Chapter 2. Recognizing Opportunities and Generating Ideas

I.                     The Difference Between Opportunities and Ideas

·         An opportunity is a favorable set of circumstances that creates a need for a new product, service, or business.

·         An entrepreneur recognizes a problem or an opportunity gap and creates a business to address the problem or fill the identified gap.

·         An opportunity has four essential qualities: It is (1) attractive, (2) timely, (3) durable and (4) anchored in a product, service, or business that creates or adds value for its buyer or end user.

·         Window of opportunity is a metaphor describing the time period in which a firm can realistically enter a new market.

·         An idea is a thought, an impression, or a notion. An idea may or may not meet the criteria of an opportunity.

 

II.                   Three Ways to Identify Opportunity

1.       Observing Trends

The most important trends to follow are:

a.       Economic Forces

·         State of the economy

·         Level of disposable income

·         Consumer spending patterns

b.       Social Forces

·         Social and cultural trends

·         Demographic changes

·         What people think is “in”

c.       Technological Advances

·         New technologies

·         Emerging technologies

·         New uses of old technologies

d.       Political and Regulatory Changes

·         New changes in political arena

·         New laws and regulations

2.       Solving a Problem

Problems can be recognized by observing the challenges that people encounter in their daily lives and through more simple means, such as intuition, serendipity, or chance. Consistent with this observation, many companies have been started by people who have experienced a problem in their own lives, and then realized that the solution to the problem represented a business opportunity.

3.       Finding Gaps in the Marketplace

A common way that gaps in the marketplace are recognized is when people become frustrated because they can’t find a product or service that they need and recognize that other people feel the same way.

III.                 Personal Characteristics of the Entrepreneur

Opportunity recognition refers to the process of perceiving the possibility of a profitable new business or a new product or service.

1.       Prior Experience

Several studies show that prior experience in an industry helps entrepreneurs recognize business opportunities.

2.       Cognitive Factors

Entrepreneurial alertness is the ability to notice things without engaging in deliberate search.

3.       Social Networks

The extent and depth of an individual’s social network affects opportunity recognition.

4.       Creativity

The process of generating a novel or useful idea. Five steps to generating creative ideas:

a.       Preparation

The background, experience, and knowledge that an entrepreneur brings to the opportunity recognition process.

b.       Incubation

The stage during which a person considers an idea or thinks about a problem.

c.       Insight

The flash of recognition when the solution to a problem is seen or an idea is born.

d.       Evaluation

The stage of the creative process during which an idea is subjected to scrutiny and analyzed for its viability.

e.       Elaboration

The stage during which the creative idea is put into a final form.

IV.                Techniques for Generating Ideas

1.       Brainstorming

The process of generating several ideas about a specific topic.

2.       Focus Groups

A gathering of 5 to 10 people who are selected because of their relationship to the issue being discussed. Focus groups usually work best as a follow-up to brainstorming, when the general idea for a business has been formulated but further refinement of the idea is needed.

3.       Library and Internet Research

The best ideas emerge when the general notion of an idea is merged with extensive library and internet research.

4.       Other Techniques

·         Customer Advisory Boards

Meet regularly to discuss needs, wants, and problem that may lead to new ideas.

·         Day-in-the-Life Research

A company routinely sends team of testers to the homes and businesses of its user to see how its products are working and to seek insights for new product ideas.

V.                  Encouraging the Development of New Ideas

1.       Establishing a Focal Point for Ideas

Some firms meet the challenge of encouraging, collecting, and evaluating ideas by designating a specific person to screen and track them. Another approach is to establish an idea bank, which is a physical or digital repository for storing ideas.

2.       Encouraging Creativity at the Firm Level

An employee may exhibit creativity in a number of ways, including solving a problem or taking an opportunity and using it to develop a new product or service idea.