapid mistakes maximize your learning -Find skin in the game partners -You build the future -Go against the grain And win!
And, give me a follow @girdley for more stuff on entrepreneurship, life and my journey. 🙂

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