Available Means: Starting with What You Have

This topic focuses on how effectual entrepreneurs make plans using the means available to them. It looks in-depth at the principle of a ‘bird-in-hand’ and its action-oriented focus, which is in contrast with the elaborate pre-planning characteristics of conventional business planning.

Welcome to Topic 4: Available Means: Starting with What You Have.

In this topic, you will learn about:

• Available means – the bird-in-hand principle
• Differences between causal and effectual thinking
• The benefits of being means-driven
• Available means case studies.

These relate to the Subject Learning Outcomes:

1. Articulate the difference between causal and effectual logic and when both are best used in organisations.
2. Identify and apply the core principles of effectuation and how they form the basis of the effectual cycle.
3. Explain the entrepreneurial bias toward action leads to experience, which in turn increases self-efficacy.

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Available means – the bird-in-hand principle

Read et al. (2016, p. 122) states the following: "For the effectual entrepreneur, the fundamental question is, “What effects can I create, given who I am, what I know and who I know?” He or she begins by imagining several possible courses of action, the consequences of which are, for the most part, uncertain. The entrepreneur evaluates these courses of action in terms of what resources need to be put at risk to pursue each. Any course of action needs to have the possibility of becoming valuable, but rather than select on an expected upside, she prioritises them according to which possibility is associated with the most acceptable downside."

The preceding statement describes the available means (also referred to as the bird in hand) principle and encapsulates the core ideas of this topic. As useful as plans can be, they are based on predictions. Predicting that you will get something, for instance receiving a refund on your taxes, is taking a risk. Expert entrepreneurs seek to closely manage their risks, so they avoid predicting and speculating. They don't assume they will get resources in the future, but rather act with the means they have available to them right now.

The Society for Effectual Action (2018), in their discussion of 'effectuation 101',  state that expert entrepreneurs determine the means first, not the endpoint. That, in simple terms, is the bird-in-hand principle as part of effectuation theory.

Implications of the bird-in-hand principle

So, what are your available means and how do they play a role in taking action? The following video shares thoughts from the effectuation community members, answering this question from an effectuation perspective.

The Society for Effectual Action is a fantastic resource put together by Saras Sarasvathy, Stuart Read and many others, working diligently to better understand and share the concepts behind effectuation in the entrepreneurial sphere. As you would have heard in the previous video, they describe the bird-in-hand principle as follows:

“When expert entrepreneurs seek to build a new venture, they start with their means. These means can be grouped into three categories:

1. Who I am – my traits, tastes, and abilities.
2. What I know – my education, training, expertise, and experience.
3. Who I know – my social and professional networks” (Society for Effectual Action, 2018).

Entrepreneurs will use these means, drawing on things within their control, to imagine possibilities and act. Commonly, the entrepreneur will start small, with the closest means, and move into the implementation stage without planning the result. As each action is taken, possible outcomes are reconfigured. It is important to note that entrepreneurs often dismiss or fail to recognise the assets that are part of their available means. Recognising this is a skill that you need to develop as an entrepreneur to increase your self-efficacy.

Means-driven makes sense

Let us summarise why it makes sense to be means-driven. Consider the following advantages of being means-driven.

As an effectual entrepreneur you are:

• Not chasing investors.
• Not waiting for the perfect opportunity or the perfect set of resources.
• Working with your strengths without having to overcome your weaknesses first.
• Co-creative with stakeholders, who want to shape goals, not just provide resources.
• Increasing the possible slate of stakeholders who can self-select into your venture.
• Increasing the probability of innovative surprises.
• Increasing the likelihood of finding or creating opportunities that are a better fit for you.
• Decreasing the cost of possible failure, as you only risk means that are affordable to lose.
• Increasing the likelihood that failures will be learning experiences that you can recover from faster and build on when you are ready to try again.
• Forcing yourself to get creative with meagre resources, including slack resources and even waste.

