Topic 2- Recognizing opportunities (Entrepreneurship Development)
- 2. What is An Opportunity? Opportunity Defined An opportunity is a favorable set of circumstances that creates a need for a new product, service or business.
- 3. What is an Opportunity? An opportunity has four essential qualities
- 4. ABILITY TO SEARCH AND DISCOVER BUSINESS OPPORTUNITIES •Experience and exposure •Knowledge and skills •“Special alertness”
- 5. Sources of identifying opportunities • Social network • Creativity • Vigilant • Employees • Customers • Retailers and distributors • Business associates • Bankers
- 6. CRITERIA FOR EVALUATION AND SELECTION 1. Can make money and has potential for growth 2. Less competition 3. Good fit between entrepreneur and opportunity 4. Has competitive advantage 5. Workable and efficient 6. Not against the norms and values of the community 7. Conform with laws and regulations
- 7. Three Ways to Identify an Opportunity 2-7
- 8. First Approach: Observing Trends Observing Trends •Trends create opportunities for entrepreneurs to pursue. •The most important trends are: •Economic forces. •Social forces. •Technological advances. •Political action and regulatory change. •It’s important to be aware of changes in these areas. 2-8
- 9. First Approach: Observing Trends Environmental Trends Suggesting Business or Product Opportunity Gaps
- 10. Trend 1: Economic Forces Economic trends help determine areas that are ripe for new startups and areas that startups should avoid. Example of Economic Trend Creating a Favorable Opportunity • A weak economy favors startups that help consumers save money. • An example is GasBuddy.com, a company started to help consumers save money on gas.
- 11. Trend 2: Social Forces Social trends alter how people and businesses behave and set their priorities. These trends provide opportunities for new businesses to accommodate the changes. Examples of Social Trends • Retirement of baby boomers. • The increasing diversity of the workplace. • Increasing interest in health, fitness, and wellness. • Emphasis on alternative forms of energy. • New forms of music and other types of entertainment.
- 12. Trend 3: Technological Advances Advances in technology frequently create business opportunities. Examples of Entire Industries that Have Been Created as the Results of Technological Advances • Computer industry • Internet • Biotechnology • Digital photography
- 13. Trend 3: Technological Advances Once a technology is created, products often emerge to advance it. Example: H20Audio An example is H20Audio, a company started by four former San Diego State University students, that makes waterproof housings for the Apple iPod.
- 14. Trend 4: Political Action and Regulatory Changes Political action and regulatory changes also provide the basis for opportunities. General Example Laws to protect the environment have created opportunities for entrepreneurs to start firms that help other firms comply with environmental laws and regulations.
- 15. Trend 4: Political Action and Regulatory Changes Company created to help other companies comply with a specific law. Specific Example The No Child Left Behind Act of 2002 requires states to develop criterion-based assessments in basic skills to be periodically given to students in certain grades. Kim and Jay Kleeman, two high school teachers, started Shakespeare Squared, a company that helps high schools comply with the act.
- 16. Second Approach: Solving a Problem Solving a Problem •Sometimes identifying opportunities simply involves noticing a problem and finding a way to solve it. •These problems can be pinpointed through observing trends and through more simple means, such as intuition, serendipity, or change.
- 17. Third Approach: Finding Gaps in the Marketplace Gaps in the Marketplace •A third approach to identifying opportunities is to find a gap in the marketplace •A gap in the marketplace is often created when a product or service is needed by a specific group of people but doesn’t represent a large enough market to be of interest to mainstream retailers or manufacturers.
- 18. Third Approach: Finding Gaps in the Marketplace Product gaps in the marketplace represent potentially viable business opportunities. Specific Example In 2000 Tish Cirovolv realized there were no guitars on the market made specifically for women. To fill this gap, she started Daisy Rock Guitars, a company that makes guitars just for women.
