An Effectual Understanding of Impact
I’ve long been interested in the idea of the impact instinct: the ability for a trained professional to continuously generate big wins at a rate much higher than his or her equally well-trained peers (see here and here and here).
What explains this impact instinct?
A reader named Jason recently pointed me toward some interesting research relevant to this question. The topic is effectuation, a theory of entrepreneurial success devised by Saras Sarasvathy (see above), a professor at the University of Virginia’s Darden School of Business.
The origin of effectuation is a study Sarasvathy conducted in 1997. She traveled the country to interview 30 different entrepreneurs who founded successful companies (their company valuations were all measured in hundreds of millions of dollars). Instead of simply asking them their approach to business, she had each solve a 17-page problem set containing 10 decision problems relevant to introducing a new product. She asked that they talk out loud about their thinking, and then later scrutinized the transcripts of these sessions. The patterns she identified became effectuation theory.
In a nutshell, this theory notes that we’re used to thinking about problems (especially in the business world) using causal rationality. We identify a goal and then attempt to identify the optimal path to accomplishing this goal given our current resources. This process is top-down with the final goal occupying the apex position.
The entrepreneurs Sarasvathy interviewed did not rely on causal thinking. They instead relied on an alternative she called effectuative thinking.
Effectuative thinking, unlike causal thinking, is bottom-up. It doesn’t start with a final goal in mind. Instead, as Sarasvathy explains, “it begins with a given set of means and allows goals to emerge contingently over time.”
Sarasvathy identifies four main principles to approaching your work in this manner:
- Start with what you already know how to do well.
- Filter your efforts to avoid big downsides not to select for big upsides.
- Work with other people who bring new abilities to the table.
- Take advantage of the unexpected .
If you approach a new business using these guidelines, you might not know in advance your main product or even your market, but according to this theory you’re optimizing your chances of nonetheless ending up successful.
Here’s Sarasvathy describing effectuation in action:
“Plans are made and unmade and revised and recast through action and interaction with others on a daily basis…Through their actions, the effectual entrepreneurs’ set of means and consequently the set of possible effects change and get reconfigured. Eventually, certain of the emerging effects coalesce into clearly achievable and desirable goals — landmarks that point to a discernible path beginning to emerge in the wilderness.”
An analogy that helps me understand these issues is that the marketplace can be described as an unpredictable and complex landscape with only a small number of peaks representing massive potential.
Causal thinking has you try to draw a map to a peak in advance. Given the complexity of the landscape, this is likely to fail. Your best bet is that your map, by pure luck, happens to lead you straight to a high peak.
Effectual thinking, by contrast, has you hone your navigation skills. It teaches you how to systematically search the landscape around you, bringing along guides that know the area, and keeping you attention tuned to the tell-tale signs of elevation gain.
There are, of course, other business trends that echo similar ideas (think: lean methodology). But what’s nice about effectuation is that its principles are presented in a general way that seem applicable beyond the world of business start-ups.
The reader who brought this work to my attention, for example, is involved in a study to see if effectuation explains star academics (the original question that piqued my interest about such issues).
One could imagine the same theory being just as applicable to explaining consistent success in other fields, such as book writing or even personal productivity.
At the very least, Sarasvathy’s scientific results underscore what I’ve long argued: the process of becoming a stand out in almost any field is way more nuanced and complicated than most suspect.