Research Reveals the Best Way to Find a Startup Idea

Nearly every course on entrepreneurship follows the same basic framework. To start a business, you come up with (or get assigned) an idea, do some market research, pencil-whip a few financial projections, identify a team, explore financing options — in short, take an idea and create a business plan to execute that idea.

As University of Virginia associate professor Saras Sarasvathy writes, that’s an example of causal reasoning. “Causal rationality begins with a pre-determined goal and a given set of means, and seeks to identify the optimal — fastest, cheapest, most efficient, etc. — alternative to achieve the given goal.”

Yet that’s not what the 30 extremely successful entrepreneurs Sarasvathy studied during her research tend to do. Instead, they use what she calls “effectual reasoning.” 

Rather than starting with an end goal, they focus on what they currently have:

  • Who they are: Traits, interests, abilities, etc.
  • What they know: Skills, knowledge, experience, etc.
  • Whom they know: Personal and professional networks.

Using these means, the entrepreneurs begin to imagine and implement possible effects that can be created with them.

Most often, they start very small with the means that are closest at hand, and move almost directly into action without elaborate planning. Unlike causal reasoning that comes to life through careful planning and subsequent execution, effectual reasoning lives and breathes execution.

Plans are made and unmade and revised and recast through action and interaction with others on a daily basis.

For example, say you like working with your hands. You have some carpentry skills. You’ve collected some tools along the way. And you want to start your own business.

A casual reasoning approach would involve doing market research, identifying an underserved niche (you settle on building decks), identifying your market, creating a marketing campaign to reach that market — all the usual stuff. Lots of “ready, aim, aim, aim, aim,” and eventually, when all ducks are in a row, “fire.”

An effectual reasoning approach involves taking a quick inventory. You want to start a construction business. You have some skills. You have some tools. You know a lot of people in your neighborhood, many whose houses don’t have backyard decks. So you take the “ready, fire” approach, and start by selling.

As it turns out, none of your neighbors want a deck. But one has a growing family and could sure use an extra bedroom. Another doesn’t want any work done on his house, but has always wanted to be handier and says he’ll work cheap if you’ll teach him on the job. Another could use a new roof.

No matter how hard you try, taking the causal approach — predicting what you think will happen and then trying to actually make that happen — is not a guarantee of success.

That’s why so many entrepreneurs take the effectual approach. Their market research involves selling. Talking to potential customers. Finding out what they need, not what you want to provide. Finding out what they will pay, not what you want to charge. 

And then leveraging what they have to meet that need — and build that business. 

If you’re struggling to come up with an idea for a business, stop starting at the end. Stop trying to determine, in fine detail, what product or service you will provide. Instead, start at the beginning. Start with who you are, what you know, and whom you know.

And then try to sell something, even before you have an actual product. Sell to people you know. Sell to their networks. Do real-world market research. Instead of expecting to make a future your business plan predicted actually come true, expect to be surprised by what happens.

Expect to be surprised by what you learn.

And use that to help you refine and adapt and, in time, build your business.

Entrepreneurs are entrepreneurial, as differentiated from managerial or strategic, because they think effectually; they believe in a yet-to-be-made future that can substantially be shaped by human action; and they realize that to the extent that this human action can control the future, they need not expend energies trying to predict it.

In fact, to the extent that the future is shaped by human action, it is not much use trying to predict it – it is much more useful to understand and work with the people who are engaged in the decisions and actions that bring it into existence.

Simply put, take what you know, and the people you know, and just get started.

Don’t worry about the fact you don’t have it all figured out; it’s impossible to have it all figured out. Thinking you can is a waste of time.

Time better spent doing and learning and growing.

Because that is what will make you an entrepreneur. 

The opinions expressed here by columnists are their own, not those of

Christin Hakim

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