Business Opportunity Identification

Introduction to Entrepreneurship: Agenda

• The session will cover the definition of entrepreneurial opportunities, how they evolve, and how to identify them.
• Explore the creative process and decision-making involved in entrepreneurship.
• Introduction, Opportunity Recognition, Effectuation Principles, and Outlook are on the agenda.

Entrepreneurial Opportunities

• Entrepreneurs identify, assess, and capitalize on business opportunities.
• "An opportunity is anchored in a product or service adding value for its buyer or end user." (Hisrich et al., 2005)
• "Perceiving a possibility for new Profit" (Christensen et al., 1989)
• "The chance to meet a market need" (Ardichvili et al., 2003)
• Entrepreneurial opportunities involve introducing new goods, services, raw materials, and methods that sell for more than the production costs. (Shane and Venkataraman, 2000)

Origin of Ideas

• New ideas can come from work, university, being at home, leisure time, or while traveling
• Other sources of inspiration include:
  • Creativity Techniques
  • Talking to People

Factors Influencing Opportunity Identification

• Creativity, knowledge, and networks, with environmental changes, can lead to business opportunities.

The Essence of Creativity

• It involves generating novel and potentially useful ideas, insights, or problem solutions.
• Creativity responds to problems and challenges and can be both reactive and proactive.
• Creativity integrates both convergent (logic, previous knowledge, rationality) and divergent thinking (intuition, gut feeling, irrationality).
• Creativity can be improved through specific techniques.

Techniques for Creativity

• Analogical Reasoning: Transferring knowledge from one area to help understand or create ideas in another. (Ward, 2004, p. 180)
• Conceptual Combination: Merging distinct, previously unrelated concepts, like affordable luxury or combining needs from different customer groups.
• Checklist Method: Utilizing prompts like "Put to other uses?", "Adapt?", "Modify?" to explore opportunities, purposes, appeals, or ideas.
• WIBNI (Wouldn't It Be Nice If): A technique that sparks innovation by imagining ideal solutions.

Significance of Knowledge

• Prior experience shapes the discovery of specific opportunities.
• Other experience can open doors to other opportunities.
• Without relevant experience, the identification of opportunities is limited.
• Knowledge coupled with 3D printing technology can lead to opportunities in metal parts without tooling, drug microstructures, and sculptures from photos.

Knowledge and Creativity Together

• Sony almost missed a golden chance by temporarily halting the music CD research in the mid-1970s.
• Early music CDs had a limit of 18 hours but putting 18 hours of music would be non-viable.
• Size and shape of LP record albums were taken as starting point.
• Knowledge can restrict the development of opportunities.
• Creativity is needed to overcome restrictions.

The Role of Social Networks

• Social networks can provide valuable insights and support for entrepreneurs.
• Friends and family, potential customers, suppliers, and distributors, alongside industry experience and knowledge, are good social networks.

The Private Environment in Entrepreneurship

• Social capital drives information on technological, social, demographic, political, and regulatory change.
• Promises of support and encouragement increase the likelihood of starting a business.

Opportunities from the Environment

• Complex patterns of environmental change like political, economic, societal, and technological produce opportunities.
• These opportunities arise when conditions that didn't exist previously become present.

Identifying Sources of Opportunities

• Stay informed, learn about political, economic, social, and technological changes.
• Anticipate the consequences of these changes.
• Think of potential business opportunities.

Summary: Key Factors

• Entrepreneurial opportunities involve introducing goods/services that sell for more than production costs. (Shane and Venkataraman, 2000)
• Social networks, changing environments, knowledge, and creative vision trigger opportunity identification.
• Knowledge may limit opportunity identification.
• Systematically assess insights, networks, and the environment, then apply creativity to identify new opportunities.

Risk vs. Uncertainty: Key Differences

• Risk involves outcomes with calculable, probable outcomes.
• Uncertainty relates to situations where outcomes' probabilities cannot be determined or are unknown.

Entrepreneurial Decision Making

• Involves opportunity assessment, entry, exploitation, and exit decisions within an environment.
• Decision-making is also influenced by the individual characteristics of the entrepreneur

Uncertainties Around A Business Idea

• A business can be started on a new idea, a well defined product, and with little experience.
• Uncertainties can involve:
  • Can the business survive?
  • Can the idea go anywhere?
  • Will it actually work?
  • Is there a market?
  • Will it be profitable?

Expert vs. Non-Expert Entrepreneurs

• Expert Entrepreneurs define resources before goals.
• Non-expert Entrepreneurs define goals before defining resources.

The 5 Effectuation Principles

• Means-oriented vs Goal-oriented.
• Affordable Loss vs Expected Return
• Leveraging Contingencies vs Avoiding Suprises
• Focus on Control vs Focus on Prediction
• Partnerships vs Competitive Analysis

Principle 1: Start with Means (Bird-in-Hand)

• Beginners focus on a desired outcome while experts start with what they have available.
• Begin with available resources.
• Experts leverage their identities, knowledge, and networks to explore possibilities.
• Focus on who you are, what you know, and whom you know to inform decisions and open new opportunities.

Advantages of Being Means-Driven

• Not waiting, or looking for outside factors
• Leverage strengths
• Open to opportunites
• Creative

Principle 2: Affordable Loss

• Involves assessing what one can afford to lose at each stage, not pursuing big wins alone.
• Non-entrepreneurs focus on a goal and achieving high equity return, (Josef Ackermann statement).
• Entrepreneurs reduce risk for a low level risk, (Jeff Bezos statement).

Affordable Loss

• Traditional Approach: Calculate the upside potential and select best opportunity but focus on what you can afford to lose.
• Calculated approach or focus on downside.

Principle 3: Leverage Contingencies (Lemonade)

• Expert entrepreneurs are open to surprises, turning bad news into market opportunities.

Principle 4: Pilot-In-The-Plane

• Experts know actions lead to desired outcomes versus relying on predictions alone.
• Create your own destiny

Principle 5: Patchwork Quilt

• Build partnerships with interested parties.
• Form partnerships so the market is co-created.

Explore factors contributing to identifying business opportunities. Understand creativity vs problem-solving and the role of analogical reasoning. Learn how knowledge and environmental changes can be leveraged.