Effectuation

"Can I use my skills to start a business?"

According to an article in the Nikkei Shimbun, in recent years, an increasing number of entrepreneurs have been trying to start a business using their existing skill sets ("Start a Business Now," February 14, 2024, Nikkei Shimbun Morning Edition, P15).

Here is a summary of what the article covers:

An entrepreneurial method called "Effectuation" originating in the United States has spread in Japan. We will set up a business that can be started immediately with the skills we have, and then flexibly change the tactics. This approach is in contrast to the traditional method of researching the target market in advance and working backwards from there to develop a business plan. If it takes root, there is a possibility that the base of entrepreneurs and founders will expand also in Japan.

This theory was proposed in 2001 by Professor Saras Sarasbachy of the University of Virginia in the United States. It is said that the theory has five principles such as "start a business using the skills and technology you have" and "decide the risk you can take first", all of which are extracted from the experience of successful entrepreneurs. In Japan, the Japan Effects Association was launched in 2021.

On the other hand, the conventional general entrepreneurial method is called "Causation". The method would identify the target market and area, and develop a business plan through competitive analysis followed by on-going market research. Furthermore, there is also another approach called "Lean Startup," in which an idea is launched and commercialized in a short period of time with minimum viable products or services, which may not fully serve needs and wants of target customers. After releasing services, startups only respond to what customers request to make the services more viable….

Japan's business opening rate was 5% as of 2020, far behind of the UK (12%) and the US (9% in 2019). One of the reasons for this is that there are few close acquaintances who have actual entrepreneurial experience, and it is difficult to imagine role models.

In 2022, the Japanese Government formulated “Five-year Plan for fostering Startups”, including setting up a goal of creating 100,000 startups, and has been trying to implement various support measures. Mari Yoshida, Associate Professor at Kobe University's Graduate School of Business Administration, believes that "if the idea of effectuation spreads, people who think they could not found a startup might be able to dare to take a step forward in solving social issues." (EOD)