Effectuation and Causation in Business Management

This report discusses the concept of effectuation and causation in business management, their principles, and their significance in understanding the dynamic situation of business management issues in the global contemporary business environment. It covers the principles of effectuation and causation, their application in resolving business issues, and the challenges faced in implementing these approaches. The report concludes that while these approaches can be effective in the short term, regular market analysis is necessary for long-term success.

Essay

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Effectuation and Causation.........................................................................................................3
REFERENCES................................................................................................................................8

INTRODUCTION
Causation basically refers to that approach where entrepreneurs focuses on the
predetermined goal and after that they aim for finding the means to reach towards their goal.
Effectuation defined as the approach where entrepreneurs focuses on the means at hand where
they focuses to materialise into more than one goals which were not predefined into the
necessary manner(Adams and Makramalla., 2015). The present report will cover discussion
about concept of effectuation and causation. In addition to this, the report will cover analysis
about the statement into critical manner and its significance in terms of understanding the
dynamic situation of business management issues in this global contemporary business
environment.
MAIN BODY
Effectuation and Causation
Effectuation refers to the process where entrepreneurs use to create new ventures and
looking at ways in terms of creating value for a business. This is basically defined as the form of
problem solving or reasoning that assumes the future is largely unpredictable but it can be
controlled through actions of human. It is a logic of thinking which uniquely serves
entrepreneurs in starting the businesses. Effectuation is important because it gives a completely
different approach in the three fundamental steps of processes which includes goal setting,
resource use and decision-making as well. Causation is basically the capacity of one variable to
influence another where the first variable brings into the existence or also cause the incidence of
second variable to fluctuate. Within the business, causation basically indicates that one event is
actually directs the result of others and is the basic notion of cause and effect where one event is
identified as the consequence of the other(Dew and et.al., 2015). This is a kind of approach
where entrepreneurs have focus towards the predetermined goal and then aim for the finding the
means in terms of reaching towards the goal. Entrepreneurs who take the causation approach into
consideration basically have limited proclivity in terms of sharing ideas with other incubator
firms.

There are certain principles of effectuation which is helpful in terms of running the
business into effective manner. Effectuation has basically five main principles which are
significantly important in terms of keeping into the mind as they help in terms of taking a
different perspective. It is defined into the following manner:
 Bird in hand Principle: Under this principle, it is important to initiate whatever in the
hands of an individual. There are certain questions which comes under this principle
which includes who are you, whom do you know, what can you do and what capabilities
and other means do individual have access to right now?
 Lemonade Principle: When an individual is dealing with higher level of uncertainty
then unpleasant surprises will occur (Dew and Sarasvathy., 2016). It is important to use
the surprises rather than trying to plan all types of alternative scenarios and use them in
the form of clues to pivot the current ideas.
 Crazy Quilt Principle: Individual who select the idea build the partnership with them
rather than selecting people by their own choice. The chances of success has increased
when people with whom the partnership has been done are as crazy about the idea as the
individual.
 Pilot in the plane Principle: Under this principle it is important have focus on the
activities which are in the control and have more chances of bringing the desired results.
An effectual world view is rooted in the belief that the future is made.
 Affordable loss Principle: At every step, limit the risk by understanding what an
individual can lose(Jain and et.al., 2018).It could be reputation, financial or other means.
It is important to make sure that an individual can afford the loss when the upcoming
action runs the risk of losing one of the resources.
There are certain principles of causation and it is defined into the following manner:
 Focus on optimal decision and maximisation of expected returns
 Competitive analysis
 Exploitation of pre-existing knowledge
 Focus on predictable aspects of uncertain future
These principles are helpful in terms of entailing the predictability and also it is easy to infer that
if both causes are equal, the corresponding effects are also equal.