Now that we have a firm grounding in the available means (or bird-in-hand) principle, let us examine two examples of entrepreneurs and how they, in their own specific situations, applied their available means in taking action. These examples illustrate how embarking on a path with what you have, is enough to create viable ventures.

Available means case studies

The two case studies presented here are notable entrepreneurial ventures. For each, their success became phenomenal because the individuals involved leveraged their available means. These are:

1. Stacy Pita Chips.
2. Estée Lauder.

Case study 1: Stacy's Pita Chips

From sandwich cart to global food brand

Let's look at the story of Stacy's Pita Chips as an example of the principle, Bird-in-Hand.

Effectual journey analysis: A structure for understanding case studies

The table below introduces a structure we will use to analyse the use of effectual logic in case studies.

Key parts (or chapters) of the entrepreneur's story are examined based on the action taken and the effect created. The action taken is often spurred on by an event where the entrepreneur is able to leverage contingencies (Lemonade Principle) and grounded in the entrepreneur's available means and co-creation with others. You will recognise from your own life that usually many factors combine to move you to take action. The same is true for entrepreneurs.

Take some time to review the analysis table below, which highlights some key chapters from the Stacy's story. While you do this, think about your own life and all the various events which paved your pathway to where you are today. All of this forms your available means.

In the next section we will delve in more depth into each of the key parts of Stacy’s Pita Chips, so you can see how the analysis is applied to a case study.

Stacy's Pita Chips – effectuation at work

Although this topic is focused on the available means principle, using effectual logic to take action also involves other principles, as you will see from the detailed analysis below.

Looking at the analysis of Stacy's effectual journey below, you will see that some key take-outs have been selected to look at more closely. Let us go through each of the following key take-outs to see how the principle of available means plays out in the evolution of Stacy's Pita Chips.

 

The initial dream is dashed

 

The Hollywood version of start-up founders is that they have an idea, some experience or skills, they pitch it to friends and family, who are supportive, and then the adventure begins. There is a general misconception that as an entrepreneur you will launch with a perfect plan and lots of financial backing to support this.

Stacy's story is more typical: despite having the experience and skills and a solid upper-middle class family with presumably the financial means, her idea does not get support, making her re-think how to proceed. That might seem like a setback, but by taking the action of pitching to her family, she has gained new perspectives (added to her available means) and has a better sense of her affordable loss. Every action provides some sort of feedback, which poses a learning opportunity.

Effectual principle	Situation	Action taken	Effect created
Pilot-in-the-plane	Stacy worked part-time as a restaurant waitress and manager. Mark as a bartender and waiter. Both really liked cooking food.	Returning to New England, the pair pitches the idea of opening a California-style bistro to their families.	The reaction is underwhelming, and they fear the amount of debt.
Available means	Stacy has experience with healthy food in California and is committed to a healthy lifestyle.
	Stacy knows how to make great, healthy California-style pita sandwiches.

 

Starting small

 

With a downsized sense of affordable loss, Stacy and Mark initially act by using a small part of their available means to buy a pushcart and start experimenting with their food ideas at events and festivals. Consider how much less risky this is for them: a smaller capital outlay, time investment related only to specific events, not seven days a week as a restaurant would require and none of the restrictions of a commercial lease, facilities management, staff and so on. In addition, with the events drawing potential customers, they do not have to put much time and energy into marketing.

Effectual principle	Situation	Action taken	Effect created
Lemonade	Their original idea of a bistro doesn’t happen.	Stacy and Mark buy a food pushcart and start selling food at events and festivals.	Stacy and Mark gain experience in the food business and build up courage to do more.
Affordable loss	Stacy and Mark are willing to risk a small investment to try out their California dream.

What is the result of this action in starting their pushcart venture? They gain experience in the food business, feedback from customers and return on their investment of available means. So overall, they have taken an important step in increasing their available means for their next step.

