How to build a company – Qhuba Effectuation

Today is the last day of my holiday. I have collected enough sand in clothes and shoes, taken enough pictures, read enough and thought a lot. For me holiday is not only a period of more time for the family, but more than anything else: read, think and write time. Due to the limited bandwidth on the Belgium coast, the favourite summer hide-out of my wife and five kids, I have followed the news mostly through RSS feeds on Google Reader. This is an incredibly efficient way to keep yourself informed about what is going on the world, in the business community, but also to acquire new insights in many subjects that interest you. I have subscriptions to The Economist, Harvard Business Review, Financieel Dagblad, Financial Times, CIO Magazine, CFO Magazine, Business Insider, Computable, Emerce, MT, Lifehacker, Lifehacking, New York Times, Reuters, Time Magazine, Twitter, Linkedin and many more. This combined with the feeds on keywords (the same keywords that are the tags of this blog, plus some others) generate more than a thousand news items each day. That sounds like a lot, but an hour in the morning and an hour in the afternoon are enough to scan, select and mark the real interesting ones for further reading.

In an earlier blog I wrote about Effectuation. At the time I had started reading the book of Thomas Blekman called Corporate Effectuation. It started nice, basically explaining the theories of Saras Sarasvathy of Carnegy Mellon University on how her research of successful entrepreneurs uncovered five basic principles these people shared. Her 2001 publication “Causation and Effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency” was the start of a whole series of publications on the subject.

The second half of Blekman’s book tries to match the principles to initiatives in large corporations, such as HPO (High Performance Organisation), Lean Six Sigma and other frameworks. He finishes with a CEBP, a modular Corporate Effectuation Business Programme. That to me is contrary to the essence of the principles described by Sarasvathy. Canning, packing and labeling a sellable methods, frameworks and solution suggest that the world is predictable. Have a solution and find the problem that it will solve. Was that not causation?

Still a good read. If you want to read the essence only, best go for the original papers.

Today on Twitter, Paulo Coelho: Face reality. And unwilled changes will happen. How true, and although I am sure Mr. Coelho meant changes in your personal life, I would imagine the same principles are at work in the lives of happy people, as in the businesses of successful effectuators. Or maybe that is the whole secret: successful business people are just people. Not just people ate home and business people ate work. You will see that the principles are probably applicable at a higher percentage of decisions people take every day in their private lives than on the decision they take  in their professional capacity.

An analogy for effectuation is how Columbus discovered Amerika when looking for India. Unexpected events are opportunities, not threats. You can spot them, pick them up and start running, turn away from them, or do nothing. Just read a blog from Seth Godin: either capture everything in a process, and just show up for work, or confront your fear of being stupid and try something new.

Back to the five principles, and being curious and competitive, see how we are doing:

1.Of course you have a strategy, and so do we, but most goals emerge by imagining courses of action which start from available means of who I am, what I know, and who I know. This is now often called the “Bird-in hand-principle”. (“What do I have?” versus “What do I need?”). This is, indeed, where we started, but don’t most startups? You think about what drives you, what your passions are and what it is that you do best. You try to be honest about your limitations mistakes we had made in the past. We all had a burning desire to prove that a practical approach towards strategy execution, portfolio management and benefits management, and that people with experience were the key, instead of the frameworks and processes. We did not want to be, or work with consultants, but with executors, implementors, changers and innovators.

2.Attitude toward outsiders: Share what you have with committed players, in many roles (candidates, associates, clients, partners), but always with the intention of “shared rewards partnerships”. This “Crazy Quilt principle” of build a network of self-selected stakeholders is the essence of what we do. So much so that we now ask our clients to tell us what our reward should be. We call this Client Value Pricing. But in this network of stakeholders we do not only want to make clients successful by providing capable people to support in strategy execution, we also want to be a platform for professional and personal growth of all that participate.

3.Attitude toward unexpected events: Surprise is good. Someone wrote “Imaginative re-thinking of possibilities transforms the unexpected into innovation and new opportunities”. That’s a lot of syllables, but probably a good way to describe the Lemonade principle. If you come across lemons making lemonade is a good option. Embrace surprises every day. And we had to: our company started operating at the beginning of a worldwide economic recession. The need for the kind of services we provide might not directly be affected by the economic situation, but obviously there is a correlation between corporate investment budgets and the demand and price level of strategy execution services. We focused on assignment with more or less immediate benefits for the clients, and tried to make them measurable. At the labour market is changing. More and more highly qualified professionals become independent contractors with entrepreneurial ambitions. This is an opportunity that we embraced, too, and the whole structure and style of our business was created to appeal to ambitions and skills of these talented people.

4.The Affordable Loss Principle is how you look at of risk and resources: Pursue promising opportunities without investing more resources than stakeholders can afford to lose. Limit downside potential. The structure of our business is a partnership, where initially we had no employees, not offices, hardly any overhead. The risks were shared with partners, who could afford to have an income that might be a fraction of what they used to earn in their corporate roles. Of course now, three years later, and getting close to €10M turnover, our risk profile has changed, and we employ, invest and think accordingly.

5.Pilot-in-the-plane principle; The future comes from what people do. ”Rely on human agency as prime driver of opportunity rather than on technical or economic systems and trends. There cannot be such a thing a just showing up for work, and trusting that the processes, the frameworks and the technology take care of the rest. For prove, watch this video.

All nice and good, and to some extend we recognize all these elements. Problem is, there are many more. For us it all starts with words like: Best people, practical knowledge, corporate success, but also words like expert peer network, autonomy, mastery, and making contributions. I haven’t managed to stick all of those in a framework, but if anyone has good idea, let us hear it.

Meanwhile – again on my RSS feed – Chris Brogan suggest we start listening to our taxi drivers, of we want to know about success in business; Matthew Toren taught us something about the basics of bootstrapping in marketing and Seth Godin – there he is again – about creating myths  instead of just brands.

So we grow and we learn everyday, and it’s fun! Don’t tell my wife, but I am not unhappy the holiday is over.

6 Responses to How to build a company – Qhuba Effectuation

  1. Dear Wouter,
    Belief it or not but I truly enjoyed reading your post. Of course I find it disturbing that my intentions didn’t get across as I had intended. I understand your concerns and critics. The proven CEBP-approach is not as CAUSAL as it was perceived. That’s the problem with frameworks

    • Hi Thomas,

      Thanks for your comment. Although I enjoyed the book, I thought that introducing a framework felt “old-style” as it suggests that the world can be caught in models. Models work towards results, that sounds more like causation than like effectuation. Of course, having read your book, which only contains a short synopsis of the CEBP model, I am not familiar in depth with the approach, or with the results. I would be happy to hear more about them when we meet. I felt that the concept of Effectuation was powerful enough not to need the the association with models and frameworks.

  2. The way we operate is that we have a framework, approach the challenge as holostic as described in the orchestration chapter and tailor it. It is not meant as a CAUSAL one size fits all method. Just a structured aproach to give clients insights in the corridor that we use in combination with a masterfull change leadership approach (see HPO chapter). The other chapters describe solutions that an effectuation aproach offers when applying causal methods like reframing, the blue ocean strategy method and business model generation and what have you. Many corporate managers think corporate entrepreneurship is a contradictio in terminis… I see it as a nescessity and it needs to be bridged. Quite a journey…

  3. […] Effectuation: The theories of Saras Sarasvathy of Carnegy Mellon University on how her research of successful entrepreneurs uncovered five basic principles these people shared. Her 2001 publication “Causation and Effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency” was the start of a whole series of publications on the subject. […]

  4. […] opportunities and to grab them with both hands. I have written a blog about this ability – Effectuation – […]

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