Effectuation Stories

          Case studies, lessons and stories about Effectuation!

          Loosen The Reins Without Losing Control

          On page 90 of his book Corporate Effectuation, a big challenge is made to the author, Thomas Blekman. Here, a manager of Heineken International states that "Corporate Effectuation is a paradigm-shifting work that most certainly is a serious candidate for the Management Book of the Year award."รน Is it really that special that it will live up to the expectations? Why do you think this book will be a trend breaker? Because it combines the desire of organizations to remain in control with the space that employees need to be enterprising. To accomplish this, you need ambidexterity. And Corporate Effectuation explains how it can be done. Notwithstanding the fact that the world is changing at an ever accelerating pace, thanks to the principles of Effectuation, enterprises can still remain in control. It is getting less and less useful to make people study operational excellence and cost control with only the Six Sigma black belts wrapped on. 3M's Post-it and Philips's Senseo all came about by entrepreneurship inside the company, without ever losing corporate control. Management in Holland is still based too much on the now eroding principles of predictability and certainty. Management seems to center around this question: "How can I make my employees meet the organizational targets in the most efficient way?"รน But here's a better formulation: "How can I best facilitate my employees to achieve their goals?"

          The world is no longer predictable. Whoever still believes in predictability wears blinders and misses a lot of chances. We have to understand ambidexterity and organize our enterprises in a different way. According to the principles of Effectuation, all certainty turns into unpredictability. Not really a pleasant message for shareholders and analysts, is it? But then explain to me why we do accept this from Google? There, employees are allowed to spend twenty percent of their working time on other tasks than their job. And why do shares in Apple decline so dramatically as soon as Steve Jobs announces his sick leave? Because he allows his people to be enterprising. Top management should have ambitions that go beyond the consolidation of the status quo; they should have convictions and focus. Employees should have passion and the room and guidance to explore. Management must have the guts to let the reins go and to determine the strategic course together with employees. You think that's chaos, even a sign of softness? I would say instead that it's structured chaos, leading to strategic flexibility. Cor Boonstra from Philips was appointed to turn the Philips spaghetti into asparagus, but in doing so he also excised some vital parts. Later, there appeared to be some coherence after all, by wounding it. Chaos is not the same as acting chaotically.

          With Corporate Effectuation, you can create sustainable value. 3M showed with the Post-it stickers how it should be done. But don't you think this was sheer luck? At 3M, they appointed James McNerney - the former number 2 of General Motors - as their CEO in 2000. His mission was to structure the enterprise by using Six Sigma in the most profitable and efficient way. His approach mangled the forces of innovation until they stopped breathing, and Mr. McNerney soon left for new challenges at Boeing. There was no room left at all to 'learn' anything anymore, only to 'give account.' It wounded 3M in the soul as an enterprise invented to innovate. In the Netherlands, a lot of managers like Mr. McNerney are active and there is a lot that still has to be done before we dare to allow more room for corporate entrepreneurship and internal entrepreneurs. But there is no choice. Have a look at the energy sector. Today nuclear plants are allowed, tomorrow they are outlawed. Wind energy is profitable, then ridiculous. The government is changing its mind on a yearly basis. The era when we could manage only on certainty and predictability has gone. And you claim that the five principles of Effectuation can solve this problem? Absolutely!

          These are five principles that are interconnected in a cyclical process, discovered by Saras Sarasvathy. She developed the method of Effectuation in 2001, supervised by the Nobel Prize laureate Herbert Simon. They investigated entrepreneurs who had already proven successful, and most certainly not by coincidence, with the launch of more than one enterprise to their credit. Their entrepreneurial DNA appeared to be based on these five principles: - Bird in hand: start with who you are, what you know, and whom you know, with your own vision, ambition and directions, and not necessarily with a predetermined goal or a pre-envisioned opportunity - Affordable loss: Invest only what you can afford to lose - Crazy Quilt: Create an expanding network of self-selected stakeholders and get to ever better ideas together. Don't make it too difficult when you can do it together. Co-creation reduces the costs of the start-up - Lemonade: Be open to surprises and leverage them: when you hit on lemons, make lemonade. Treat them as useful inputs rather than hindrances to be avoided - Pilot in the plane: Co-create the future with things within your control and with your self-selected partners, even if this means you are off limits of the formal corporate protocols. Like the controlled ditching of a passenger plane in the Hudson River by the pilot. Existing protocols excluded even the possibility of such a landing. Nevertheless he saved hundreds of lives by doing so.

          In writing this book, I applied Effectuation particularly to the corporate world. Effectuation is just as valuable and usable for start-ups and the self-employed, but in Corporate Effectuation, I wished to demonstrate first and foremost that entrepreneurship can also be a great help in making an existing enterprise flourish. How can you orchestrate your entrepreneurship in an unpredictable market without losing control? I'm no longer a believer in the ten inch thick business cases. In order not to waste the budgets, they have to be cut continuously to fit again. If all those corporate cases were indeed that successful in the past decade, why haven't they all grown by tenfold as well? Don't wait until it simply falls into your lap; create chances right away by using your own available means! Find the perfect combination between a smart creator (by developing something new yourself) and a smart follower. KPN lately appears to be mainly a follower, but it is my conviction that they will not succeed that way. They already had to follow suit more than once, and have to realize they have to become a creator just as well. So there is still quite a lot to be done, before you can break the trend?

          Well, in fact the real question is whether we have the leaders who are capable of staying in control of their organization, while also loosening the reins at the right moments. We went over the top regarding accountability and have to create more room to learn again. The new leaders are there - and Huib Morelisse of Nuon is one of them - but I'm afraid I have to admit that many corporates are still caught in the traditional, linear ways of thinking. It will not be an easy path to walk, but what we are doing as management nowadays won't work either. At least, not in a world that cannot be predicted any longer, while we still want to remain in control. Shareholders may get a bit nervous in realizing this, but in the end, it will be in their own best interest!

          Thomas Blekman

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