L1 3 Effectuation P2

Summary

The video explores five entrepreneurial stories, each demonstrating the application of effectuation principles to build successful businesses. Nerd Academy leveraged local resources to create a tutoring service, while Kevin Dewitt's Agilex turned waste into oil, starting small and scaling up. George Crum's innovation with potato chips exemplified turning challenges into opportunities. PayPal's strategic partnerships, like Verisign and Discover, highlight the importance of collaboration. Lastly, Elise van Hooten's 'Dress Your Doll' concept showcases the value of controlling one's destiny in business.

Takeaways

• 🎓 Nerd Academy started with the founders' personal network and local needs, illustrating the 'Bird in Hand' principle of effectuation.
• 💡 Kevin Dewitt's Agilex venture demonstrates the 'Affordable Loss' principle, focusing on what he could afford to lose rather than seeking large investments.
• 🍟 George Crum's creation of potato chips from unsatisfactory french fries exemplifies turning problems into opportunities through the 'Lemonade Principle'.
• 🤝 PayPal's strategic partnerships, like the one with MasterCard, highlight the 'Patchwork Quilt' principle, emphasizing collaboration and pre-commitment from partners.
• ✈️ Elfe Van Hooten's 'Dress Your Doll' concept showcases the 'Pilot in the Plane' principle, where entrepreneurs control and steer their own business direction.
• 🚀 Entrepreneurs use effectuation principles to start with what they have, rather than chasing after resources they lack.
• 💼 The 'Bird in Hand' principle encourages entrepreneurs to leverage their current capabilities and networks to create businesses.
• 💰 Understanding one's 'Affordable Loss' helps in managing risk and making informed decisions about investment and growth.
• 🔄 The 'Lemonade Principle' is about converting setbacks into innovative opportunities, as seen with the invention of potato chips.
• 🔗 Building a 'Patchwork Quilt' of partnerships is crucial for expanding reach and reducing uncertainties in business ventures.
• 🛠 The 'Pilot in the Plane' principle empowers entrepreneurs to take control of their business's future, adapting to changes and making their own path.

Q & A

What is the primary service offered by Nerd Academy?

Nerd Academy offers a home tutoring service in Raipur, India.

How did Nerd Academy's founders overcome the lack of funding and technology?

The founders leveraged their network of friends and contacts who wanted to give tuition and parents who needed such services, creating a one-to-one tutoring service without needing initial funding or technology.

What is the 'Bird in Hand' principle in effectuation?

The 'Bird in Hand' principle in effectuation means starting with what you have rather than hunting for resources or technology.

Who is Kevin Dewitt and what is his venture Agilex about?

Kevin Dewitt is an entrepreneur based in Oregon, USA, who started Agilex, a venture that extracts crude oil from discarded plastic waste, helping to recycle plastic and put it to good use.

What is the 'affordable loss' principle in effectuation?

The 'affordable loss' principle in effectuation is about understanding what you can afford to lose at each step of your venture, rather than seeking large, all-or-nothing opportunities.

How did George Crum's response to customer complaints lead to the creation of potato chips?

George Crum, a chef, responded to complaints about his french fries being too thick by slicing them extremely thin, which inadvertently led to the invention of potato chips.

What is the 'lemonade principle' in effectuation?

The 'lemonade principle' in effectuation is about leveraging contingencies and turning problems or unpleasant surprises into new opportunities.

How did PayPal address the issue of losing customers due to websites not accepting PayPal payments?

PayPal formed a partnership with MasterCard to develop and launch Verisign, a secure card service that allows customers to make payments on websites that do not accept PayPal directly.

What is the 'patchwork quilt' or 'crazy quilt' principle in effectuation?

The 'patchwork quilt' or 'crazy quilt' principle in effectuation is about collaborating with various types of partners who are willing to pre-commit, rather than searching for potential partners who might not be available or motivated.

What is the story behind Elise van Hooten's venture 'Dress Your Doll'?

Elise van Hooten, CEO of Ruse Productions, started 'Dress Your Doll', a concept where children could make clothes for their Barbies. She seized growth opportunities in the U.S. market by starting a workshop for U.S. customers.

What is the 'pilot in the plane' principle in effectuation?

The 'pilot in the plane' principle in effectuation is about entrepreneurs controlling and steering their own path rather than predicting the future.

