Unit 2 Developing Successful Business Ideas PDF

WEEK 2 Developing Successful Business Ideas OBJECTIVES 1. Explain the difference between opportunities and ideas. 2. Describe the three general approaches entrepreneurs use to identify opportunities. 3. Discuss the personal characteristics of entrepreneurs that contribute t...

WEEK 2 Developing Successful Business Ideas OBJECTIVES 1. Explain the difference between opportunities and ideas. 2. Describe the three general approaches entrepreneurs use to identify opportunities. 3. Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities. 4. Identify and describe techniques entrepreneurs use to generate ideas. 5. Discuss actions to take to encourage continuous development of new ideas in entrepreneurial firms. READING BARRINGER & IRELAND – CHAPTER 2: DEVELOPING SUCCESSFUL BUSINESS IDEAS VIDEO DISCUSSION WHAT IS THE OPPORTUNITY SHE HAS IDENTIFIED? HOW DID SHE COME UP WITH HER IDEA? WHAT IS AN OPPORTUNITY? 1 OF 2 An opportunity is a favourable Opportunity set of circumstances that Defined creates a need for a new product, service, or business. WHAT IS AN OPPORTUNITY? 2 OF 2 Four Essential Qualities of an Opportunity WAYS TO IDENTIFY AN OPPORTUNITY OBSERVING TRENDS 1 OF 2 Trends create opportunities for entrepreneurs to pursue. The most important trends are: Economic forces Social forces Technological advances Political and regulatory change OBSERVING TRENDS 2 OF 2 Environmental Trends Suggesting Business or Product Opportunity Gaps TREND 1: ECONOMIC FORCES Example of Economic Trend Creating a Economic trends Favourable Opportunity help determine A weak economy areas that are ripe favours start-ups that for new start-ups help consumers save and areas that start- money. EXAMPLE? ups should avoid. TREND 2: SOCIAL FORCES Examples of Social Social trends alter Trends how people and Aging of the businesses behave population. and set their The increasing diversity of the workplace. priorities. These Increased participation trends provide in social networks. opportunities for Growth in the uses of new businesses to mobile devices. accommodate the An increasing focus on changes. health and wellness. TREND 3: TECHNOLOGICAL ADVANCES 1 OF 2 Examples of Entire Advances in Industries that Have technology Been Created as the Result of Technological frequently create Advances business Computer industry Internet opportunities. Biotechnology Digital photography TREND 3: TECHNOLOGICAL ADVANCES 2 OF 2 Example: H20Audio Once a technology An example is is created, products H20Audio, a company often emerge to started by four former advance it. San Diego State University students, that makes waterproof housings and earbuds for the Apple iPhone. TREND 4: POLITICAL & REGULATORY CHANGES 1 OF 2 General Example Political action and Laws to protect the regulatory changes environment have also provide the created opportunities for basis for entrepreneurs to start opportunities. firms that help other firms comply with environmental laws and regulations. TREND 4: POLITICAL & REGULATORY CHANGES 2 OF 2 Specific Example Company created to Accountants start business d to help other help other companies comply with companies comply tax regulations. with the law. SOLVING A PROBLEM 1 OF 2 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. 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.  SOLVING A PROBLEM 2 OF 2 A problem facing countries is finding alternatives to fossil fuels. A large number of entrepreneurial firms, are being launched to solve this problem: Wigton Windfarm Tesla FINDING GAPS IN THE MARKETPLACE Often created when a Specific Example product or service is Tish C realized there needed by a specific were no guitars on the group of people but market made doesn’t represent a specifically for females. large enough market to To fill this gap, she be of interest to started Daisy Rock mainstream retailers or Guitars, a company that manufacturers. makes guitars just for Product gaps in the women and girls. marketplace represent potentially viable business opportunities. ENTREPRENEURS’ PERSONAL CHARACTERISTICS Characteristics that tend to make some people better at recognizing opportunities than others Prior Experience Cognitive Factors Social Networks Creativity PRIOR 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. 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. SOCIAL NETWORKS 1 OF 3 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. SOCIAL NETWORKS 2 OF 3 Strong tie vs. Weak tie relationships All of us have relationships with other people that are called “ties.” Nature of strong-tie vs. Weak-tie relationships Strong-tie relationships: characterized by frequent interaction and form between coworkers, friends, and spouses. Weak-tie relationships: 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. SOCIAL NETWORKS 3 OF 3 Why weak-tie relationships lead to more new business ideas than strong-tie relationships Strong-Tie Weak-Tie Relationships Relationships These relationships, These relationships, which typically form which form between between like-minded casual individuals, tend to acquaintances, are reinforce insights and not as apt to be ideas that people between like-minded already have. individuals, so one person may say something to another that sparks a CREATIVITY 1 OF 2 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. CREATIVITY 2 OF 2 Five Steps to Generating Creative Ideas FULL VIEW OF THE OPPORTUNITY RECOGNITION PROCESS Depicts the connection between an awareness of emerging trends and the personal characteristics of the entrepreneur TECHNIQUES FOR GENERATING IDEAS Library and Focus Groups Internet Research Brainstorming  Video FOCUS GROUPS Discussion A focus group is a gathering (usually 5-10 people), who have been selected based on their common characteristics relative to the issues being discussed. 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. LIBRARY AND INTERNET RESEARCH 1 OF 3 Libraries are an often underutilized source of information for generating new business ideas. A reference librarian 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.  LIBRARY AND INTERNET RESEARCH 2 OF 3 Examples of Useful Large public and Search Engines and university libraries Industry Reports Mintel typically have access Euromonitor to search engines BizMiner and industry reports ProQuest that would cost IBISWorld LexisNexis Academic thousands of dollars to access on your own. LIBRARY AND INTERNET RESEARCH 3 OF 3 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 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. BRAINSTORMING 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. 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. 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. FOR NEXT WEEK READ BARRINGER & IRELAND – CHAPTER 3: FEASIBILITY ANALYSIS PRESENT YOUR BUSINESS PLAN IDEA TO CLASS