Effectuation as an alternative in a dynamic environment

Companies in the VUCA world operate in an environment of volatility, uncertainty, complexity and ambiguity.

The proven classical methods and instruments are reaching their limits. Goals can only be set under limited perspectives – “tomorrow everything can be different” – without those responsible really being able to overlook the complexity.

This concerns in particular extensive development projects (products, IT, etc.), which require considerable investments and require a lot of time for implementation.

Effectuation is an alternative procedural model for uncertain, complex situations with great creative freedom.

How concrete can effectuation look in projects?

In the following example, the Service Austria division manager of an international group needed a planning and monitoring tool for the management of service orders.

He wanted to realize this with his own employees and low financial expenditure. Information from existing systems should be integrated. The solution should be created in Excel.

The complexity increased very quickly, so Excel proved to be unsuitable.

The division manager contacted the head of the IT department. Until then, the IT department had worked classically:

  1. Formulate order
  2. Assemble the project team
  3. Create an environment and stakeholder analysis (for large projects also a risk analysis and a risk management plan).
  4. Planning
  5. Phased implementation and implementation of project controlling
  6. Testing and handing over to the client

Reasons for Effectuation

In this particular case, division managers and IT managers opted for a new approach – “Effectuation” – because

  • the reason for action to improve the planning and control of service orders by using the financial figures from existing systems and linking them to other order data was clear, but at the same time the task was very complex. Thus the uncertainty regarding the result and the technical feasibility was very high.
  • the two managers wanted to test a new approach with a partnership approach.
  • the participants quickly and pragmatically get into action and arrive at usable results and did not want to spend months discussing what must, can, should be implemented company-wide.
  • the project had a lot of creative freedom, but also limited personnel and financial resources.

Implementation according to efficiency principles

High commitment

The selection of the project manager and the project team was made on a voluntary basis in order to ensure that those involved identified as closely as possible with the project. It was not the employees who had the most extensive competences who were named, but those who were strongly interested in the task/challenge. At the beginning there were very quickly three employees of the service department (who were involved in the Excel project) and two employees of the IT department.

Orientation on the available resources

The team members should contribute their existing knowledge and experience (in terms of content, process technology and IT technology) to the existing requirements, taking into account the limited budget of the division manager.

An elaborate and lengthy target definition process was dispensed with. Other organisational units should have been called in for this purpose.

The starting point was only the “vague” wish of the division manager.

Affordable loss

The next step was not a business case or an investment calculation, but the question: What (financial means, time, reputation, contacts, influence) are we prepared to use, even if the project fails? “Even if things go wrong, the loss is bearable.”

Prioritise

At the outset, the team had to select from a large number of requirements those that promised the greatest benefit and were to be created with affordable personnel expenditure. The team decided (in the first step) to use functionalities that were not covered in other systems.

Winning partners and participants

During the project, the project team and those responsible presented the contents and results to other service managers throughout Europe in team meetings. The team exposed itself very early on, also with the danger of “embarrassing” itself in the event of failure. Instead of working on a perfect product “in the quiet room”, the team invited the participants to participate and collaborate.

Adapt goals/utilize opportunities

The addressed persons were quickly convinced of the upcoming solution and its benefits and made themselves available as testers. The feedback flowed immediately into the tool and also led to an additional budget for additional functions. Further company-wide marketing led to additional partners bringing in new ideas and new funds. The scope of orders was extended and the software made more user-friendly.

In the course of the project, the division manager Austria (client) was transferred to America, in a “normal” project rather a disaster. In this case, the project was transferred to other countries as a management tool.

Experience from the client’s point of view:

  • The project was launched in March and completed in November. It was thus twice as fast as previous projects with conventional procedures.
  • The resulting tool satisfied the user’s needs so well that many responsible persons wanted to participate already in the pilot phase. However, this also meant that priorities had to be set in terms of capacity limits and some requirements were deliberately not implemented.
  • Particularly noteworthy was the very high level of commitment and motivation of the project team.

CONCLUSION

Effectuation is not a panacea. It is particularly suitable for situations and projects,

  • if it is uncertain at the beginning what the goal is, e.g. with many stakeholders with very different ideas and ideas.
  • if there is a reason for action and you want to act quickly, e.g. because the environment changes quickly
  • if the expenditure can hardly be estimated realistically and it is possible to identify an affordable loss.
  • if you want to understand coincidences as opportunities and use them very consciously. if you have the appropriate scope for design – “green meadow

In classically structured companies, the approach will lead to resistance, but at least initially to irritation. How much more planning are we doing? A project without a business case, concrete goals and data? How many mistakes can we make? May we let them fail?

First of all, it takes courage to try out this new way of thinking and proceeding. This doesn’t have to be an entire project right away. It can be individual project phases or challenges in the project to gain initial experience.

Literature:

Faschingbauer, Michael: Effectuation: How successful entrepreneurs think, decide and act. Schaeffer-Poeschel publishing house. Stuttgart 2017

Heinen-Konschak, Eric Dr.; Brendle, Bettina: Mastering projects in the unknown with Effectuation. In ProjektMagazin. Issue 14/2017

Sarasvathy, Saras D.; Dew, Nicholas: New Market Creation through Transformation, in Journal of Evolutionary Economics, 15 2005