EP101x – Do Your Venture | Prof.

Suresh Bhagavatula
Week 5

Hello everyone, today I am going to talk about decision-making process. Specifically, I would
like to talk about two different kinds of decision-making processes. First is causal approach
decision making and there is effectual approach to decision making. These two
have different influence on how you start and run your new venture. Here I am at MDC in IIM
and I am going to use the cooking metaphor to tell you all the difference between causal and
effectual. Let us say we are making blue cheese pasta.

So, what does the recipe say?

So, the recipe says that I need pasta, and some standard condiments, and seasoning but I also
need crumbled blue cheese half and half which is kind of condensed milk and parmesan
cheese. I don't have all of it with me right now! Here's what I can do. I can make a list of things
that I have, and I make a list of things that are needed for making this blue cheese. And then
I'll either go to grocery store or go online and then buy them. But the problem is, I have only
Rs.500 rupees in my pocket. So, what do I do? More important than the money, it is when will
it get delivered. Right?

So, if I want to make blue cheese pasta I have some resources, I don't have some resources. I
need to go to a grocery store to buy these resources, perhaps my neighborhood grocery store
will not have blue cheese and parmesan. So, I will have to perhaps go to longer distance and
go to a store that has international products. Most importantly I have only Rs.500 rupees. So,
this my friends is a metaphor for causal approach to decision making. I have already fixed my
goal. This is like a business plan I know what I want to do, and I try to write a business plan
trying to convince the readers that what I would like to do in my venture is profitable. But I
also describe the resources that I have, but I also need more resources that I currently have,
which is what I am using the business plan for to seek money from somebody else so that I
can get the resources that I want.

So, the process is extremely time-consuming, you spend a lot of time trying to write a business
plan, you spend a lot of time trying to figure out what are the resources at your required, you
also spend a lot of time trying to convince somebody else that if they put money in your
venture you are actually going to return 10 times what they have invested. So, what is the

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 EP101x – Do Your Venture | Prof. Suresh Bhagavatula
Week 5

problem here? The problem here the is if I want to make blue cheese pasta I can either make
blue cheese pasta or not make blue cheese pasta because I don't have all the ingredients. So
here is probably a graphic that you could see which epitomizes causal thinking.

Let me tell you, what effectuation is?

Suppose I go home, I want to cook a healthy meal. I go to my refrigerator, I open the door and
see, what do I have? I have some spring onions, I have some tomatoes, some capsicum, few
onions, I have olive oil, salt, pepper, most importantly I have butter, soya sauce, and chili
sauce, with some spaghetti. So, with these, I think we are good to go. So, I can make pasta
with very nice vegetable sauce. It is healthy bursting with goodness of fresh vegetables,
packed with flavour, most importantly I don't need to spend time on it. Already have these
ingredients with me I can just about start to cook right away. I can save the Rs.500 rupees in
my pocket.

So, if you see the difference the metaphor about effectuation is taking action. Taking action,
with the resources that you have, with who you are, and what you can do? So, with
effectuation, you don't really have to worry about what is that big product that I would like
to bring about, right. Suppose, I call an expert chef and show him the same products. The chef
can come up with multiple recipes, a multiple dishes that he can cook with the same
ingredients.

Professor: अगर हम लोग इस के साथ कु छ बनाने तो क्याहैं सकते बना क्या-? ये चार आइटम हे हमारा

पास|

So, I am asking them we have only four items here, what are the different items that we could
make using these four vegetables that we currently have?

Professor: क्याहैं सकते बना क्या-?

Cook1: इस मे सारे वेजिटेबल रख के हम लोग इसे मे माएईन कोसस भी बना साके ते है|

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 EP101x – Do Your Venture | Prof. Suresh Bhagavatula
Week 5

Professor: ये सब माएईन कोसस बना सकते हो सब ...Okay, they can make main course using all

the vegetables और?

Cook1: और सलाद भी बना सकते है|

Professor: सलाद बना सकता है| Okay, they can make multiple salads cutting different products.

Cook1: हरा प्यास मसाला

Professor: हरा प्याज़ मसाला...

Cook1: हरा प्यास मसाला

Cook 2: ...

Professor: Tomato sauce... They can make tangy tomato sauce. What else? और क्या बना सकता

है? कापजसकूं के साथ क्या बना सकता है?

Cook1: और ये कापजसकूं काट के उसमे स्टफ के रके कु छ डीप फ्राइ कर सकता है, स्टाटससस

Professor: They can make nice little starters using capsicum and spring onions and make
stuffed capsicum as starters. और क्या बना सकता है?

Cook1: इसे मे इस्खो रख के ऑजनयन, टोमतो, जचल्ली दल के सो लीके सलाद िैसा ...

Professor: Onion, tomato, chilli salad is what they can make.

Cook1: पर मे इसमे खल्ली टोमाटो रख के ये टोमाटो सलाद बना सकता है लीके टोमतो छटपटा सलाद...

Professor: Tomato salad could be made. Here is what using the same four vegetables, they
can make multiple items. That's the difference perhaps with a novice cook like me and an
expert cooks like them. That then take the same ingredients that I have and perhaps come up
with most exotic way of cooking. That is a difference between causal that I am using a recipe
with a specific outcome and they are thinking like experts that I can combine these two and

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 EP101x – Do Your Venture | Prof. Suresh Bhagavatula
Week 5

create one product, combine three and think up of another product. Use them, cut them,
deep fry them, there are so many ways in which they are leverage their expertise in order to
come up with multiple ways in which they could cook. Thank you, thank you, thank you.

So here is what when you’re thinking up of your venture, we have always been looking at a
business plan we have always been looking at, how we need to create this very large venture?
Effectuation is completely different. Effectuation is action biased. So, you get to work, you
talk to a bunch of people like I spoke to some people, you could also leverage your network
to bring in expertise. Suppose all three of us started a venture. I could be the one who is
marketing, but they could be the ones who is actually cooking. So, going by a recipe, trying to
see what is the best possible venture that you could come up with requires a lot more
resources that you control. But going the effectual way, you just look at what you have and
then come up in multiple ways, suppose you have... you don't have too much time, you can
make salad, suppose you have a lot of time you could perhaps come up with multiple dishes
using the same items. That my friends is the difference between the way in which you
approach a venture causally, and in a way in which you can approach a venture effectually.

So, I do hope that you understand this differences because you would require this effectual
approach not just at the time of starting your venture. You would be requiring that as you
would go along your venture as well. So, thanks a lot it has been a great time standing in front
of the camera and speaking to it, in the hope that all of you all are listening and understanding
what I am saying. I do look forward to receiving your multiple lean canvases and also look
forward to your presentations.

Thank you very much and all the best.

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