- 19. Personal Characteristics of the Entrepreneur Characteristics that tend to make some people better at recognizing opportunities than others Prior Experience Cognitive Factors Social Networks Creativity
- 20. Prior Experience Prior Industry Experience •Several studies have shown that prior experience in an industry helps an entrepreneur recognize business opportunities. •By working in an industry, an individual may spot a market niche that is underserved. •It is also possible that by working in an industry, an individual builds a network of social contacts who provide insights that lead to recognizing new opportunities.
- 21. Cognitive Factors Cognitive Factors •Studies have shown that opportunity recognition may be an innate skill or cognitive process. •Some people believe that entrepreneurs have a “sixth sense” that allows them to see opportunities that others miss. •This “sixth sense” is called entrepreneurial alertness, which is formally defined as the ability to notice things without engaging in deliberate search.
- 22. Social Networks Social Networks • The extent and depth of an individual’s social network affects opportunity recognition. • People who build a substantial network of social and professional contacts will be exposed to more opportunities and ideas than people with sparse networks. • In one survey of 65 start-ups, half the founders reported that they got their business idea through social contacts. •Strong Tie Vs. Weak Tie Relationships • All of us have relationships with other people that are called “ties.” (See next slide.)
- 23. Social Networks •Nature of Strong-Tie Vs. Weak Tie Relationships • Strong-tie relationship are characterized by frequent interaction and form between coworkers, friends, and spouses. • Weak-tie relationships are characterized by infrequent interaction and form between casual acquaintances. •Result • It is more likely that an entrepreneur will get new business ideas through weak-tie rather than strong-tie relationships. (See next slide.)
- 24. Social Networks Strong-Tie Relationships Weak-Tie Relationships These relationships, which typically form between like minded individuals, tend to reinforce insights and ideas that people already have. These relationships, which form between casual acquaintances, are not as apt to be between like- minded individuals, so one person may say something to another that sparks a completely new idea. Why weak-tie relationships lead to more new business ideas than strong-tie relationships
- 25. Creativity Creativity •Creativity is the process of generating a novel or useful idea. •Opportunity recognition may be, at least in part, a creative process. •For an individual, the creative process can be broken down into five stages, as shown on the next slide. 2-25
- 26. Creativity Five-Steps to Generating Creative Ideas
- 27. Full View of the Opportunity Recognition Process Depicts the connection between an awareness of emerging trends and the personal characteristics of the entrepreneur
- 28. Techniques For Generating Ideas Brainstorming Focus Groups Library and Internet Research
- 29. Brainstorming •Is a technique used to generate a large number of ideas and solutions to problems quickly. •A brainstorming “session” typically involves a group of people, and should be targeted to a specific topic. •Rules for a brainstorming session: •No criticism. •Freewhelling is encouraged. •The session should move quickly. •Leap-frogging is encouraged.
- 30. Focus Groups •A focus group is a gathering of five to ten people, who have been selected based on their common characteristics relative to the issues being discussed. •These groups are led by a trained moderator, who uses the internal dynamics of the group environment to gain insight into why people feel they way they do about a particular issue. •Although focus groups are used for a variety of purposes, they can be used to help generate new business ideas.
- 31. Library and Internet Research •Libraries are an often underutilized source of information for generating new business ideas. •The best approach is to talk to a reference librarian, who can point out useful resources, such as industry-specific magazines, trade journals, and industry reports. •Simply browsing through several issues of a trade journal or an industry report on a topic can spark new ideas.
- 32. Library and Internet Research •If you are starting from scratch, simply typing “new business ideas” into a search engine will produce links to newspapers and magazine articles about the “hottest” new business ideas. •If you have a specific topic in mind, setting up Google or Yahoo! e-mail alerts will provide you to links to a constant stream of newspaper articles, blog posts, and news releases about the topic. •Targeted searches are also useful.
- 33. Other Techniques •Customer Advisory Boards •Some companies set up customer advisory boards that meet regularly to discuss needs, wants, and problems that may lead to new ideas. •Day-In-The-Life Research •A type of anthropological research, where the employees of a company spend a day with a customer.
- 35. Thank You! 2-35