Inside the Mind of the Expert Entrepreneur: the Explorer¡¯s View of Strategy

Although firms tend to rely on business plans and objective oriented approaches to their future, this paper presents an alternative model of strategy: the explorer¡¯s view of strategy. Saras Sarasvathy, a researcher at University of Virginia, found that serial or expert entrepreneurs operate under a different mode of thinking, which she calls effectuation. This paper traces how effectuation has roots in military history. Then, it explains how Sarasvathy arrived at her findings. It then presents Sarasvathy¡¯s five findings. 1) Entrepreneurs primarily form their objectives based on the resources available to them. 2) They focus on what they could lose rather than what they could expect to gain. 3) They focus on partnerships rather than competitors. 4) They continually refine their product or services by dialoguing with their stakeholders. 5) They deviate from their originally conceived business objective. Following that is an analysis of when effectuation is better employed by a firm than the classical approach to strategy. Finally, it concludes with two concrete examples. One of them shows how a big firm can utilize effectuation, and the other demonstrates how a big firm can face drastic losses by using the classical approach to strategy in an unsuitable context.