What's Effectuation Good For?

Companies are always curious as to what their peers are doing.  One of the questions I’m asked most frequently when I talk to managers about Effectuation is “How are other companies using it”? 

These are some examples of how others are applying the Effectual principles in their corporate environments.

A New Product Launch Process

A beverage company used Effectuation to roll out a new soft drink.  While the drink itself was not innovative, they wanted to take an innovative approach to its marketing and launch.  They made a conscious decision to break from their normal marketing launch model.  In its place, they applied Effectual decision-making. 

The primary difference was how they engaged their marketing, sales, and distribution partners in a more co-creative way.   Usually, they would decide at the corporate level which market to roll out to first.  This time, they worked with their partners to seek handraisers.  And in return, they asked them to co-invest in the process.  Their partners contributed sales resources.  They exercised the crazy quilt principle to build a stakeholder network that was mutually vested in the success of the product rather than just executing on orders and agreements. 

The launch was successful and led to a full scale roll out.  After operating this way, it changed how they think of the launch process.  Now, they have incorporated Effectual elements into their early stage innovation efforts, providing them with alternative methods to deal with market uncertainties. 

 Closing a Funding Gap

A national nonprofit organization faced a significant decline in funding.  Every year, they addressed their budget needs as part of a broader strategic planning process.  This year, they applied Effectual thinking to their strategic planning review and it changed their outcomes.

Rather than focus on what was cut from their budget, they looked inward at what resources they did have – their bird in hand.  This assessment uncovered both tangible assets – such as underutilized real estate and technology, as well as intangible assets – such as members and partnerships that were ripe to be built on.

So they took their planning process outwards.  They reached out to members and potential partners to see what it would take for them to increase their investment in the organization.  These dialogues led to several members, groups, and businesses identifying ways in which they would be willing to partner to develop mutually beneficial programs. 

The outcome was that they were not only closed their funding gap, but they surpassed their shortfall and achieved better than expected outcomes because their efforts were buttressed by the partnership of a stronger network. 

Creating a New Revenue Line

A technology services business used Effectuation to develop a product based revenue line. This company grew on the strength of its people and service delivery.  They had an impressive list of corporate clients but were struggling to recruit the talent needed to scale their operations. 

At the same time, they saw gaps in the products they were implementing and additional needs among their clientele.  They put this problem out to their employees and several indicated an interest in prototyping possible technology solutions.  They did this on top of their normal job responsibilities as it was of interest to them. 

The sales team took these product prototypes out to their clients to see if they generated interest.  Not only did they get positive feedback on some of their concepts, but they were able to successfully presell a version.  They partnered with the company on further development and delivered a tech product that they can no repurpose for other organizations.  This will allow them to scale and meet their growth goals.

So What is Effectuation Good For?

Effectuation is not just a process.  It’s also a problem solving method.  Whether you work in a nonprofit or a corporation, there are organizational challenges that could be addressed by applying the entrepreneurial mindset. 

If you see your company in any of these examples, consider how you and your team might apply Effectuation to solve the problems you’re facing. 

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC

Turn Frustration into Creation

Remember the last day of school? You couldn’t wait to break free. No more homework, teacher oversight, busy work assignments. Just the freedom to be creative. You explored. You invented.

Now think about your current work environment. Feeling the same restrictions? Boxed in? Beaten down? Micromanaged? Confined to your desk, or worse yet, a cube?

Insights Ignited worked with a multinational that had high employee fatigue. They had lots of ideas in their pipeline, yet were still losing market share. Their predictive models failed to indicate a clear winner among all of their possible options. Employees saw the writing on the wall. If they didn’t come up with some breakthrough products, another round of layoffs was inevitable. This elevated the stress level of their associates even more.

Their first solution was to bring in an entrepreneur as an inspirational speaker. That didn’t work. At the end of the “motivational” speech by the successful entrepreneur, employees had one of two reactions:

1. “Everything the entrepreneur said was true. But that will never work here”.  Or.....

2. “I’m so inspired. I have an idea of my own. I want to quit this job and work on my own idea”.

Either way, the company wasn’t the beneficiary. All they got was an increasing level of frustration as people sought external outlets for their creativity.

