How does innovation work without a budget?

No budget? No problem!

Is it possible to innovate without having the money to do so? We say yes! Because everyone has ideas slumbering within themselves. And where there is an idea, there is also an innovation. But what opportunities are there to innovate without money? Especially in times as dynamic as these?

If we don't have any money, then at least we need good ideas.

— Oscar Lafontaine

The effectuation approach

Effectuation makes it possible to actively shape the future when precise planning is actually impossible due to uncertainties. It is therefore a way of thinking that is particularly popular with companies because it involves deciding and acting. Simple ideas become new products, services, companies or solutions that are developed together. The term was introduced by entrepreneurship researcher Saras Sarasvathy. The framework, which became well-known in German-speaking countries thanks to Michael Faschingbauer, is based on the following four principles.

1 Mid orientation instead of goal orientation

According to the first principle, effectuation starts with the available means instead of setting goals. We therefore consider what we have and know and thus determine the path.

2 Affordable loss instead of expected return

Since Effectuation is used especially in times of planning uncertainty, the focus is not on yield. The focus is on what you can afford to use or lose.

3 Using circumstances and coincidences instead of avoiding

Coincidences and surprises are welcome, as opportunities can be derived and benefits derived from them. Because it is precisely then that there is impetus for new ideas and paths, as is particularly evident in times of Covid-19.

4 Partnership instead of competition

Effectuation is entirely in the spirit of open innovation. From the outset, like-minded people are an important component of the process of effectuation in order to build up a network. Numerous stakeholders increase opportunities and reduce uncertainty at the same time.

The effectuation process

Effectuation runs in a loop. It starts with the question of the available resources, which gives rise to the options for action. In this phase, you get into contact with others and partnerships arise. As a result of these new partnerships, the more available resources and ideas create new potential or even new goals, which is why the question of the available resources and the resulting options for action is then answered again. In the end, this results in a new solution, a new service, a new product or even a new company.

Conclusion: Innovation without a budget?!

Regardless of whether the Effectuation Approach, the Frugal Innovation method or another approach is being followed — the goal is always to create something new with what is available. And this in the “cheapest” way possible, as many people have a tight budget in times of crisis. Ideas and partnerships are therefore all the more valuable in times of uncertainty. It is also clear that innovative organizations are more resilient and can grow more sustainably, all the more reason to get creative and innovative with what you have now.