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Thinking through decisions based on a process learned on management courses? Think again


Entrepreneurial leadership is emerging as a key theme in research into effective leadership. But what exactly, do entrepreneurs do, that marks them as successful? What might corporate/executive leaders learn from them?
Successful entrepreneurs typically share a strong belief in their own capability. They are proactive, innovative and use their initiative and have higher emotional intelligence. All of these traits can be learned via leadership coaching, so there are certain things all leaders can do, if they want to emulate entrepreneurs.

Why emulate entrepreneurs?

Starting new ventures or radical innovation always involves high uncertainty and limited resources because a brand new venture or radical innovation inevitably means that it’s impossible to predict how the future will develop. More and more frequently, leaders within even large organisations, with established products, find themselves faced with high uncertainty and new limitations on resources.

Causal decision making

Causal decision making is the approach taught on management training courses and by some providers of management coaching. This entails the leader trying to predict the future, for example, through market research. The leader sets goals extrapolated from these predictions. They then plan and acquire resources to meet these goals. On management courses, problem solving and decision making are typically taught as processes based on facts and predictions. In an arena of high uncertainty, problem solving and decision making based on assuming a degree of predictability is a recipe for disaster.

Effectual decision making

Instead, entrepreneurs use effectual decision making. There is much research that establishes a distinct effectual decision making approach that is used by entrepreneurs. Sarasvathy et al (1998), conducted in depth studies of entrepreneurs who created highly successful companies. Effectuation related to: success of radical innovation projects; new market creation; success and speed of venture creation; investment success and dealing with crises.

Effectual decision making is an approach corporate leaders might borrow from entrepreneurs. Where the causal decision maker sets goals based on predictions, the effectual  a rough vision, and makes decisions based on: identity – who I am; expertise – what I know; networks – who I know.

Key differences

The research shows entrepreneurs don’t try to predict the future. They focus on the means available to them currently. Instead of calculating expected return, they only invest what they can afford to lose.
They also have a different approach to the unexpected. Causal decision makers tend to see surprises as hindering the execution of the plan. The effectual decision maker sees surprises as offering new opportunities. They incorporate unexpected events by changing their plans.
Finally, they have a different attitude to competition. Causal decision makers protect their knowledge. In contrast, effectual decision makers work in partnership with potential competitors. They do this to gain access to resources, reduce uncertainty and shape the project.
Interested in learning more about entrepreneurial leadership? Want to hone your skills of effectual decision making? For executive coaching, or coaching on leadership, call me now: 01302 220221.

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