Outlines

00:00

🎓 Entrepreneurial Success through Effectuation Principles

This paragraph introduces the concept of effectuation principles in entrepreneurship through the story of Nerd Academy, a home tutoring service provider in Raipur, India. Despite lacking funding and technology, the founders leveraged their network of friends wanting to give tuition and parents seeking such services. By mapping these two groups, they established a successful offline tutoring service. The story illustrates the 'Bird in Hand' principle of effectuation, emphasizing starting with available resources rather than seeking external ones. The paragraph also discusses other effectuation principles like 'Affordable Loss' through the story of Kevin Dewitt's venture Agilex, which recycles plastic waste into crude oil, and the 'Lemonade Principle' exemplified by George Crum's creation of potato chips. Additionally, it highlights the importance of leveraging networks and forming strategic partnerships, as demonstrated by PayPal's collaborations with MasterCard and Discover Card.

05:01

🤝 The Power of Collaboration and Control in Entrepreneurship

The second paragraph delves into the importance of collaboration and control in entrepreneurship. It discusses the 'Patchwork Quilt' principle, where entrepreneurs form strategic partnerships with pre-committed stakeholders to reduce uncertainty. The story of Elise van Hooten, CEO of Ruse Productions, is highlighted, showcasing her initiative to start 'Dress Your Doll,' a concept allowing children to make clothes for their dolls. Recognizing a growth opportunity in the U.S. market, she quickly established a workshop there, embodying the 'Pilot in the Plane' principle. This principle encourages entrepreneurs to control and steer their future rather than predict it. The paragraph motivates aspiring entrepreneurs to take charge of their ventures and start their entrepreneurial journeys.

Keywords

💡Effectuation

Effectuation is a decision-making process used by entrepreneurs to create new ventures. It involves starting with the resources at hand and leveraging them to create opportunities. In the video, effectuation is the central theme, with each story illustrating how entrepreneurs used this principle to start their businesses, such as Nerd Academy using their network of tutors and students.

💡Nerd Academy

Nerd Academy is a home tutoring service provider in Raipur, India, mentioned in the script as an example of an entrepreneur starting with what they have. The founders leveraged their personal network of friends and parents to create a one-on-one tutoring service, demonstrating the 'Bird in Hand' principle of effectuation.

💡Bird in Hand

The 'Bird in Hand' principle is one of the effectuation principles that emphasizes starting with what you have rather than what you don't. It is exemplified by Nerd Academy, which began with the founders' immediate network of tutors and students, without seeking external funding or technology.

💡Affordable Loss

Affordable loss is the second effectuation principle discussed in the video, which is about understanding how much one can afford to lose at each step of the entrepreneurial journey. Kevin Dewitt, the founder of Agilex, used this principle by starting with a small-scale operation, asking himself what he could afford to lose, rather than risking everything.

💡Agilex

Agilex is a venture that extracts crude oil from discarded plastic waste, turning trash into a valuable resource. It is highlighted in the video as an example of applying the 'Affordable Loss' principle, where the founder started small and grew the business based on his financial capacity to lose.

💡Lemonade Principle

The Lemonade Principle is about turning problems into opportunities, which is the third effectuation principle. George Crum's story of inventing potato chips when his french fries were criticized is used in the video to illustrate this principle, showing how to leverage contingencies.

💡Patchwork Quilt

The Patchwork Quilt, or Crazy Quilt, is the fourth effectuation principle that emphasizes forming strategic partnerships to reduce uncertainty. PayPal's partnerships with MasterCard and Discover Card to expand their payment services are used in the video as examples of this principle in action.

💡Networks and Partnerships

Networking and forming strategic partnerships are crucial for entrepreneurs to reduce uncertainties and create opportunities. The video mentions how PayPal leveraged its network to form partnerships, which is a key aspect of the Patchwork Quilt principle.

💡Pilot in the Plane

The 'Pilot in the Plane' principle is the fifth effectuation principle that encourages entrepreneurs to control and steer their own path rather than predicting the future. Elise van Hooten's story of starting 'Dress Your Doll' and quickly adapting to the U.S. market exemplifies this principle.

💡Control and Steer

Control and steer is about entrepreneurs taking charge of their ventures and making decisions that shape their future. It is part of the 'Pilot in the Plane' principle and is illustrated by Elise van Hooten's proactive approach to entering the U.S. market without hesitation.

Highlights

Nerdy Academy started as a home tutoring service in Raipur, India, showcasing the effectuation principle of starting with what you have.

The founders of Nerdy Academy leveraged their college network to connect tutors with parents needing tuition services.

Nerdy Academy's success illustrates the 'Bird in Hand' effectuation principle, focusing on available resources.

Agilex, founded by Kevin Dewitt, recycles plastic waste into crude oil, demonstrating the application of industry knowledge.

Dewitt's venture began with an affordable loss strategy, aligning with the effectuation principle of controllable risk.

George Crum's story of inventing potato chips exemplifies turning customer complaints into a new opportunity.

