Chapter 2: Recognizing Opportunities and Generating Ideas PDF

Chapter 2 Recognizing Opportunities and Generating Ideas...

Chapter 2 Recognizing Opportunities and Generating Ideas Bruce R. Barringer R. Duane Ireland Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-1  Chapter Objectives 1 of 2 1. Explain why it’s important to start a new firm when its ―window of opportunity‖ is open. 2. Explain the difference between an opportunity and an idea. 3. Describe the three general approaches entrepreneurs use to identify opportunities. 4. Identify the four environmental trends that are most instrumental in creating business opportunities. 5. List the personal characteristics that make some people better at recognizing business opportunities than others. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-2  Chapter Objectives 2 of 2 6. Identify the five steps in the creative process. 7. Describe the purpose of brainstorming and its use as an idea generator. 8. Describe how to use library and Internet research to generate new business ideas. 9. Explain the purpose of maintaining an idea bank. 10. Describe three steps for protecting ideas from being lost or stolen. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-3  What is An Opportunity? 1 of 2 An opportunity is a favorable Opportunity Defined set of circumstances that creates a need for a new product, service, or business. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-4  What is an Opportunity? 2 of 2 Four Essential Qualities of an Opportunity Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-5  Three Ways to Identify an Opportunity Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-6  First Approach: Observing Trends 1 of 2 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. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-7  First Approach: Observing Trends 2 of 2 Environmental Trends Suggesting Business or Product Opportunity Gaps Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-8  Trend 1: Economic Forces Example of Economic Trend Creating a Favorable Opportunity Economic trends help A weak economy favors determine areas that are start-ups that help consumers ripe for new start-ups and save money. areas that start-ups should An example is GasBuddy.com, avoid. a company started to help consumers save money on gas. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-9  Trend 2: Social Forces Examples of Social Trends Social trends alter how people and businesses Aging of baby boomers behave and set their The increasing diversity of priorities. These trends the workplace Increasing interest in social provide opportunities for networks such as Facebook new businesses to and Twitter accommodate the An increasing focus on health changes. and wellness Increasing interest in ―green‖ products Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-10  Trend 3: Technological Advances 1 of 2 Examples of Entire Industries Advances in technology that Have Been Created as the frequently create business Result of Technological Advances opportunities. Computer industry Internet Biotechnology Digital photography Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-11  Trend 3: Technological Advances 2 of 2 Example: H20Audio Once a technology is An example is H20Audio, a created, products often company started by four emerge to advance it. former San Diego State University students, that makes waterproof housings for the Apple iPhone and iPod. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-12  Trend 4: Political Action and Regulatory Changes 1 of 2 General Example Political action and Laws to protect the environment regulatory changes also have created opportunities for provide the basis for entrepreneurs to start firms that opportunities. help other firms comply with environmental laws and regulations. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-13  Trend 4: Political Action and Regulatory Changes 2 of 2 Specific Example Company created to help The No Child Left Behind Act of 2002 requires states to other companies comply develop criterion-based with a specific law. 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. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-14  Second Approach: Solving a Problem 1 of 2 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. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-15  Second Approach: Solving a Problem 2 of 2 A problem facing the U.S. and other countries is finding alternatives to fossil fuels. A large number of entrepreneurial firms, like this solar farm, are being launched to solve this problem. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-16  Third Approach: Finding Gaps in the Marketplace 1 of 2 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. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-17  Third Approach: Finding Gaps in the Marketplace 2 of 2 Specific Example Product gaps in the In 2000 Tish Cirovolv marketplace represent realized there were no guitars potentially viable on the market made business opportunities. specifically for women. To fill this gap, she started Daisy Rock Guitars, a company that makes guitars just for women. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-18 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 Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-19  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. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-20  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. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-21  Social Networks 1 of 3 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. – Research results suggest that between 40% and 50% of people who start a business got their idea via a social contact. Strong Tie Vs. Weak Tie Relationships – All of us have relationships with other people that are called ―ties.‖ (See next slide.) Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-22  Social Networks 2 of 3 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.) Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-23  Social Networks 3 of 3 Why weak-tie relationships lead to more new business ideas than strong-tie relationships Strong-Tie Relationships Weak-Tie Relationships These relationships, which These relationships, which typically form between like- form between casual minded individuals, tend to acquaintances, are not as reinforce insights and ideas apt to be between like- that people already have. minded individuals, so one person may say something to another that sparks a completely new idea. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-24  Creativity 1 of 2 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. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-25  Creativity 2 of 2 Five Steps to Generating Creative Ideas Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-26  Full View of the Opportunity Recognition Process Depicts the connection between an awareness of emerging trends and the personal characteristics of the entrepreneur Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-27  Techniques for Generating Ideas Brainstorming Focus Groups Library and Internet Research Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-28  Brainstorming 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. Freewheeling is encouraged. The session should move quickly. Leap-frogging is encouraged. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-29  Focus Groups Focus Group – 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 the 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. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-30  Library and Internet Research 1 of 3 Library 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. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-31  Library and Internet Research 2 of 3 Examples of Useful Search Large public and Engines and Industry Reports university libraries BizMiner typically have access to ProQuest search engines and IBISWorld industry reports that would Mintel cost thousands of dollars LexisNexis Academic to access on your own. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-32  Library and Internet Research 3 of 3 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 with links to a constant stream of newspaper articles, blog posts, and news releases about the topic. – Targeted searches are also useful. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-33  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. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-34  Encouraging New Ideas 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—for if it’s everybody’s job, it may be no one’s responsibility. – Another approach is to establish an idea bank (or vault), which is a physical or digital repository for storing ideas. Encouraging Creativity at the Firm Level – Creativity is the raw material that goes into innovation and should be encouraged at the organizational and individual supervisory level. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-35 Protecting Ideas From Being Lost or Stolen Step 1 – The idea should be put in a tangible form such as entered into a physical idea logbook or saved on a computer disk, and the date the idea was first thought of should be entered. Step 2 – The idea should be secured. This may seem like an obvious step, but is often overlooked. Step 3 – Avoid making an inadvertent or voluntary disclosure of an idea, in a manner that forfeits the right to claim exclusive rights to it. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-36  All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 2-37