A Holistic Approach (and effectual logic) to Problem-Solving. In my previous article, I introduced the concepts of opportunity obsession and opportunity focus.
Next I explore a second trait that I believe makes an entrepreneur “entrepreneurial.
In their search to find such solutions to their customers’ pains, successful entrepreneurs apply effectuation (and effectual logic)*1 which stands in contrast to the causative approach to problem-solving as taught in most business schools.
Entrepreneurs usually have only a vague idea of their product and of the market they wish to target. They are comfortable embracing the unexpected in imagining a possible new end using a given set of means.
This type of holistic thinking and effectual reasoning moves entrepreneurs to accept “affordable loss” as opposed to “expected returns” when assessing opportunities.
Like the entrepreneur’s acceptance of affordable loss is a “tolerance for tinkering” which enabled a company like 3M to become one of the most innovative firms of our time.*2
3M’s holistic and effectual approach is evidenced by the following quote:
“…(it) is not up to 3M’s customers to ask for products they need; it’s up to the company to anticipate the needs of customers.”*3
The firm IBM is another example of longevity created through holistic thinking and effectual logic. Before 1981 the company had rejected the concept of a personal computer.
However, after witnessing the enthusiasm of young people playing games on early PCs, IBM quickly established a task force and rushed to develop the first IBM PC.
It did so at the risk of failing to capture the large market that it hoped it would capture and without a clear picture of the market and how it would go about selling its PCs.*4
However, IBM had a clear picture of the pain it wished to solve and remained confident in its ability to follow through on its entrepreneurial initiatives.
The same can be said of the confidence and belief that successful entrepreneurs have in their abilities to address customer pains and build enduring firms.
Takeaways:
The willingness to experiment, and to suffer initial setbacks or failures, in the search of a holistic solution to customer pains, should be a part of the entrepreneur’s skillset.
A culture of affordable loss is to be encouraged. Approaching problems using effectual logic can assist entrepreneurs in organically learning from failures to arrive at the next steps.
Next article: “Leadership-balanced entrepreneurship”
*1 Taken from lecture slides of Prof Nadim Habib’s Entrepreneurship course at NOVA School of Business and Economics, Carcavelos, Lisbon. The concepts of effectuation and effectual logic are credited to Saras D. Sarasvathy
*2 Dewald, J; Achieving Longevity: How Great Firms Prosper Through Entrepreneurial Thinking. 2016 p 146
*3 See Dewald supra at p 147
*4 See Dewald supra at 149
Leander J Opperman
Managing Director
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