How does innovation work without a budget?

No budget? No problem!

Is it possible to innovate without having any money to do so? We say yes! Because everyone has ideas lying dormant inside them. And where there is an idea, there is also an innovation. But what are the possibilities of innovating without money? Especially in such dynamic times as these?

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

- Oskar Lafontaine

The Effectuation Approach

Effectuation makes it possible to actively shape the future when precise planning is actually not possible due to uncertainties. It is therefore a way of thinking that is particularly popular with companies because it is about deciding and acting. In the process, simple ideas become new products, services, companies or solutions that are jointly developed. The term was introduced by entrepreneurship researcher Saras Sarasvathy. The framework, which became known in German-speaking countries through Michael Faschingbauer, is based on the following four principles.

1 Means orientation instead of goal orientation

According to the first principle, Effectuation starts with the means at hand instead of setting the goal. So we consider what we have and what we know and use that to determine the path.

2 Affordable loss instead of expected return

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

3 Use circumstances and coincidences instead of avoiding them

Coincidences and surprises are welcome, because opportunities can be derived from them and benefits can be gained. For it is precisely then that there are impulses for new ideas and paths, as can be seen especially in Covid-19 times.

4 Partnership instead of competition

Effectuation is very much in the spirit of Open Innovation. Like-minded people are an important component in the process of Effectuation from the very beginning in order to build a network. Having numerous stakeholders increases the possibilities and at the same time decreases the uncertainty.

The Effectuation process

Effectuation runs in a loop. It begins with the question of the available means, from which the possibilities for action arise. In this phase, one enters into an exchange with others and partnerships emerge. Through these new partnerships, new potentials or even new goals emerge from the more available means and ideas, which is why the question about the existing means and the resulting possibilities for action is then answered again. In the end, a new solution, a new service, a new product or even a new company emerges.

Conclusion: Innovation without a budget?

Regardless of whether the Effectuation approach, the Frugal Innovation method or another approach is pursued - the goal is always to create something new with what is already there. And to do so in the "cheapest" way possible, since in times of crisis many people's budgets are tight. Ideas and partnerships are therefore all the more valuable in uncertain times. It is also clear that innovative organisations are more resilient and can grow more sustainably, all the more reason to get creative and innovative with what you have now.