I recently attended a Workshop in which I came across theories on idea generation. I’m not a huge fan of theories, as I believe a lot of them are just common sense. However some, when used correctly in real life situations, can be very useful.
The two theories which I found particularly interesting revolve around idea generation and relate to how you decide which business idea to undertake. The theory states that there are two ways of generating and implementing new business venture ideas: through effectual and causal reasoning.
- Effectual reasoning revolves around your set of means and how this can be applied to business: what resources do you have, what are your interests, who you know? Essentially, what can you achieve with the resources you have. The goal is not present, and is allowed to emerge over time, based on opportunities and threats which arise.
- Causal reasoning is based on trying to achieve a certain goal, using the best possible means to get there. These may be the most effective, cheapest or fastest, but doesn’t necessarily take into account the means which you already have access to.
A good comparative example would be by applying it to travel. Someone acting under causal reasoning would be a general, setting out to conquer land, whereas someone operating under effectual reasoning would be an explorer looking to discover unknown waters.
Obviously this theory applies principally to entrepreneurship. An entrepreneur developing an idea may think about what field they have knowledge and interest in, which area their friends and family work in, and then implement an idea based on this, learning and adapting their business along the way. This would be an example of effectual reasoning.
A business example of causal reasoning could be an entrepreneur developing an idea based on a desire or goal. For example to create a business which will be sold for £1m within 5 years, and not dramatically altering their business model, despite the existing contacts they may have and the people they come into contact with, or opportunities and threats which arise.
There is no right or wrong way to undertake entrepreneurship and idea generation. Statistics seem to suggest that entrepreneurs who create businesses under the effectual reasoning concept are more successful, however, what works for some, doesn’t always work for all.
I very quickly learnt that creating contacts and networking is possibly the most important part of running your own start-up, so whichever approach you take, being open to new approaches and support from people outside your company, and adapting to them, is crucial.
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