Manager entrepreneurs use their causal reasoning skills to try and predict the future in an effort to avoid surprises. Founder entrepreneurs use their effectual reasoning to turn an unexpected result or condition into a profitable end. They plan for the expected, but try not to extend too much in the way or resources just in case they are forced to pivot. Surprises are welcomed as inputs and guideposts to determine if they need to pivot their business venture in what is known as the leverage contingency principle.
Goal Oriented = Upfront Planning
In a former career, I was a Fire Control Technician (FT) in the United States Coast Guard. As an FT, we used a radar to track a target and a sophisticated computer to account for a score of variables to adjust the aim of our gun mounted on the bow of our ship. These variables included air temperature, wind speed and direction, projectile and powder temperature as well as a dozen other factors that would ultimately affect the flight of a projectile weighing more the 50 lbs as it travels from the muzzle of our gun to the target, potentially ten miles downrange.
The goal was to point the gun at an imaginary point in space where the bullet and target would both occupy the same space at a given point sometime in the future, hitting and destroying the target on the first shot. A lot of effort was required to deliver an accurate first shot. After all, during a ship-to-ship or ship-to-airplane battle, hitting your target first is essential to survival.
This fire control example is equivalent to the needs of mass-market product type startups which rely on lots of upfront planning where speed and accuracy of execution are paramount. Moreover, this approach is the paradigm of conventional business advice that promotes lots of upfront planning prior to launch and assumes that pre-start money is no object and all that matters is a successful first launch.
Means Oriented = Experimentation & Observation
Compare the fire control example to the way a Gunner’s Mate (GM) in the Coast Guard approaches the same problem. They use a bunch of relatively cheap 50 caliber bullets and a simple optical sight. The GM simply aims at the target, knowing that his first few rounds will most likely miss the target since he does not account for any of the variables which affect the trajectory of the projectile up front. After a burst of a few rounds, he simply observes the fall of shot and then adjusts his aim using what we in the shooting sport call “Kentucky Windage” until he hits the target.
The leverage contingency principle is the embodiment of the GM’s example. It uses little upfront planning, lots of cheap Minimally Viable Products (MVP’s), and observes the results to adjust their next move until a better solution is reached. Rather than following the “ready, aim, fire” model of the manager entrepreneur, the founder-entrepreneur practices the “ready, fire, adjust aim” model until they get a hit.
In the early stages of a company, manager entrepreneurs often experience a “ready, aim, aim, aim, and never get to fire” scenario. In contrast, founder entrepreneurs plan for contingencies and use their effectual reasoning to recognize and leverage surprises to adjust their aim.
All too often conventional business advice discourages founder entrepreneurs from practicing the leverage contingency principle. Instead of encouraging the founder entrepreneur to adopt the affordable loss principle and make small low-cost incremental steps to observe what happens and adjust their models, they recommend extensive upfront planning as a way to hit their ultimate target or goal on the first try without any type of feedback loop to test assumptions during the development process.
In the next and final post in the series, we will look at how to shape the future rather than predict it, we’ll conclude this series by summarizing how the logic of the manager entrepreneur with their predominantly causal reasoning approach is very different from the founder entrepreneur with their predominantly effectual reasoning.
Is your planning designed to predict demand and avoid surprises or is your planning designed to use a feedback loop to test assumptions before becoming too committed to a direction, therefore welcoming surprises as a needed course correction?
The follow series of post make up what I call the “New Small Business Manifesto”
- Why Being Told You Need a Business Plan May Be Bad Advice
- Why The Business Planning Advice You Have Received Is Probably Stale
- Why The Business Advice You Are Getting Is One-Sided
- How Your Reasoning Skills Can Affect Your Business Success
- Affordable Loss Principle – Reaching Markets with Minimum Resources
- Strategic Partnership Principle – The Truth about Competitive Analysis
- Leverage Contingency Principle – Planning for the Unexpected
- Exploit the Future by Shaping It – Don’t Try to Predict It
IF YOU LIKE OUR CONTENT PLEASE SUBSCRIBE AND SHARE IT ON YOUR SOCIAL MEDIA CHANNELS. THANK YOU!