How could you deal with uncertainty in an entrepreneurial way to help you thrive under VUCA? What happens if you walk into a meeting with an uncertain idea that might have a positive impact on the business? Chances are high that they will ask you to provide a viable business case before you get the ‘license to act’. But what if you just can’t provide reliable data, because both idea and context are highly uncertain? Most likely, your proposal will be dismissed.
As seen in history, basing early stage decisions on prediction and planning logic can kill a whole company. At the minimum, it is a serious barrier to innovation. What are the options when prediction and planning just do not work yet?
Imagine if the Kodak management could time travel back to the meeting in 1977 where they dismissed the idea of commercializing their patent for a digital camera. With knowledge from today, they would almost certainly take a different decision.
It might make sense to look at the breed, that thrives under uncertainty: expert entrepreneurs. Two decades ago, Saras D. Sarasvathy started to study expert entrepreneurs through the lens of cognitive science and made a fascinating discovery. Expert entrepreneurs, unlike corporate managers, tend to wave predictive information when making decisions under uncertainty. With gaining experience, they all tend towards a logic of non-predictive control, which she called effectuation. Sarasvathy stated: ‘The expert entrepreneurs think in terms of control, not in terms of uncertainty’.
In times of an ever-increasing level of VUCA, effectuation as a way of thinking, deciding and acting is becoming highly relevant. It provides a rational remedy for analysis paralysis and makes them capable of acting again, when sit-and-think just doesn’t do the job.
no prediction possible
Effectuation can be seen as the logic of non-predictive control, described in four principles.
1. Start with the means at hand: Take action based on what you (personally as well as on the company level) have available (your purpose and preferences, what you know already, and who you know) instead of trying to set SMART targets to reach a predicted optimal position.
2. Think about affordable loss: Pursue interesting but uncertain opportunities, despite not being able to predict the expected return. Limit your downside potential, however. Only invest resources up to a level you can afford to lose.
3. Leverage contingencies: Surprises are good in an uncertain context. New developments encourage imaginative re-thinking of possibilities and continual transformation of your preliminary targets.
4. Engage in early partnerships: Don’t try to find the perfect partners – start out with the ones who are available and willing to commit to something early in the process. Strategy is created jointly through partnerships that shape new opportunities where everyone who commits, benefits.
how to benefit?
The predictive mindset works like a native language: It goes without saying. But in the contexts where uncertainty caused by new technologies, fickle customers, creative competitors and even government regulation is on the rise, thoughtful prediction and planning – the dominant elements in this language – are close to useless. As a cure, effectuation can be introduced as a foreign language:
• As the working language for those, who are confronted with highly uncertain tasks in e. g. innovation, learning and business development.
• Managers and leaders can learn effectuation as a second language. They need to be able to switch to the other non-predictive tongue whenever they deal with highly uncertain topics.
• Finally, everyone in the VUCA environment should learn some basic vocabulary in the foreign language; perhaps not to actively use it in their daily work, but to understand why the ones dealing with the uncertain sound (think, decide and act) so different.
That said, you might wonder how to get started. Well, you can learn the basics from books, online or in the classroom, but in the end you will only learn a language by applying it. So, when do you start using an other language?