The Entrepreneurial Method: students validate theory with practice in class

The academic year for Alba’s new MSc in Entrepreneurship cohort kicked off in September and our students followed the introductory course “Realities of Entrepreneurship”. In this course we aim at showcasing the entrepreneurial method based on the theory of Effectuation, as introduced by Professor Saras Sarasvathy in 2001.

“Realities of Entrepreneurship” focuses on understanding, analyzing and applying the five effectual principles that combine into the effectual cycle. By using this cycle, entrepreneurs can exploit ideas and form ventures that avoid usual startup pitfalls. The effectual principles are:

• Means: Entrepreneurs set up goals based on possibilities that relate to their means; who they are, what they know and whom they know.
• Affordable Loss: Entrepreneurs examine opportunities and limit risk by defining what they can afford to lose.
• Co Creation Partnership: Entrepreneurs expand their means and create more possibilities by working with others and identifying key partners.
• Leverage Contingencies: Entrepreneurs embrace surprises.
• Worldview: Entrepreneurs avoid prediction and prefer to control their settings by focusing on actions that they determine.

These principles are intuitively combined by entrepreneurs in what researchers identify as the effectuation process. Means create goals and encourage interactions that look for commitment in order to implement ideas. Commitment create new means and expand goals. At the same time, changes in the environment may create additional means, new possibilities or lift constraints. The combination of the above drives entrepreneurs to create new firms, products or, even, markets.