Marketing Under Uncertainty: The Logic of an Effectual Approach

Stuart Read, Nicholas Dew, Saras D. Sarasvathy, Michael Song, & Robert Wiltbank
Journal of Marketing
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Uncertainty is everywhere. It is imposed on people as consumer taste or as global demographics change. It is created when people deliver innovative products or business models to the market. Yet little has been written about how to effectively manage situations in which historical data cannot offer the predictive insights that would enable a manager to make informed business decisions. This article describes how experienced, expert entrepreneurs deploy unique strategies when confronted with an uncertain, shifting marketplace—strategies that invert traditional market research approaches used by managers with less entrepreneurial experience.

The expert entrepreneurs who participated in this study exhibit the following traits:

•They start taking action on the basis of what they know, who they know, and the resources they have available, doing what they can do rather than analyzing optimal courses of action.
•They evaluate opportunities on the basis of whether the downside risk is acceptable rather than on the attractiveness of the predicted upside.
•They seek partnerships with people and firms willing to make a commitment to the joint creation of products, services, firms, or markets rather than focusing on competitive analysis or relying on market research.
•They embrace surprises that arise from uncertain situations, leveraging flexibility rather than making commitments based on expectations.
•They focus on effectual activities in which they have some means of controlling the outcome, thus reducing their need for predictions.

The term “effectual” is used to describe expert entrepreneurs who successfully effect the transformation of uncertain situations into new products, services, firms, and markets and demonstrate their unique approach to marketing-mix elements, such as price and place. The central implication for managers in start-ups, established companies, and multinational firms is clear: In uncertain situations, opportunities cannot be found through search, analysis, and selection but instead are cocreated in collaboration with partners, customers, and stakeholders.

Biography
Stuart Read is Dean of Research, Development, and Publishing and Professor of Marketing at IMD. His academic credentials include a PhD in Marketing from the University of Washington and a bachelor’s degree in Computer Science from Harvard University. Stuart’s research is focused on effectuation, a set of heuristics that describe how people effectively make decisions in situations of true uncertainty. He has approximately 20 years of industry experience and has participated in the creation of six high-technology start-up firms. Of those firms, 4 were acquired by industry leaders, including Sun Microsystems and Lotus Development Corporation. Two are publicly traded. Stuart has also spent six years with enterprise database software provider, Oracle Corporation; thus, he is equally interested in research and applications of effectual principles in entrepreneurial start-up and large corporate settings

Nicholas Dew is Assistant Professor of Strategic Management at the Naval Postgraduate School, Monterey, CA. His research focuses on entrepreneurial cognition and industry evolution. He has a PhD in Management from the University of Virginia and an MBA from the Darden School of Business. Before entering academia, he spent eight years working internationally in the oil industry. His work has been published in several academic journals, including Strategic Management Journal, Journal of Business Venturing, Entrepreneurship Theory and Practice, Journal of Economic Behavior and Organization, Journal of Business Ethics, Journal of Evolutionary Economics, Industrial and Corporate Change, and Organization Studies. Nick has been a recipient of the Louis D. Liskin award for teaching excellence in the business school at the Naval Postgraduate School.

Saras D. Sarasvathy Associate Professor of Business Administration at the University of Virgina’s Darden School of Business. Saras is a leading scholar on the cognitive basis for high-performance entrepreneurship and is the author of Effectuation: Elements of Entrepreneurial Expertise. Effectuation is recognized as a rigorous framework for understanding the creation and growth of new organizations and markets. The research program based on effectuation involves more than a dozen scholars from around the world whose published and working papers can be found at www.effectuation.org. Saras has also developed several cases and other instructional materials to teach effectuation. In addition to a master’s degree in Industrial Administration, Saras received her PhD in Information Systems from Carnegie Mellon University. Her thesis on entrepreneurial expertise was supervised by Herbert Simon, 1978 Nobel Laureate in Economics. Before joining Darden, she was on the faculty at the University of Washington and University of Maryland. Before that, she was part of the founding team in five entrepreneurial ventures.

Michael Song holds the Charles N. Kimball, MRI/Missouri Endowed Chair in Management of Technology and Innovation, is Professor of Marketing, and is the founder and executive director of Institute for Entrepreneurship and Innovation at University of Missouri–Kansas City. Dr. Song is ranked as the world’s foremost scholar in innovation management, among the “most-cited scientists in economics and business” over a ten-year period, the most published scholar in Journal of Product Innovation Management over the past 20 years, and one of the top 20 technology management scholars. Dr. Song has published more than 75 articles in top academic journals, including Management Science, Strategic Management Journal, Academy of Management Journal, Journal of Marketing Research, Marketing Science, Journal of Marketing, Journal of the Academy of Marketing Science, Journal of International Business Studies, Journal of Operations Management, and Journal of Product Innovation Management, among other outlets.

Robert Wiltbank is Associate Professor of Strategic Management in the Atkinson Graduate School of Management at Willamette University. His research focuses on strategy making under uncertainty, particularly as it is related to new venture development. His research on angel investing performance is the first large empirical examination of the outcomes achieved by angel investors in the United States. At Willamette University, he teaches courses on new venture creation, strategic management, and industry analysis. He is a Batten Institute Research Fellow with the Darden School at the University of Virginia and is on the editorial board of the Journal of Business Venturing. He holds a PhD in Strategic Management from the University of Washington and a degree in Finance and Accounting from Oregon State University.

Journal of Marketing, Volume 73, Number 3, May 2009
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Stuart Read, Nicholas Dew, Saras D. Sarasvathy, Michael Song, & Robert Wiltbank
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