The five principles on which we can create an entrepreneurial society
by Philippe Silberzahn

As Global Peter Drucker Forum President Richard Straub wrote in a recent HBR article, between discredited financial capitalism on the one hand and ever more burdensome state bureaucracies on the other, never has the construction of an entrepreneurial society been more necessary to address the major issues faced by our societies. This call echoes Peter Drucker’s, who wrote that what we need is not just an entrepreneurial economy, but an “entrepreneurial society in which innovation and entrepreneurship are normal, steady, and continuous.” Drucker saw innovation and entrepreneurship as life-sustaining activities that should pervade organizations, the economy, and society. What is at stake, writes Straub, is “the capability to take passionate ownership of the problems we face, and to accept responsibility for creating our own solutions.”

 

Therefore, the question is no longer whether or not we need an entrepreneurial society, or what form this society could take, but how we can get there.

 

In a way, this question seems paradoxical: the entrepreneurial vocabulary now pervades the world of management. All large organizations want to become more entrepreneurial. They develop their own incubators to exploit the entrepreneurial talent outside, they open “labs” and “co-working spaces” to experiment with new approaches, they adopt new methods such as “lean startup” or “design thinking” and they organize “hackathons” and “startup weekends,” and so on.

 

At the same time, entrepreneurship has become the preferred career choice for an increasing number of young people, whose generation no longer dreams of joining large companies but wants instead to build its own future. Adds Straub, “young people are legitimizing entrepreneurship with enthusiasm, passion, and drive.”

 

And yet there is little evidence that this legitimization and eager adoption of new techniques by organizations is significantly changing the entrepreneurial orientation of society. The dawn of the entrepreneurial society seems to be far off.

 

One reason for this may be that the change of a society requires much more than simply adopting new tools and new methods. As the economist and historian Deirdre McCloskey wrote eloquently, such change is based primarily on the adoption of new values, defined as that by which someone is worthy of esteem. So if we are to build an entrepreneurial society, we must ask the question: on which values and principles should an entrepreneurial society be build?

 

Academic research has made considerable progress on this issue. Twenty years ago, former Indian entrepreneur Saras Sarasvathy started her PhD with a seemingly modest question: How do entrepreneurs think? In other words, is there a specific logic to their actions?

 

Up until then, entrepreneurship research had bounced back and forth between two opposite views: one was that entrepreneurship was all about extraordinary individuals, able to have a vision and a capacity of outstanding achievement, while another posited that entrepreneurship was a management problem just like another and was all about careful planning. To quote Stuart Read, professor at IMD and Willamette University and co-author of several articles with Saras Sarasvathy, “Entrepreneurship was then exactly where science was at the dawn of the scientific revolution 400 years ago. It was anecdotal; but without sound principles, it was neither actionable nor teachable.”

 

It is these principles of entrepreneurial action that Sarasvathy identified in her groundbreaking research. They are five, which are grouped under the name “Effectuation.” The results of this research have had a significant impact on how we understand entrepreneurship.

These principles are:

1. Start with your means. Entrepreneurs start from their available means to figure out what they can do rather than setting a goal and then look for ways to achieve this goal. What are their means? Their personality, their knowledge, and their network. These means are universal. Anybody has them, whether one has a Physics PhD in Silicon Valley or is a street vendor in Mumbai. If all it takes to start is one’s personality, one’s knowledge, and one’s network, so everyone can act entrepreneurially.
2. Decide what to do based on affordable loss, not expected return. Entrepreneurs do not decide on the basis of an expected return, which is often too uncertain, but on what they are willing to lose. Entrepreneurs do not like risk, they agree to take it but want to control their exposure. They reason thus: “I will spend three months and a budget of X to test this idea, and then we’ll see.” The affordable level of loss can be low, which means that one can start with very limited means.
3. Create a crazy quilt. Just like quilting is about creating an object together from pieces of recovered fabric, entrepreneurship is about stitching together resources brought by committed stakeholders. That means that entrepreneurship is an inherently social process. It is less about genius and vision from extraordinary people than about value creating, mutually beneficial cooperation between normal people.
4. Take advantage of surprises. Entrepreneurs are pragmatic about the unpredictable nature of their environment. Rather than spend days developing an ideal vision and build a perfect plan, which would anyway be annihilated at the first encounter with reality, they act in everyday life and take advantage of surprises, good or bad. The certainty of surprises to come does not translate into pessimism but precludes the necessity of vision.
5. Be the pilot in the plane. Beneath effectuation lies a specific view of the future, according to which it is not something that happens and that one can, at best, try to predict, but something that entrepreneurs create. There is nothing deterministic and there are no inevitable trends. The future is the result of the imagination of entrepreneurs and their action combined with those of others. Accordingly, there are virtually no limits to entrepreneurial action. It may start small, but may end up change the world in unpredictable ways.

These principles challenge prevalent misconceptions about entrepreneurship and they explain how the future is created – not as the result of the action of some visionary privileged superhero, but by millions of committed people acting purposefully, and convincing others to help them in their project.

 

The values of the entrepreneurial society

Strong values underlie these principles of Effectuation, on which the entrepreneurial society that Drucker was calling for can be built. What is worthy of esteem with Effectuation?

• Personality rather than idea;
• Normal, acting individual rather than superhero;
• Patient co-construction of the future with others, rather than prior vision;
• Reflective action of the individual rather than planned social engineering;
• Prudence rather than big bet;
• Control rather than prediction.

These values can be summarized in a simple message: everyone can bring entrepreneurial change, regardless of race, age, sex, level of education, location, or possession tangible resources. Change begins with the individual and is only possible with him. Faced with the proponents of social engineering, Effectuation reaffirms the paramount importance of individual initiative. The advent of entrepreneurial society will thus not only be the purview of responsible groups in society, as Drucker thought, but also and perhaps mainly of individuals themselves, wherever they come from and whatever they are.

 

Everything that is needed for the individual to begin to change the world is personality, knowledge, and personal network of stakeholders; resources that everyone has immediately and freely.

 

With Effectuation, we can now abandon both the romantic vision and the mechanical vision of entrepreneurship. We have clear principles, and they are operable and teachable.

 

We need to teach them to propagate the values that underlie them. This is probably why the key to entrepreneurial society is education and why the big question that comes next is to know what to teach and how to teach it for these values to become embodied in society.

 

About the author:

Philippe Silberzahn is a former entrepreneur and now professor of innovation and entrepreneurship at EMLYON Business School in France.