 

Long queues

 

Now it is clear to see how the previous actions taken by Stacy and Mark paved the way (and added to their available means) for them to embark on the next experiment, namely, serving healthy Californian-style pita sandwiches to inner-city employees during their short lunch breaks. But things go a little too well; long queues form, so Stacy and Mark fear losing customers who cannot afford to wait.

Headline Effectual principle Situation Action taken Effect created Long queues Lemonade Stacy and Mark notice that there are few healthy lunch options from food carts in Boston. They offer California-style pita bread sandwiches from a food cart at lunchtime in the financial district of Boston. They fill an unmet need of employees in downtown Boston for healthy food options and create enough demand to have customers lining up, despite learning to produce 200 fresh sandwiches in two hours. Available means They now have experience serving customers from a food cart. Affordable loss They have free time during the lunch hour.

Effectual principle	Situation	Action taken	Effect created
Lemonade	Stacy and Mark notice that there are few healthy lunch options from food carts in Boston.	They offer California-style pita bread sandwiches from a food cart at lunchtime in the financial district of Boston.	They fill an unmet need of employees in downtown Boston for healthy food options and create enough demand to have customers lining up, despite learning to produce 200 fresh sandwiches in two hours.
Available means	They now have experience serving customers from a food cart.
Affordable loss	They have free time during the lunch hour.

 

A snack while you wait

 

The long queues, combined with leftover pita bread are elements which lead Stacy and Mark to take action and create pita chips to give away to waiting customers. This is related to the lemonade principle where mistakes and unexpected situations can be the source of new opportunities. Like is often the case, Stacy & Mark could not have predicted what would come next: The customers were as interested (some more so) in the pita chips as they were in the sandwiches! They realised that they were onto something. This is an important lesson as an entrepreneur, being able to notice opportunities as they arise. This is a key lesson from effectual thinking – as we deal with uncertainty (and unexpected situations) entrepreneurs recognise and act upon opportunities, to shape the future.

Effectual principle	Situation	Action taken	Effect created
Lemonade	Limited capacity results in long queues and frustrated customers going elsewhere.	Leftover pita is toasted, seasoned, and served to waiting customers.	Unconventional approach “created happy hour atmosphere” and customers stay in the queue longer.
Affordable means	Predicting consumption is hard and there is always leftover pita bread at the end of the day.
Affordable loss	Leftover pita bread is not fresh enough for sandwich making, but good enough to process in other ways.

 

Leveraging the pita chip’s popularity

 

The unexpected success of the pita chips and the resulting demand created cash flow and increased demand for pita bread. This changed their perspective and set them on a new path: baking their own pita bread and thus increasing their skills and experience, in other words, yet again increasing their available means.

Effectual principle	Situation	Action taken	Effect created
Available means	Newfound experience with pita chips, including customer preferences.	Stacy and Mark begin baking their own pita bread.	They gain more control over their costs and increasing their understanding of the snack business.
Lemonade	Increasing demand for pita bread as raw material to make chips results in making is a core ingredient and cost factor.

 

Authentic storytelling

 

There is one critical element of available means we have not discussed thus far: the engaging personality and compelling story of Stacy & Mark. This, combined with a lack of money for marketing and plenty of pita chips samples and time outside of the lunch hour rush, makes a perfect combination for Stacy & Mark to personally share samples and their story in new locations, including supermarkets and conferences.

Effectual principle	Situation	Action taken	Effect created
Lemonade	Limited cash for marketing.	They create delicious samples of products and personally give them to interested potential customers, including supermarkets.	Branding and promotion reflective of founders’ identity engendering trust.
Available means	Tasty products which can be portioned as samples.
Available means	Engaging personality and compelling story of young, healthy couple making tasty food.
Affordable loss	Free time when not busy with lunch sandwich rush.

 

Scaling up

 

By now, people were noticing the success of Stacy & Mark, adding to their reputation and thus their available means. Some food cart customers, bankers by trade, offer to finance the franchising of Stacy's sandwich business. But after some research (adding to her available means), Stacy sees better growth opportunities in the pita chip business and the opportunity to not be subject to the uncertainty (weather, holidays, variable competition) of the streetside lunch time business. In this way they can shape the future based on a (more) acceptable level of risk.

