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Are you an Entrepreneur or a Businessperson?

By Nihar Amoncar, University of South Wales

 

Once upon a time there were two homeless persons in India who used to ask people for money outside the Mumbai railway station. However, these two (let’s call them Mani and Ravi) had different intentions behind asking for money. Mani simply wanted to meet his everyday needs of food but Ravi had something else he wanted to do with the money besides simply feeding himself – he wanted to improve his own life and that of those around him – he wanted to create value that he could exchange. Ravi saw that these people who gave him money always bought tea from a café while waiting for the train to arrive. Ravi worked out how much money he required for food everyday on average and he started saving the rest. After 6 months of saving, he pleasantly surprised the people who used to give him money. Ravi had bought a bicycle, gas stove and a tea kettle using the money he saved. The people who gave him money were happy to see him offer tea to them and started paying him for the same; they would not buy from their regular café as they saw Ravi had improved his situation with their money – thus demand for the tea increased. Three years passed, and suddenly these people who used to buy tea from Ravi everyday couldn’t see him anymore – that’s because he had now bought a small tea shop next to the railway station – wherein he had employed more homeless people to work with him. Today he owns a chain of tea shops across the railway stations of Mumbai.

 

The difference between Mani and Ravi was that Mani was merely meeting his basic needs with the money, he did not have vision or imagination as to how he could use the money he got to improve his condition. He was merely transacting – get money – eat and repeat. Very monotonous. Whereas Ravi was observant, he looked for an opportunity (that people always bought tea at the station), he used the resources (money he had saved) that were available to him to buy the tea kettle and the bicycle which he could carry around to serve tea (Innovation – making tea selling ‘mobile’). Once he started selling tea, he was not content with that, he went further and saved more and rented a tea shop as the demand for his services increased (up-scaling). He also used the means that were available to him i.e. other homeless people, who could be working for a better life (social aspect of Entrepreneurship). Mani was simply going about the ‘business of his life’ – survival. Ravi on the other hand was ‘Entrepreneurial’ – he recognized opportunity, he created value (tea), he innovated, he took a risk – what if people did not buy his tea and preferred the café instead? So, there was uncertainty right? But in Business, there will always be uncertainty – whether it maybe due to BREXIT or Trump. Can there be business without uncertainty? Once a wise man said to me – “Uncertainty separates the men among boys, it filters the real Entrepreneurs from mere businessmen”.

 

An Entrepreneur is not merely expected to ‘run’ a business, they are expected to innovate, identify social problems or gaps and address them with innovation. Entrepreneurs should not long for certainty; they should use uncertainty to create markets – by being proactive and risk taking. Risk taking does not mean reckless investments without prior calculation, risk-taking means you stake what you can afford to lose (like in Ravi’s case, even if he lost all the money he saved – he still could feed himself, so affordable loss!). Risk can be managed by 1) using your available means, and Dr. Saras Sarasvathy, a social scientist argues that every individual Entrepreneur has their own unique set of available means – your own family background, your education, your experience, your social network. These can be the fundamental means you can use to start a business. 2) Risk can also be managed by limiting borrowing as much as possible – how can we achieve this? By co-creation, sharing is the new normal. For example, USW shares its football pitch with Cardiff city football club – this means USW can afford to have and maintain the pitch by sharing it with strategic partners – by combining resources (the USW land and Cardiff city football club financial capital). Strategic partnerships can help reduce risk by spreading it and hence an Entrepreneur needs to network. Some say, “One is an average of the four people one surrounds oneself with”; so build your network early. Get out and share your vision, your plans and ACT on them. Events like Making Business Happen help you do that, so make the best of this opportunity – don’t worry about expected rewards in future, work hard in the present and compete with yourself. Good work will yield good results, don’t worry yourself with the future and its uncertainty – you have the ability to build the future for yourself.

 

Note: Dr. Saras Sarasvathy and her theory of Effectuation has inspired the above post. Learn more about Effectual logic of Entrepreneurs from the table below.

 

 

Principles of Effectuation

 

Principles of Effectuation Description
Start with means (Bird in hand) Entrepreneurs start with their means: who I am, what I know, and whom I know when they set out to build a new venture. Then, the entrepreneurs imagine possibilities that originate from their means. 
Focus on downside risk (Affordable loss) Entrepreneurs limit risk by understanding what they can afford to lose at each step, instead of seeking large all-or nothing opportunities. They choose goals and actions where there is upside even if the downside ends up happening. 
Leverage contingencies (Lemonade) Entrepreneurs invite the surprise factor. Instead of making “what-if” scenarios to deal with worst-case scenarios, experts interpret “bad” news and surprises as potential clues to create new markets. 
Form partnerships (Patchwork quilt) Entrepreneurs build partnerships with self-selecting stakeholders. By obtaining pre-commitments from these key partners early on in the venture, experts reduce uncertainty and co-create the new market with its interested participants. 
Control vs Predict (Pilot-in-the-Plane) By focusing on activities within their control, expert entrepreneurs know their actions will result in the desired outcomes. An effectual worldview is rooted in the belief that the future is neither found nor predicted, but rather made. 

Source: http://www.effectuation.org/sites/default/files/documents/effectuation-3-pager.pdf