The 'Lemonade Principle' in effectuation encourages entrepreneurs to make the best out of adverse situations.

PayPal's strategic partnerships, like the one with MasterCard, highlight the importance of networking and collaboration.

The 'Patchwork Quilt' principle emphasizes the value of forming alliances with pre-committed partners.

Els van Hooten's 'Dress Your Doll' concept is an example of entrepreneurs steering their own path.

The 'Pilot in the Plane' principle encourages entrepreneurs to control and navigate their business's future.

Entrepreneurs are encouraged to start with what they have instead of seeking external resources.

Effectuation principles help in reducing business risks by focusing on controllable losses.

Turning problems into opportunities is a key strategy for innovative business growth.

Collaborating with various partners can reduce uncertainties and create a supportive business ecosystem.

Entrepreneurs should aim to write their own future and be in control of their business's direction.

Transcripts

let's look at five entrepreneur stories

to see how they use effectuation

principles to create businesses

let's start with nerdy Academy

nerdy Academy is a home tutoring service

provider in raipur in India

the founders wanted to set up an ad Tech

Venture which would provide an online

and mobile app platform for tutors and

students Unfortunately they did not have

either funding or access to technology

so what did they do they looked at what

they had in hand

since they were in college they had many

friends and other people in the network

who wanted to earn more by giving

tuition to school students

they also knew the parents of several

school-going children who required such

a service

all they did was bring these two

together

by mapping people from the two pools

they were able to offer a one-to-one

tutoring service which was completely

offline and focused on their town alone

today nerdy Academy has over 200 tutors

and about a thousand students registered

with them

this illustrates the effectuation

principle Bird in Hand

and this is common sense isn't it

all it means is you start with what you

have rather than hunting down for

resources technology

Etc

let's move on to entrepreneur Kevin

Dewitt based out of Oregon USA he

started a venture called agilex which

extracts crude oil from discarded

plastic waste thus helping to recycle

plastic waste and putting it to good use

today it is a multi-million dollar

company

but how did David start his Venture well

he started based on what he had learned

in his 20 years in the chemical industry

he saw an opportunity for making money

out of trash by applying his knowledge

in science but he didn't start with a

big Bank rather he set up a small and

Basics no flow recycle unit which grew

over the years to decide on how much

money he could spend and how much more

to invest he asked himself one simple

question

what could he afford to lose this is the

second effectuation principle and is

known as affordable loss

expert entrepreneurs can limit Risk by

understanding what they can afford to

lose at each step they do not look for

large All or Nothing kind of

opportunities in other words they do not

Gamble

expert entrepreneurs also believe in the

saying when life gives you lemons make

lemonade

that's what George Crum did

at the time he was a chef in an elegant

New York Resort and was facing Flack

over his french fries which is guests

complained were too thick and not crispy

enough

so to play a joke on them he cut his

fries so thin that people won't be able

to eat them with a fork and lo and

behold potato chips were born

this is the third principle of

effectuation the lemonade principle the

Mantra is to leverage contingencies and

turn unpleasant surprises in other words

problems into new opportunities

but leveraging contingencies alone is

not enough to make your Venture a

success leveraging your networks and

forming strategic Partnerships is

equally important

who hasn't heard of PayPal

when PayPal discovered that they were

losing out on customers because there

were some websites that did not accept

Paypal payments directly they formed a

partnership with MasterCard

this led to the development and launch

of verisign a PayPal secure card service

that allows customers to make payments

on websites that do not accept Paypal

directly by generating a unique

single-use MasterCard number for

e-checkout

again in 2012 PayPal announced its

partnership with Discover card to enter

the offline retail Market where they

could use Discover Cards existing

Network across 7 million stores

this is the essence of the fourth

effectuation principle the patchwork

quilt or crazy quilt

here entrepreneurs collaborate with

various types of Partners who are

willing to pre-commit rather than search

for potential Partners who might not be

available or be as motivated

networking is the Mantra here accumulate

as many stakeholders to create the

future and reduce uncertainty

entrepreneurs are always looking to

reduce uncertainties and to do that they

want to write their own future and be

their own bosses

that's what Belgium's elves van Hooten

CEO of ruse Productions did she started

dress your doll a totally unique concept

where children could make clothes for

their Barbies themselves

then she found significant growth

opportunities for dress your doll in the

U.S market a market

with a dramatically different retail

Network she sees that opportunity and

then started their own workshop for U.S

customers without second thoughts

she became her own pilot

this is the fifth principle of

effectuation the pilot in the plane

where the entrepreneurs don't feel the

need to predict the future as long as

they control it and steer their own path

so are you ready to steer your own

aircraft what are you waiting for get

ready get going