Effectual principle	Situation	Action taken	Effect created
Available means	Bankers who enjoyed Stacy’s pita sandwiches off to help them franchise their sandwich cart concept.	Stacy and Mark decide to sell their food cart and concentrate on chips.	Stacy and Mark gain more control of their work patterns (not being tied to the lunchtime rush and inclement weather) and can focus on a single product line.
Lemonade	Stacy’s research indicates they could grow quicker with pita chips than sandwiches.

 

Elevated to the deli section

 

The last chapter of our analysis focuses on the available means Stacy and Mark had built up, the relationships to supermarket deli section managers. Wanting to help Stacy and Mark while also increasing traffic (and thus revenue), the deli managers agree to stock Stacy's Pita Chips in their department, relieving Stacy and Mark of the intense competition and placement fees of the snack food aisle.

Effectual principle	Situation	Action taken	Effect created
Lemonade	Stacy’s pita chips can’t compete on price with everyday snack chips in supermarkets.	Deli managers agree to Stacy displaying her pita chips in their section and offering free samples for customers to taste.	Customers understand difference in product and deli managers happily have increased traffic (and sales) in their department.
Lemonade	Many supermarkets charge high fees for prime shelf space in their competitive snack food isle.
Available means	Good relationships with deli managers in supermarkets and unique flavour and health approach compared to traditional chips.
Co-creation	Deli managers are interested in helping out Stacy and Mark.
Affordable loss	Deli managers are looking for ways to draw customers to their section to increase revenue.

What about effectual logic in a big company?

We have seen that effectual logic can be seen at every twist and turn of the Stacy's story. But now Stacy's Pita Chips is part of the enormous food conglomerate Pepsico. You will remember from the previous topic that large companies with relatively high business predictability can successfully rely on causal logic. But based on the following video, it appears that the Stacy's Team has relative independence and can act entrepreneurially - in other words effectually. So, what is going on here? Watch this video carefully in preparation for the upcoming discussion question.

But can that work, a seemingly effectual approach (using the timing and political importance of major women’s' protests to market a snack food) when you report to bosses who are using causal logic to run a big company? Share your perspective in the following discussion question:

Available means plus action equals feedback (more available means)

Based on the course content thus far, you might believe that the key to entrepreneurial success is how you think alone. The Estée Lauder quote above tells us something different. Her publicly listed, family-controlled company is now worth billions of US Dollars because she, her family, and many, many dedicated team members did things (took action) over the course of decades.

Estée Lauder probably never realised it, but her actions (more later in this section) were driven by effectual logic. She started with her available means (primarily her charming personality and willingness to work hard) to do things, try things (run small experiments), collect feedback from her customers and thus increase her understanding of the market.

Bit by bit, Estée Lauder built up a sizeable stock of available means with which she could do increasingly more - a virtuous cycle.

You have previously read about the Estée Lauder case in the textbook (p. 112). The analysis below explains in detail the importance of available means to this case, with the tables breaking down the effectual principles we can observe in this case study.

 

Estée Lauder – effectuation at work

The right name

This is a case of available means which is not seen as such by the founder. Esther Lauter was not satisfied with her name, wanting it to sound more exotic and French. So, she took action and created new available means to better serve her goals in the beauty industry.

Effectual principle	Situation	Action taken	Effect created
Pilot-in-the-plane	Esther Lauter is self-conscious about her unusual name.	She changes her name to sound more exotic and French.	She creates expectations based on consumer beliefs about French luxury, quality, and beauty culture.

Made in the kitchen

Available means are often simple, everyday things that most of us have at our disposal. In the case of Estée, it was the family kitchen, an uncle with chemistry skills, and later a local restaurant kitchen outside of normal business hours. That combination, with hard work, became the first products for Estée to test on customers, get feedback, and rather quickly, sell.

