NEW FIRMS, NEW PRODUCTS OR NEW MARKETS MEANS WHO I AM WHAT I KNOW WHO I KNOW DEAD END OPPORTUNITY ON HOLD EFFECTUATION IN ACTION NEW FIRMS, NEW PRODUCTS OR NEW MARKETS NEW GOALS NO COMMITMENT EXPANDING CYCLE OF RESOURCES CONSTRAINTS CHANGES IN THE ENVIRONMENT CONVERGING CYCLE OF CONSTRAINTS ON GOAL WHAT CAN I DO? INTERACT WITH PEOPLE I KNOW STAKEHOLDER COMMITMENTS

DIFFERENTIAL APPROACH TO RISK BETWEEN ENTREPRENEURS AND BANKERS For a given level of risk, entrepreneurs feel they can expand the problem space and increase returns For a given level of return, bankers feel they can reduce the problem space and decrease risk. Step 2 Push creatively to increase return Try to reduce risk through insurance, etc. Step 1 Pick a comfortable level of risk Pick a target return Risk Return High Low Bankers DIFFERENTIAL APPROACH TO RISK BETWEEN ENTREPRENEURS AND BANKERS

STRATEGIES WITH RESPECT TO PREDICTION AND CONTROL HIGH Planning Market Power PREDICTION (market or technology) VISIONARY (market or technology) EMPHASIS ON PREDICTION Adaptation Effectuation RISK (market or technology) UNCERTAINTY (market or technology) LOW LOW EMPHASIS ON CONTROL HIGH

Inaction: Learned Helplessness CONTROL IN VENTURE ENVIRONMENTS HIGH Planning Market Power PREDICTION Planned Action MONOPOLY Overlooked Action EMPHASIS ON PREDICTION Adaptation Effectuation RISK Inaction: Learned Helplessness UNCERTAINTY Creative Action LOW LOW EMPHASIS ON CONTROL HIGH

SUCCESS RATE OF START-UPS 0% 20% 40% 60% 80% 100% SUCCESS RATE OF START-UPS Close with no debt Survive 2 years Survive 4 years Survive 8 years Close with profit IPO

Prospective Investors Prospective Customers ELEMENTS THAT IMPACT ENTREPRENEURIAL VENTURE SUCCESS FIRM Economy Popularity of Space with Press Competition Vertical Industry Strategy Choice of Market Segment Channel(s) Definition of Customer Buyer Customer Pain: Aspirin or Vitamin? Relationships with Prospective Investors Existing Investors Location Popularity of Space with Investors Existing Customers Prospective Customers Capital Directors Advisors Partnerships Leader Team Culture Technology Business Model Execution Position Less — Within the Firm's Control — More

Technological feasibility VALUE MARKET PERSONAL Is it worth doing? Financial feasibility Can I do it? What will it take to do it? Whom else do I need? ASSESSING OPPORTUNITY “DOABILITY” Do I want to do it? What turns me on about it? Why do I want to do it? Exit strategies Is it doable? Technological feasibility Market feasibility Economic feasibility

Managerial Thinking (Causal) Entrepreneurial Thinking (Effectual) Distinguishing Characteristic Selecting between given means to achieve a pre-determined goal Entrepreneurial Thinking (Effectual) Imagining a possible new end using a given set of means GIVEN MEANS GIVEN GOAL IMAGINED ENDS M1 M2 M3 M4 M5 CAUSAL vs. EFFECTUAL REASONING

THE CONTINGENCY PATH TO NOVEL OUTCOMES CONTINGENCIES Information Events People CHANGE YOUR MEANS What you know Who you are Who you know WHICH GIVES YOU NEW MEANS TO LEVERAGE by asking yourself "Now what can I do with my revised means?" WHICH MAY GENERATE NOVEL OUTCOMES i.e. new venture directions

THE UNCERTAINTY PARADOX How can you control a future you cannot predict? You create it THE CERTAINTY PARADOX How can you create a future in an environment mostly outside your control? You co-create it with other stakeholders THE EQUITY PARADOX How do you bring other people on board to create a non-existent pie? You let them self-select for a piece of it THE AUTONOMY PARADOX How do you share the pie without losing control of it? You understand that ownership is not control; ownership is about the meta-rules THE PERSISTENCE PARADOX What do you do when things go wrong? You persist, but pre-commit when to give up THE PERFORMANCE PARADOX You have built a great organization, a market that’s maturing and becoming predictable Voila, you now have little control over it! [control shifts to prediction]. CONTINGENCY RELATIONSHIP How much an individual’s intervention makes a difference

Working with inputs outside your control Working with inputs within your control Low impetus to act Compelling impetus to act Outcomes assumed to be within your control Causal = Need to chase resources Causal = Predicted Outcomes Effectual = Self-selected stakeholders Effectual = Novel Outcomes Causal = Plan and make calculated bets Outcomes assumed to be outside your control Effectual = Be open to changing goals Inaction Learned Helplessness High impetus to act

WORKING WITH AND WITHOUT CONTROL Working with inputs outside your control within your control Outcomes assumed to be Causal = Predicted Outcomes Effectual = Novel Outcomes WORKING WITH AND WITHOUT CONTROL Plan and make calculated bets Be open to changing goals Need to chase resources Self-selected stakeholders Low Impetus to Act Compelling Impetus to Act Inaction: Learned Helplessness High Impetus to Act