Business performance is often perceived as having no societal impact. It seems to be a strictly financial matter and to concern only its shareholders, and nobody else, and as such is even morally suspect for some. We are happy for the company that has good results, and we may suspect that is at done at the expense of society. Yet, the performance of businesses, and more generally that of organizations, is a major societal issue, an observation made by Peter Drucker, and still relevant today.
Read the rest of the piece on the Global Peter Drucker Forum’s blog here.
We often think that to innovate, we must start from scratch. Yet, all innovators are “dwarfs on the shoulders of giants”, as the philosopher Bernard de Chartres said. Far from refusing reality, let alone ignoring it, innovators start by accepting it, and then transforming it.
Saras Sarasvathy, the originator of the entrepreneurial theory of effectuation, has just received the prestigious Swedish Global Award for Entrepreneurship Research. Organized since 1996 by the Swedish Foundation for Small Business Research (FSF) and the Swedish Agency for Economic and Regional Growth, the award recognizes researchers who made major contributions to entrepreneurship research. She joins such great researchers as Sidney Winter, Shaker Zahra, Kathleen Eisenhardt, Scott Shane, Israel Kirzner, William Gartner, William Beaumol or Zoltan Acs and David Audretsch. The prize is the recognition of more than twenty years of efforts to promote a radically different approach to entrepreneurship. But its significance goes far beyond that, as effectuation is above all a vision of human action and freedom.
In these times of coronavirus epidemic, I have the opportunity to talk to people from very different backgrounds (emergency doctors, researchers, self-employed people, entrepreneurs, retirees, business leaders, etc.) to understand how they “live” the current crisis both personally and professionally. From these discussions, I can draw three courses of action that a CEO can usefully adopt in the face of the extreme and unprecedented situation we are experiencing. Continue reading →
How do entrepreneurs manage risk? A persistent and widely shared belief is that entrepreneurs are risk seekers; that they like taking risk. Ask anyone in the street or in a classroom, and they will tell you, “An entrepreneur is someone who is courageous, who likes to take risks.” But nothing could be further from the truth. Entrepreneurs don’t like risk; no study has ever shown that. What studies show is that while entrepreneurs are willing to take risks, because they recognize that it is necessary, they try to control them. To do that, they use three principles that are at the core of the entrepreneurial theory called effectuation, proposed twenty years ago by Darden professor Saras Sarasvathy.
It is decided, the theme of your next company convention will be “All entrepreneurs!” You’ll talk about Google, Tesla, Facebook, plus a Chinese champion for good measure. The manager of your Lab in San Francisco will come to talk about the latest local innovations. You will show a film that will explain “the six qualities of a good entrepreneur” with rock opera music. After a closing speech by the leader who, in essence, will say that it is only a matter of courage, the roadmap will be clear.
Overwhelmed by stories of fundraising, pitches, startups, incubators and the frenzy of hackathons, we often forget that the vast majority of the entrepreneurial phenomenon is in fact fairly mundane and banal. Well banal, in a way. Let’s say that the heroism of some entrepreneurs is far from the kind we hear and read all the time in the media. Nothing illustrates this better than the story of Madame Tao, which seems to have come out of a fairy tale.
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.
Everything is going faster! Change is accelerating! At least that’s what we hear all the time. What if this platitude reflected a misunderstanding of the nature of disruptions and how they develop? And what if, therefore, it led to the wrong answers by incumbents and startups? Let’s analyze the nature of disruptions and our relationship to time.
The entrepreneurial theory of effectuation was developed fifteen years ago, but it is only beginning to gain visibility outside academic circles. And it is all the better because it changes our way of seeing how entrepreneurs think and act in their creative process. Let’s review this in detail. Continue reading →