Effectual principle	Situation	Action taken	Effect created
Lemonade	No production facilities and insecure future.	Estée works with her uncle to formulate products and learns how to produce them in the family kitchen and later in a local restaurant.	First products at low cost, reducing risk and increasing pricing flexibility.
Affordable loss	Available capacity in family kitchen.
Available means	Estée Lauder’s uncle is chemist.
Co-creation	Estée Lauder’s uncle agrees to help her.
Co-creation	Local restaurant allows Estée to use their spare kitchen capacity.

Reference to the founder

That the brand still carries Estée Lauder's name is not by chance. From the beginning, her distinct personality of determination, grace and lovely nature served her well in gaining acceptance among women seeking cosmetics. This is a classic example of enduring available means: the brand promise.

Effectual principle	Situation	Action taken	Effect created
Lemonade	Consumers initially do not know or trust Estée.	Uses personality and innate sense of empathy to personalise her approach to potential customers to push “….her way to acceptance”.	Creates a brand to match her personality and increasing social acceptance of assertive women.
Available means	Distinct personality of determination, grace and lovely nature.

Lived experience

Another often overlooked type of available means is lived experience. As a woman, Estée naturally understands other women and uses her intuition to successfully build her venture, despite being surrounded by men doing business in their way. Estée is noticed, valued, and supported by other women.

Some people think that personal interests are for your free time only. Estée did not! Her insatiable love of beauty (as part of her available means) became a driving force for her business.

Effectual principle	Situation	Action taken	Effect created
Available means	Estée understands women.	Estée uses her intuition and understanding of women to build her venture.	A business focused on and supported by women.
Lemonade	Estée is surrounded by men running businesses, including the cosmetics industry.
Available means	Estée Lauder about herself “… a little girl’s insatiable love of beauty in things.”	Starts selling beauty products, building the company on family culture and values.	Establishes a reputation for quality and a loyal customer following.

Free samples

"Gives Away to Sell" is a demonstration of affordable loss, based on having the available means (in this case product samples) to give away. At the time this was not a sales strategy any other cosmetic companies employed and in fact, it was very much looked down on by the established market players. Estée understood that providing free samples and demonstrating how her cosmetics made her customers beautiful were very convincing sales techniques, long before they were done widely in the industry.

Effectual principle	Situation	Action taken	Effect created
Affordable loss	Limited cash for marketing, but free time and product samples available.	Provides samples by applying makeup to potential customers.	Increases awareness for the brand despite not advertising and builds a sense of reciprocity in the customers.

Family feel

We've saved the biggest aspect of Estée Lauder’s available means till last: her family. From the beginning, she involved (and was supported by) her family closely in her business, expanding her Available Means, Affordable Loss and to make the most of Lemons she encountered. This deep understanding which permeates the Estée Lauder corporate culture has allowed the family to maintain control of the business, despite being publicly traded.

Effectual principle	Situation	Action taken	Effect created
Co-creation	“My parents had a wonderful partnership. She was the one who came out with creative ideas, all the ideas. My father’s role was the business part.” Leonard Lauder.	Co-creates based on personal strengths and sharing of work. Joseph Lauder (Estée’s husband) sells business to raise funds to finance Estée’s fledging business.	Over course of years, becomes a global cosmetics brand.
Lemonade	Insufficient capital was available to finance Estée’s growing business.
Available means	A family in business: “You cannot really run a business unless you have a sense that your company is your family.” Leonard Lauder.
Available means	“That quality of rolling up their sleeves and working hard with a common purpose is super important as you talk about a family business that starts to transcend generations.”

 

The following video summarised this well and gives more insight into Estée Lauder.

 

Wrap up

We started with the available means (bird-in-hand) principle, examining this in action based on entrepreneurial stories. The cases we looked at as part of the LMS as well as those set out in the textbook, illustrate that very different personalities, often new to the field they chose to pursue, shared the same commitment to action and used their initially limited available means to build a venture.

