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Cross-posted  from the YouthPower Learning Newsletter
By Anne Bitga, Technical Services Manager, Making Cents International

Many young people living in developing countries have heard the constant refrain from their governments, NGOs, and other community actors that the path to the future is via entrepreneurship. And in many places, this is for good reason. The reality is, in many developing countries, there are not enough employment opportunities being generated to absorb the large number of young people moving out of the education system and looking to earn a livelihood.

But entrepreneurship is a concept that is new to many young people, and those who have heard of it often have limited and preconceived notions about what entrepreneurship means. For example, many youth entrepreneurship programs reference individuals like Mark Zuckerberg or Bill Gates as examples of successful entrepreneurs, and it’s typical for youth to equate entrepreneurship with white, Western men working out of their garages before creating transformative technology and earning billions of dollars. Other common assumptions youth have about entrepreneurship include that businesses require significant amounts of capital to start, only educated and well-connected people can be entrepreneurs, and the starting point of entrepreneurship is the development of a business plan.

In reality, entrepreneurship is a complex journey that often involves engaging with potential customers, iteratively adapting a product/service based on market feedback, and “bootstrapping,” that is, starting without outside resources. Throughout this journey, success is predicated as much on soft skills, such as critical thinking, flexibility, persistence, and creativity, as it is on technical business management skills. However, entrepreneurship skills development is not enough if an entrepreneurial ecosystem that fosters entrepreneurship development is not present.

So how can practitioners and donors develop effective programming to help youth truly understand what entrepreneurship is and engage as entrepreneurs themselves? Additionally, how can entrepreneurship programs be designed to meet youth where they are — resource-poor and often new to the world of business?

One promising, albeit nascent, approach that some global practitioners are exploring is effectuation theory-based, youth entrepreneurship training programs. Effectuation theory, developed by Dr. Saras Sarasvathy in 2001, is an attempt to describe entrepreneurial behavior. The theory posits that since the future is unknowable, entrepreneurs cannot predict the future. Thus, market prediction activities, such as business planning and financial modelling, are not critical to starting a business. Rather, effectuation theory suggests that entrepreneurs, through their entrepreneurial activity, actively engage in a process of market creation.

Global practitioners in particular have recognized the value of the theory’s five guiding principles in helping dispel the common myths of entrepreneurship and shaping youth’s understanding of the entrepreneurial journey.

  1. The Bird-in-Hand principle invites young people to start doing business based on their own available resources, or their “means.” Given that many youth have limited resources to begin with, this principle necessitates that youth entrepreneurs start small. However, it also recognizes the tremendous value of nonfinancial resources in the entrepreneurial process, such as one’s identity (“who I am”), skills and experiences (“what I know”), and personal connections (“who I know”).
  2. The Crazy Quilt principle teaches young people about the importance of collaboration, rather than competition, in business. The principle in short offers that entrepreneurs expand their resources by entering into strategic partnerships with others. For youth, this dismisses the myth of the solitary entrepreneurial genius and instead promotes the idea of working with one’s peers to solve problems and seize opportunities, leveraging the strengths each individual brings to the team.
  3. The Affordable Loss principle delivers a reality check to youth related to the potential financial success of their business. It reminds youth to consider not what they expect to gain from their business, but rather only what they can afford to lose; a pertinent reminder given that globally, over 70% of business start-ups fail (Riani, Abdo. Forbes Magazine). Youth may dream about getting rich from business; this principle realistically reminds them that financial success in business takes time, if it comes at all, and that there is a lot of hard work before any gains.
  4. The Lemonade principle recognizes that entrepreneurs encounter surprises – good and bad – on their entrepreneurial journey. This is especially true in developing country contexts, where settings can shift dramatically in response to political, social, and environmental occurrences. The principle suggests that youth treat these surprises as opportunities to be seized rather than set-backs, helping reinforce key soft skills, such as problem-solving, flexibility, and creativity, that youth need to be successful in business and in life.
  5. The Pilot-in-the-Plane principle, the overarching worldview of the theory, invites young people, as entrepreneurs, to see themselves, rather than pre-existing market factors, as determinants of their future. This is a particularly powerful idea for youth, many of whom might otherwise feel like they are victims of factors beyond their control.

Though much has yet to be learned about the impact of effectuation theory in youth entrepreneurship programs, it has emerged as a promising approach to help shape youth’s mindsets related to starting a business. Furthermore, effectuation theory in youth entrepreneurship training programs has:

  • Proved to be applicable and useful across sectors, and simple and easy to understand across contexts;
  • Has a bias towards action that helps young people get their ventures off the ground quickly, even in resource-limited cases; and
  • Stresses an assets-based approach, in alignment with Positive Youth Development (PYD), that focuses on what young people have rather than dwelling on what they do not.

However, practitioners implementing effectuation-based youth entrepreneurship programs noted some challenges:

  • Effectuation can be a difficult mindset for some youth to adopt;
  • Identifying capable trainers and teachers committed to using an effectual approach to entrepreneurship can be an obstacle; and
  • Most ecosystems within which entrepreneurs function are not effectual in nature (e.g., most banks require business plans), thus practitioners must balance using effectuation while also preparing youth to navigate this environment.

For practitioners interested in exploring ways to integrate the theory into their programs, check out YouthPower Learning’s study on effectuation theory, which includes case studies from Ghana and Mozambique highlighting several programs’ experience applying the theory to youth entrepreneurship training as well as a training guidance note that offers recommendations as to how practitioners can incorporate the theory into their programming. The full suite of resources can be found here.

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