Effectual leadership: How to (really) transform organizations by learning from entrepreneurs

In 1934, a visionary General De Gaulle explained how the massive use of tanks in time of war could give a decisive advantage. The tanks were known since the First World War, but they were only used as reinforcement of the infantry. De Gaulle proposed to revise this conception completely and place it at the center of the military effort. He was not listened to except by the German general Guderian who put this idea into practice successfully a few years later … against France.

The same is true for the transformation of organizations: the importance of integrating entrepreneurs has long been recognized and organizations have made efforts in this direction, but only in order to become more entrepreneurial. It is this conception that must be revisited: entrepreneurs should not just come to reinforce the existing management, but contribute to transform it by their principles of action. Let’s see how.

The challenge of transformation

Faced with the many disruptions in their environment, most large companies have no choice but to transform themselves in depth. And yet the results of transformation programs, launched over the past decade, are disappointing.

There are many reasons for this, but the main one has to do with the logic behind these programs. In fact, they face a contradiction: on the one hand, transformation is made necessary by the advent of a more entrepreneurial society in which future success and performance will be based on creativity and autonomy. But on the other hand, such programs remain trapped in old mental models: a goal set by the top management, a execution plan, a method… All this is quite far from the entrepreneurial world. It is therefore the very way of transforming that must be changed.

Normal individuals applying simple principles

Twenty years ago, Saras Sarasvathy, an American researcher of Indian origin, highlighted five principles of how entrepreneurs create new products, new markets and new organizations. These are not necessarily visionary superheroes with significant resources, but normal individuals applying some simple principles, which she has grouped under the name effectuation:

1- Start with what you have, not what you would like to have;

2- Decide in terms of affordable loss, not expected return;

3- Progress by partnering with other stakeholders;

4- Take advantage of surprises rather than trying to avoid them;

5- See the world as you would like it to be.

For years, we taught these principles to companies to make them more entrepreneurial because, like many others, we thought that the solution to the challenges of disruptions was to think like entrepreneurs by adopting their mental models. Over time we realized, however, that while these were certainly useful to become more innovative, they did not solve the problem of transformation.

So we took the question again starting from an observation: entrepreneurs transform the world because they perceive it differently. They question the beliefs that seem so obvious. In the same way, the transformation of an organization also goes through a redefinition of its way of seeing the world, of its mental models. It is not easy because they are constitutive of its identity. It is therefore essential to anchor this redefinition in a managerial practice if it is to succeed.

We have gradually realized that the principles of effectual action can provide this anchor: if they allow entrepreneurs to transform the world, why not do the same with organizations? To do this, it suffices to adapt the principles of implementation to the problem of transformation, to give the “effectual leader” a basis for action.

1- Start with what you have: while transformation programs focus logically on the goal to achieve, effectual leaders begin where they are, relying on the organization and its identity. They therefore include themselves in the “problem” and are not content to wait for the initiative to come from elsewhere, and even less from above. Principle’s impact: free the possibilities.

2- Act by thinking in affordable loss: transformation programs want to do everything right now. In times of change and uncertainty, you often have to start small to be able to grow bigger afterwards. To do so is to reduce risk and to increase the chances of success. Principle’s impact: make immediate progress by acting now.

3- Obtain stakeholder commitments: Most of the procedures imposed on employees do not take into account an important reality of the organization: that it is above all a social construct. Like entrepreneurs create markets by convincing a growing number of stakeholders to engage in their project, so does effectual leaders who transform the organization from the inside, one stakeholder at a time. Principle’s impact: create a collective dynamic.

4- Take advantage of surprises: effectual leaders capture the unexpected moment – a remark of a colleague, a failure or a decision – to question the beliefs on which it relies. This questioning can then lead to reconsider these beliefs and discuss a more relevant alternative. Principle’s impact: to leave the disembodied plan and enter fully into the life of the organization.

5- Create the context: far from imposing a change from above where everything is thought of in advance, effectual leaders create a context in which the principles are applied daily. Principle’s impact: to regain a real power of influence.

The first virtue of these principles is that they do not constitute “yet another method”; quite the contrary. Like effectuation, on which they are based, they formalize a practice, a form of daily discipline which has the effect that small but constant efforts eventually lead to great results. More importantly, these principles do not exclude other methods or approaches that can be used elsewhere.

Start small to end big

The method is you; and the plan is the action

Another advantage is that because they are principles, they are teachable and applicable by all, in all fields and in all circumstances. The transformation no longer depends on the top management or on a superhero CEO; it is born and developed anywhere in the organization. It does not result from a big bang program which would be destabilizing and stressful for employees, and especially risky for the organization. On the contrary. In essence it is saying to all the actors of the company: “The method is you; and the plan is the action”; it puts the ball back in their court and provides them with concrete principles of action. It allows them to take ownership of the transformation, the only condition for its success. And it is really effective because it is often the way leaders become aware that they have been “trapped” for years, undergoing the same pitfalls, and that these principles could free them to act.

The stakes are important. While many today draw a line on large organizations and call for a society of independent contractors, the reality is that, for a long time yet, these organizations will be those that create wealth and jobs. Having concrete and actionable principles to rethink management and break the deadlock, to transform and adapt to the new economic environment, has become a condition for survival.

Written with Beatrice Rousset. This is a translation and adaptation of the original article published by Harvard Business Review (French Edition), which can be found here.

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