Hopefully the detailed analysis of the case studies helped reinforce your understanding of effectuation, the principle of available means, and how the various effectual principles interact to become action, which creates effects. Those effects often become the available means for future actions.

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In-seminar learning tasks

The in-seminar learning tasks identified below will be completed during the scheduled seminar. Your lecturer will guide you through these tasks. Click on each of the following headings to read more about the requirements for each of your in-seminar learning tasks.

Welcome to your post-seminar learning task for this week. Please ensure you complete this after attending your scheduled seminar with your lecturer. Your lecturer will advise you if this is to be completed during your consultation session. Click on the following heading to read more about the requirement of your post-seminar learning task.

Each week you will have a consultation session, which will be facilitated by your lecturer. You can join in and work with your peers on activities relating to this subject. These session times and activities will be communicated to you by your lecturer each week. Your lecturer will start a video stream during your scheduled class time. You can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then clicking 'Join' to enter the class.

Click here to access your consultation session.

Should you be unable to attend, you will be able to watch the recording, which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.

Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)

These are optional readings to deepen your understanding of the topic material:

• Sarasvathy, S 2008, ‘The Bird-in-hand principle: who I am, what I know, and who I know’, SSRN Electronic Journal, 0090:1-8.
• Sarasvathy, S & Glinska, G 2018, A bird in hand: Founding a sustainable business in Ghana, The Rector and Visitors of the University of Virginia.

References

• CBS WIRE 2017, Five advice from Claus Meyer, streaming video, YouTube, https://www.youtube.com/watch?v=HRhlVwUPY6s
• CreativeMornings HQ 2017, Claus Meyer: changing communities with food, streaming video, YouTube, https://www.youtube.com/watch?v=M2IqS9Q71uY
• Entrepreneur 2008, Estee Lauder, https://www.entrepreneur.com/article/197658
• Furlotti, M, Podoynitsyna, K & Mauer, R 2020, ‘Means versus goals at the starting line: Performance and conditions of effectiveness of entrepreneurial action’, Journal of Small Business Management, 58(2):333-361.
• Great Big Story 2016, When gourmet gives back: creating a food scene in Bolivia, streaming video, YouTube, https://youtu.be/f4KLGIAIe5E
• iLab Incubator 2020, Bird in hand, streaming video, YouTube, https://www.youtube.com/watch?v=vuEhFsjMto4
• Mirriam-Webster n.d., A bird in the hand is worth two in the bush, https://www.merriam-webster.com/dictionary/a%20bird%20in%20the%20hand%20is%20worth%20two%20in%20the%20bush
• PaydirtPictures 2012, Stacy's Pita Chips - the Stacys way, streaming video, YouTube, https://www.youtube.com/watch?v=-EFKfIiOu1Y
• Read, S, Sarasvathy, S, Dew, N & Wiltbank, R 2016, Effectual Entrepreneurship, 2nd ed., Routledge.
• Schilling Publishing 2014, SEPM 2013: Claus Meyer, streaming video, YouTube, https://www.youtube.com/watch?v=DX0Hz75e4rg
• Society for Effectual Action, 2018, Effectuation 101, https://www.effectuation.org/?page_id=207#:~:text=Expert%20entrepreneurs%20believe%20that%20the,or%20finding%20the%20optimal%20opportunity.
• Stacy's Pita Chip 2016, Stacy’s® Story, streaming video, Vimeo, https://vimeo.com/153802987
• Stacy's Pita Chips 2017, Stacy’s stands with you, streaming video, YouTube, https://www.youtube.com/watch?v=B_AII5ecuP0
• TED 2015, The single biggest reason why start-ups succeed | Bill Gross, streaming video, YouTube, https://www.youtube.com/watch?v=bNpx7gpSqbY
• The Estée Lauder Companies 2018, A passion for beauty, a family in business, streaming video, YouTube, https://www.youtube.com/watch?v=vAWqlljhxJ0