In today's period of time, businesses or companies are facing certain issues which
includes global uncertainty, technology, gender inequality, diversity and management issues as
well. There are many businesses who can't achieve higher level of success and there are certain
reasons behind it. At the global level, uncertainty has occurred which creates a kind of situation
where businesses have to figure out that in which manner they can lead themselves in the time of
instability(Nemkova., 2017). In the similar manner, technology is also changing at a faster pace
manner so businesses have to make themselves leveraging in terms of technology which makes
them more efficient in order to connect in a better manner with their customers. Businesses have
to face issues regarding the gender inequality because there are certain countries where equal
opportunity has not been provided according to the calibre of an individual. Businesses have to
also face issues into the context of diversity due to which it is challenging for businesses to
tackle such kind of large number of people with different backgrounds and culture.
It has been observed that major issue is related to the management due to which proper
decision-making has not been done for growth and development of an organisation. An effective
decision at appropriate time can change the results and can contribute in hike of revenue
generation of that particular business. For solving the issues of business, the concept of
effectuation and causation can be used into positive framework. While using effectuation
concept in terms of resolving the issues of business it is important that to take actions according
to the available resources or the opportunities which are currently in hand in terms of solving the
problem. For solving the current issues of global uncertainty, technology, gender inequality,
diversity and management it is necessary that to do proper analysis and research that where are
the loop holes in this entire process. Businesses have to identify that in which spectrum they are
taking wrong actions so that corrective actions can be taken for that particular purpose.
When causation concept has been used within the business for solving the business issues
it is important that they have to think in a different perspective of setting goals so that they can
achieve out of box results for their related issues(Packard and et.al., 2017). For example, when
management issues needs to be resolved first of all they have to set goal that how many months
or years of gap they have to change strategy or made some new policies for the organisation so
that correct decision can be taken according to market requirement.

In terms of technology related issues, they have to set goal in such a manner that they
constantly remains in touch with the current changing market trends and also have proper idea
about the upcoming technology so that they can accordingly apply within the business(Tolstoy
and et.al., 2021).For solving the issue of diversity and gender inequality, it is important for
businesses to create awareness about gender equality at global level so that businesses need not
to face these kinds of issues on repeated basis. For dealing with diverse people businesses can
study and research about different culture people so that they can easily deal with diverse group
of people and can also understand their needs as well. It has been observed that after applying
the concept of causation and effectuation approach, the exact results can't be achieved. There are
certain reasons behind it because market is continuously changing and setting the targets
becomes older according to requirements of market. Within this issue, technology plays a very
significant role where they have to make changes in their way of working at organisational level
because technologies are changing on a very fast pace manner. So up to a certain extent,
effectuation and causation approaches does not act as successful parameters in terms of resolving
the business issues.
CONCLUSION
The above stated report concludes that effectuation and causation are the approaches
which help in terms of resolving the issues of businesses into successful manner. It has been
concluded that both the approaches have different way of resolving the issues of business at
organisational level. It has been determined that under effectuation approach, the issues can be
resolved through available resources and supporting parameters. In the case of causation
approach, for solving the issues first of all goals has been determined and then actions has been
taken accordingly for resolving the issues. It has been determined that there are certain principles
which help in terms of taking the right approach for doing the business into effective manner. It
has been observed that up to a certain level these approaches can't be effective from long term
perspective of business. So it is important that to have proper analysis about the market on
regular basis in order to resolve the issues into positive manner.

REFERENCES
Books and Journals
Adams, M. and Makramalla, M., 2015. Cybersecurity skills training: An attacker-centric
gamified approach. Technology Innovation Management Review, 5(1).
Dew and et.al., 2015. Entrepreneurial expertise and the use of control. Journal of Business
Venturing Insights, 4, pp.30-37.
Dew, N. and Sarasvathy, S. D., 2016. Exaptation and niche construction: behavioral insights for
an evolutionary theory. Industrial and Corporate Change, 25(1), pp.167-179.
Jain and et.al., 2018. Does entrepreneurial logic impact funding evaluation of startups?.
Nemkova, E., 2017. The impact of agility on the market performance of born-global firms: An
exploratory study of the ‘Tech City’innovation cluster. Journal of Business Research,
80, pp.257-265.
Packard and et.al., 2017. Uncertainty types and transitions in the entrepreneurial process.
Organization Science, 28(5), pp.840-856.
Tolstoy and et.al., 2021. The development of international e-commerce in retail SMEs: An
effectuation perspective. Journal of World Business, 56(3), p.101165.