Effectuation and causation

I already used several times in this blog the words “effectuation” and “causation”. Those processes are becoming increasingly important in entrepreneurship research and in particular in the attempt to understand how companies in general, and SME’s in particular, innovate.

To sum-up the idea behind causation, let’s say that the goal is set first and the means to achieve this goal defined afterwards. At the opposite, effectuation assumes that a limited set of means is available and that the options to choose from must depend on the means at disposal.

Education given in B-Schools tends to focus on the causation process and, in my opinion, doesn’t emphasize sufficiently the feasibility of the project. A MBA student studying the business model of U-Haul would conclude that billions of dollars are necessary to create such a company. However it was started with 500$ without a clear idea of where it was heading to.

I illustrated the same effectuation process recently with the beautiful business case of Waka, an energy drink created by an entrepreneur who was willing to innovate in his field of expertise and with the technical means at his disposal. A wonderful product was born that would probably have cost millions if it had been conceived by a big corporation.

Effectuation and causation remains however specialized and confidential terms that I want to explain you. Filipe Da Costa (University of Aachen) kindly provided me with a slide he presented in Liege during a workshop on entrepreneurship. This slide very well summarizes the differences between the two processes.