Saturday, May 19, 2018

The Decision Making Logic Used by Entrepreneurs

Entrepreneurs have a hard time making decisions that improve their outcomes. Many start out without much knowledge in business and when they are faced with tough choices they don't know what to do or where to go. According to an analysis of 385 decision events they found that effectuation and causation logics dominated the entrepreneurs decision models (Reymen,et. al 2017).

What is a decision logic? It is a methodology people use to make decisions about events where they may not have all of the information. With limited information people have to use a methodology.

Effectuation Logic: The logic incorporates concepts of self and their abilities to make decisions. They also may focus on losses vs. profits, find collaborators to reduce risk, understanding contingencies, seek to control factors that impact the future.

Causation Logic: Try and see the relationships between what causes another. If they do A they are hope to have B happen.

You may find that entrepreneurs are not just poking into the night to find success. They have a logic that allows them to look at themselves, their current situation, abilities, collaborators and possibilities to make decision. The ultimate goal is to reduce risk and increase reward.

Reymen, et. al. (2017). Decision making for business model development: A process study of effectuation and causation in new... R&D Management, 47 (4).

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