Important Lesson Learned from Zigbee Technology

I think the most important lesson learned from the Zigbee venture is what has already been found out about the proper way to start a new venture. According to the Effectuation Theory of Entrepreneurship, developed by Professor Saras Sarasvathy, University of Virginia, there are two types of thinking when starting a new venture; “effectual” and “causal” thinking. Casual or predictive reasoning or rationality involves having a pre-determined goal and using the resources available to find the most efficient way to achieve that goal as in the case of Zigbee.

Effectual reasoning is different, as it does not start with a specific goal in mind. It begins with a set of means (resources) and goals only emerge over time through the of interactions of the founders with the stakeholders. For example, effectual thinkers are like explorers who set out on voyages to unknown places.

In other words, effectuation principle holds the view that, contrary to causal reasoning that says you have to plan first and the execution comes second, effectual reasoning depends on execution. As already stated above, the reason is that most entrepreneurs use what they have got to start with. Plans are not static and many people with experience with start-ups will agree that predetermined plans are changeable and sometimes do not reflect the realities. I have heard many instances where business founders have said that they never used the plans because the realities on ground were entirely different form predictions to the extent that the plan became irrelevant.

Also effectuation Theory focuses on the cost, what is called “Affordable loss”. The process of evaluating any venture starts with the evaluation of the means or resources (cost) and from there, the goal is determined. Goals and risk (cost) have to go hand - in – hand.

I think when embarking on a new venture flexibility is required and surprises should be seen not as bad news but as potential clues to exploit new markets. Basically what this principle says is that entrepreneurs have to be open to change and be prepared to go in a different direction. Causal reasoning does the opposite by doing everything to minimise surprises or bad news as we have seen in this case.