Then they tried Effectuation.

Effectuation empowers employees.

Effectuation puts a limit on the downside. Managers explicitly set an acceptable level of risk. But within those parameters, employees are free to innovate. Effectuation provides a framework for communicating both the risks and the process of innovating that allows managers to be comfortable with letting their employees have creative freedom.

How?

In this case, the company cited 4 components of Effectuation that they felt most contributed to increased employee engagement.

1. A common vocabulary - The language of Effectuation (e.g. Bird in Hand, Lemonade, Crazy Quilt, etc.) is memorable and easy to understand. There’s not a lot of technical jargon.

2. A shared understanding of boundaries - Effectuation requires explicit acknowledgment of risks. This allows managers to feel confident that employees understand the non-negotiables, while leaving them free to pursue innovative outcomes.   

3. Conversion of perceived negatives into positives - Setbacks are a part of trying new things. Effectuation provides a way to transform unexpected events from a project risk to a potential benefit.  

4. Innovation accountability - When a group pivots, it can be difficult to track progress. Effectuation provides metrics that hold innovation teams accountable to process as well as outcomes.

Using Effectuation, this company was able to develop and launch a product that opened a new segment for them. And they did so in a non-traditional way, using a new process and marketing approach as well. Employee satisfaction improved and they cited feeling more empowered to do their jobs.

How about you? Feeling frustrated at work? Empower yourself – and your team – through Effectuation.

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC

Effectuation: Innovating like an Entrepreneur

There are a lot of ways to innovate. Googling “how to innovate” elicits over 24 million results. When companies want to explore innovation, they often seek out the wisdom of entrepreneurs. They’ll invite them to speak, share their experiences, and provide tips.

The result? A lot of advice. You’ll get one individual’s take on what made them successful. It’s an “I did this and it worked for me – so you should do it too” approach. While valuable, there are pitfalls in this.

• It’s incomplete. Entrepreneurs often pick up the story from when they started to gain traction on their idea. Many times, the attempts, missteps, and failures along the way are omitted.

• It’s individual. Each entrepreneur has their own set of circumstances that influence their outcomes. These are not necessarily applicable to everyone.

• It’s inconsistent. Each entrepreneur speaks from his/her own perspective. Sometimes their experiences conflict with each other.

So how do you get at what it really takes to develop and launch successful innovations?

The answer is effectuation. Effectuation is the science of how successful entrepreneurs operate. Developed through social science research, it is both an academic discipline and a practical framework for problem solving that results in innovative products, services, processes and solutions. It is based on control rather than prediction.

Before building a business plan or drafting a financial model, successful entrepreneurs put their attention on what they have within their reach – the assets they already have on hand. Then they reach out to others and seek commitments rather than feedback. This dual emphasis on control and commitments is the secret sauce that separates expert entrepreneurs from their novice counterparts. And it ensures truly unique solutions.

How can large corporations with rigid organizational structures gain this entrepreneurial “advantage”? By following the principles of effectuation:

• The Pilot in the Plane Principle: Start with a mindset of control rather than prediction. Make your own opportunities – don’t go looking for them or attempt to replicate what others have done.

• The Bird in Hand Principle: Leverage what’s already available to you. Consider who you are, what you know, and whom you know.

• The Affordable Loss Principle: Failure is inherent in the innovation process. Resourcefulness is a requirement for innovation longevity. Figure out in advance how much you are willing to lose pursuing your idea. Evaluate your opportunities based on this. It will ensure that when you do encounter a bump, it is a mere obstacle rather than a derailer.

• The Lemonade Principle: Embrace the unpredictable. As long as you remain flexible and willing to change based on the real time market data you receive, you are in control of your goals.

• Crazy-Quilt Principle: Form partnerships. Find those people already around you who are willing to make a real commitment and collaborate to jointly create something truly innovative. Feedback is plentiful but develop deeper relationships with stakeholders, inviting them to put some skin in the game to advance your idea. By doing so they will be encouraged to bring their assets to bear and will significantly increase your ability to get traction.

Where can Effectuation take you and your organization? Who knows. That's what innovation is all about. So don’t wait – Effectuate.   

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC