Text by Terje Simonsen, founder of Gen2 Energy 

Entrepreneurship is a fascinating journey, full of strategic choices and decision-making. To illustrate this, we can compare this journey to the process of cooking.

Should you cook based on the ingredients you already have, or plan a menu according to guests' preferences and then purchase the necessary ingredients? Similarly, entrepreneurs are faced with the choice between two approaches: Effectuation and Causation.

Professor Saras Sarasvathy has developed a new way of thinking about entrepreneurship. Instead of starting with an idea and then trying to find the resources to execute it, entrepreneurs start with the resources they already have and then look for opportunities.

Effectuation: Build your business based on what you have

Imagine you're in the kitchen, preparing to make dinner. Instead of shopping for a specific recipe, you open the fridge to see what you have. You improvise a dish based on available ingredients, adapting as you go, and perhaps creating something completely new. This is similar to effectuation in entrepreneurship.

The Bird-in-Hand principle: Just like starting with the ingredients you already have, entrepreneurs start with their existing resources and skills.

The Affordable Loss principle: In cooking, you risk using what you already have. Similarly, entrepreneurs consider what they are willing to lose, rather than potential gain.

The Crazy Quilt principle: Maybe you collaborate with a friend in the kitchen. In business, entrepreneurs network with partners who have complementary skills.

The Lemonade Principle: If you're missing an ingredient, improvise. For entrepreneurs, this means seeing opportunities in challenges.

Pilot-in-the-Plane principle: Just like tasting and adjusting a dish along the way, entrepreneurs adapt their strategy based on changes in the market.

Causation: Analysis and planning before action

When preparing a dinner for friends, you might start by asking what they like, researching recipes, and then shopping for specific ingredients. This is like causation in entrepreneurship, where everything is planned before action.

Market analysis: In the kitchen, you ask friends about their preferences. In business, entrepreneurs collect data to understand the market.

Product development: Based on your research, you create a dish. In entrepreneurship, products are created after market analysis.

Marketing and implementation: You serve and present the dish to your guests, while entrepreneurs launch products to their audience.

The bottom line is whether you're in the kitchen or in the business world, success requires both improvisation and careful planning. The best approach varies based on the situation, but with dedication and passion, both the improvising chef and the strategic entrepreneur can achieve great success.


Click here to learn more about this new way of thinking.