This is my IIIrd sem presentation on Entrepreneur. The subject of this presentation is Causal & Effectual Reasoning.

3. Causal rationality begins with a pre-determined goal & a given set of means & seeks to identify the optimal – fastest, cheapest, most efficient, etc – alternatives to achieve the given goal.

5. Causal vs. effectual reasoning Causal thinkers are like great generals seeking to conquer the world – Genghis Khan, conquering two third of the known land Effectual thinkers are like explorers setting out on voyage in to uncharted waters – Columbusdiscovering the new world.

6. CONTD….. It is relevant to mention here that the same person can use both causal & effectual reasoning at different times depending on what the circumstances call for. In fact, best entrepreneurs are capable of both & do use them most optimally. They, however, prefer effectual reasoning over causal reasoning in early stages of new venture. While causal reasoning may or may not involve creative thinking, effectual reasoning is inherently creative.

7. Managerial Thinking – Causal Reasoning Distinguishing Characteristics Selecting between given means to achieve pre-determined goal M1 M2 M3 M4 M5 M6 GOAL Given Means Strategic Thinking – Creative Causal Reasoning Distinguishing Characteristics Generating new means to achieve pre-determined goal M1 M2 M3 M4 M5 M6 GOAL New Means are generated

8. Entrepreneurial Thinking – Effectual Reasoning Distinguishing Characteristics Imagining possible new ends using given set of means Imagined Ends Given Means E1 E2 E3 E4 E5 E6 M1 M2 M4 M3 M6 M5

10. Most often they start very small with the means that are closest at hand and move almost directly into action without elaborate planning.

12. Eventually, certain of emerging effects coalesce into clearly achievable & desirable goals – landmarks that point to a discernible path beginning to emerge in the wilderness.

13. Traditional management teaches potential entrepreneurship an extremely causal process – the sequential progression from idea to market research, to financial projections, to team, to business planning, to financing, to prototype, to market & of course surprises will happen along the way.

15. Effectual Reasoning: The Principles Effectual reasoning is indeed a convincing & logical alternative to causal rationality: - While causal reasoning focuses on expected return, effectual reasoning emphasizes affordable loss. While causal reasoning depends upon competitive analysis, Effectual reasoning is built upon strategic partnership. While causal reasoning urges the exploitation of pre-existing knowledge & prediction, Effectual reasoning stresses the leveraging the contingencies.

17. In finding the first customer in near vicinity, whether with in their geographic vicinity, with in their social network or with in their area of professional expertise, entrepreneurs do not tie themselves to any theorized or pre conceived market.

20. Whereas, an entrepreneur would target key companies & create one to one understanding with them; the challenge then is really to pick the partners & package oneself early before going full steam.

21. In fact, the strategic partnership principle dove-tails very well with the affordable loss principle to bring the entrepreneur’s idea to market at really low cost.

22. Furthermore, pre-commitments from key stakeholders help reduce uncertainty in early stages of creating the enterprise.

25. Their structure, culture, core competence & endurance are all the result of particular people striving to forge & fulfill particular aspirations through interaction with space, time & technologies they live in.

27. Causal reasoning is based on the logic – to the extent that we can predict the future, we can control it. This is the reason both academics & practitioners in business spend enormous time, resources & energy on developing predictive models.

28. Effectual reasoning on the other hand is based on logic – to the extent we can control the future, we do not need to predict it.

29. How does one control an unpredictable future? Let’s analyze it – where does future come from? Is it largely the continuation of the past & present?

32. Experienced professionals in entrepreneurial arena maintain that finding & leading right people is the key to creating an enduring venture.

33. Entrepreneurs know that such right people are not the one in the job market; rather the right people are the one who need emotional ownership in the goals & objectives of the Endeavour.