Effectuation in Manufacturing: How Entrepreneurial Decision-making Techniques can be used to Deal with Uncertainty in Manufacturing

Abstract

Aspiring countries all over the world gain market share in manufacturing and rapidly close the productivity and quality gap that has until now protected some parts of the industry in Europe and the United States from dislocation. However, causal production planning and manufacturing, the basis for productivity and quality, is challenged by the ever-greater need for flexibility and customized products in an uncertain business environment. The result is an increasing manufacturing complexity driven by the high number of product variations. Production managers are thus faced with a high degree of uncertainty under which they have to make their decisions. In many ways, manufacturing managers face similar challenges as entrepreneurs do: they have to operate in an uncertain environment, cannot rely on forecasts and have to involve different stakeholders inside and outside the company in order to be successful. This article uses a case-study-based approach to assess how production managers can apply decision-making principals of successful entrepreneurs. “Effectuation” instead of causal decision-making can be applied to handle the uncertainty of mass customization, to seek the right partners in alliances and to advance towards virtual production. In order to deal with uncertainty in manufacturing, managers have to allow a more entrepreneurial handling of situations. To the best of our knowledge, this study is the first to connect effectual decision-making with the manufacturing context. The findings help managers to use their resources more efficiently and contribute to bridge the gap between production research and entrepreneurship.