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Combining effectual and causal methodologies in growth-phase startups
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Entrepreneurship and innovation.
2015 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

Lean Startup is a widely adopted method nowadays, which contains a consistent approach to unveil a valid business model in a scenario of extreme uncertainty. This process involves a significant amount of effectual reasoning.

On the other hand, established companies use planning strategies for their operations where causal reasoning drives the decision-making process based on future market predictions.

There is clearly a gap on how growing startups that have discovered a working business model shift their initial effectual methodologies to more causal methods while they grow. In this thesis, common effectual and causal methodologies are explained and mapped against existing frameworks used in the industry. Furthermore, an analysis of how companies can include causality into the effectual methodologies initially used is done, in particular using the Lean Startup framework.

Furthermore, the intrusion of causal components in effectual frameworks leads to a question of balancing between the causal and effectual components. A simple method to detect whether a startup needs one or the other during its evolution is presented and explained using game theory. Through non-cooperative game strategies, i.e. Nash equilibrium, a simple rule to evaluate the current balance between causation and effectuation can be used. 

Place, publisher, year, edition, pages
2015. , 44 p.
Keyword [en]
Effectuation, causation, lean, business model, strategy, balance, innovation, exploitation, exploration, game theory, Nash equilibrium.
National Category
Business Administration
URN: urn:nbn:se:kth:diva-170111OAI: diva2:827296
Educational program
Master of Science - Entrepreneurship and Innovation Management
2015-05-25, Stockholm, 15:20 (English)
Available from: 2015-06-30 Created: 2015-06-26 Last updated: 2015-06-30Bibliographically approved

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