Effectuation and Innovation I: avoid market research

Effectuation (Sarasvathy) is a theory of entrepreneurial activity based on experiential learning by organizations. Efffectuation is a prescription for innovating when the risk is unknown and unknowable. Effectuation comprises four principles presented in contrast to the causal model of marketing strategy (Sarasvathy 2001): 

  1. Affordable loss rather than expected returns,
  2. Strategic Alliances rather than competitive analysis,
  3. Exploitation of contingencies rather than exploitation of preexisting knowledge, and           
  4. controlling an unpredictable future rather than predicting an uncertain one.

In essence under “Knightian uncertainty”– where outcomes and probabilities are unknowable — an entrepreneur: enters a market based on his/her knowledge, experience and networks; keeps investments small to retain future options; and plans to shape the development of the nascent market with the help of customers and stakeholders (Sarasvathy 2008).

A major early theme from Sarasvathy’s research on expert serial entrepreneurs was a that “expert entrepreneurs distrust market research…, namely surveys, focus groups…” entrepreneurs trusted experience and what they could see with their own eyes. This first theme from the effectuation study is consistent with a stream of literature in innovation advocating individual direct engagement methods for innovation instead of the traditional market research, such as: “Probe and Learn” with products just good enough, corporate “skunkworks” with limited resources, von Hippel’s Lead Users who develop their own innovations, Thomke’s experimentation, etc.

By entering the market early with limit risk exposure, these innovators are able to use realtime market information instead of market research reports to guide innovation and business decisions.

A question for those of us interested in social media marketing: can SM provide “mezzanine data” that might be not as good as real-time market data but closer than traditional market research?

To again echo comments from the recent PDMA conference:

  • Just Do It!
  • If your first release is not embarrassing you waited too long!
  • Real-time market data not market research!
  • How does a firm insert itself in user innovation?
  • Agile Innovation!
This entry was posted in Co-creation or User collaboration, Customer Research Methods, experiential innovation, Experiment, Ideation, Social Media Marketing and tagged , , , , , , , . Bookmark the permalink.

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