Models for spotting

entrepreneurial opportunities
 Chapter 6

Opportunity and the Creative Pursuit of Innovative Ideas

 Your viewpoint?

‘Imagine a world in which everything is

? so intelligently designed that human

activity generates a delightful,
restorative ecological footprint.’
William McDonough,
The Natural Advantage of Nations
 Learning Objectives
• To explore how ideas fit within the opportunity identification process

• To define and illustrate the sources of opportunity for entrepreneurs

• To identify the four models of market opportunity: competition, innovation, alertness and social need
• To examine the role of creativity and to review the major components of the creative process: knowledge
accumulation, incubation process, idea evaluation and implementation

• To present ways of developing personal creativity: recognize relationships, use lateral thinking, use your
‘brains’, think outside the box, identify arenas of creativity and work in creative climates

• To introduce how innovation can inspire opportunity through invention, extension, duplication and synthesis

• To review some of the major misconceptions associated with innovation and to define the 10 principles of
innovation

• To consider the challenges and changing dynamics of social and sustainability innovation
 But first
Come up with the worst
Ideas and the Search for Opportunity Do
Entrepreneurs have ESP?
• Do entrepreneurs have some kind of
extra-sensory perception (ESP) to be
able to see what others cannot see over
the horizon!?
• Opportunity is central to entrepreneurship.
• Both opportunity creation and opportunity
recognition are fundamental to value creation.
• Innovation in its purest sense refers to newness.
• But . . . just because something is new
does not mean it will automatically
create value.
 Sources of innovative ideas

• How to take advantage of ideas that create opportunities ?

• Trends
• Unexpected occurrences
• Incongruities
• Process needs
• Industry and market changes
• Demographics
• Perceptual changes
• Knowledge based concepts
Sources of Innovative Ideas
 Models for spotting
entrepreneurial opportunities
1. Competition

2. Innovation

3. Alertness

4. Social
 Starting with a ‘static economy’
• Balance between supply and demand
• Each competitor maintains market
share
• No new competitors to disrupt the
economy
• This market is ripe for
entrepreneurial opportunity!
Attributed to Richard Cantillon,
first entrepreneurship economist
Model 1: Competition
• Entrepreneur identifies
opportunities where
– demand is sufficiently high to be able to
obtain a high selling price while
– being aware of opportunities to obtain
goods and services at low buying prices.
• Also known as ‘arbitrage’:
purchasing low and selling high
• New opportunities replace existing
companies or drive them out of
business.
First elaborated by Joseph
Schumpeter (1883-1950
Model 2: Innovation

• Disrupts existing markets

and create new ones
• Disrupts equilibrium
• Creates demand
• Cannibalises existing
businesses and causes
losses in an economy, but
overall output is increased.
 Joseph von Mises,
popularised by Kirzner
Model 3: Alertness
• Opportunities are already ‘out there’
waiting to be discovered.
• But the entrepreneur recognises
them due to superior knowledge of
the market, industry, technology
and/or networks.
• The entrepreneur has the advantage
of seeing things differently
 Model 4: Social need
• Social innovation seeks to satisfy needs
unlikely to be satisfied by the market.
• Uses market-based opportunities to address
a social problem
• Market-based solution to address a
social problem.
• Customers, suppliers or workforce are Replace at
different 2nd pages
• Venture has a social mission be it an
environmental purpose, animal welfare etc.
• What are some examples of social
innovations . . .?
Examples of Social
Innovations
• Community-centred planning
• Emissions trading
• Fair trade
• Habitat conservation
• International labour standards
• Microfinance
• Socially responsible investing
• Supported employment
 Being creative

?
How can you
become more
creative? What
are some
concrete ways
you have
practised?
Developing your Entrepreneurial Capacity:
Four Phases
• Phase 1: Background or knowledge
accumulation: Entrepreneurs practice
the creative search for background
knowledge
• Phase 2: The mind incubation
process: Subconscious mulls over
the tremendous amounts of
information
• Phase 3: The idea experience: A bolt
out of the blue
• Phase 4: Evaluation and
implementation: Reworking of ideas
to put them into final
 • Seeking out a wide variety
of perspectives on a
Phase 1: situation
Background • Enhanced by reading
or knowledge widely, interacting with
accumulation others, travelling to
new places, recording
what is learnt and taking
the time to research
 • Allowing the subconscious
to work through the
Phase 2: information collected in
Phase 1
The mind • Enhanced by engaging
incubation in routine activities,
process regular exercise, play
(e.g. board games and
puzzles),
meditation and
reflection
 • The ‘eureka factor’ or when the
light bulb comes on in cartoons,
which can occur at any time
Phase 3: • Enhanced by daydreaming about
The idea the project, practicing hobbies,
working in a relaxed
experience environment, setting aside the
problem, and keeping a notebook
 • Requires courage, self-
discipline and perseverance
Phase 4: • Enhanced by increasing
Evaluation energy levels, knowing the
business planning process,
and testing the idea with smart
implementation people and viewing problems
as challenges
Entrepreneurial
imagination and
creativity
• To see opportunities,
entrepreneurs blend
imaginative and creative
thinking with a systematic,
logical process ability
• Asking ‘what if…?’ and
‘why not…?’.
• Seeing opportunities
where others see
problems.
 The nature of the creative process
• Your creative potential is ‘Human creativity [is]
something that can be developed the key factor in our
economy and society …
and improved. we now have an
economy powered by
• Creativity is not some mysterious human creativity.
and rare talent reserved for a Creativity …is now the
decisive source of
select few. It is a distinct way of competitive
advantage’.
looking at the world that is
often illogical. Richard Florida
• The creative process involves
seeing relationships among
things others have not seen.
Exercise: Can you think of the
most common ‘idea stoppers’?
• Here are some

?
examples in English.
•– ‘Naah.’
• – ‘Can’t’ (said with a shake
of the head and an air of
finality).
• – ‘That’s the dumbest
Inthe United States, these
thing I’ve ever heard.’
devices became known as a
• Give some "Denver boot" because Denver
the first in the country them.
examples in
another language!
 Exercise: Can you think of the
most common ‘idea stoppers’
• ‘Naah.’
• ‘Can’t’ (said with a shake of the head and an air
of finality).
• ‘That’s the dumbest thing I’ve ever heard.’
• ‘Yeah, but if you did that . . .’ (poses an extreme
or unlikely disaster case).
‘We already tried that – years ago.’ • ‘Let’s get back to reality.’
•
• ‘We’ve done all right so far; why do we need • ‘We’ve got deadlines to meet – we don’t have
that?’ time to consider that.’
• • ‘It’s not in the budget.’
‘I don’t see anything wrong with the way we’re
doing it now.’ • ‘Are you kidding?’
• ‘That doesn’t sound too practical.’ • ‘Let’s not go off on a tangent.’
• ‘We’ve never done anything like that before.’ • ‘Where do you get these weird ideas?’
 How to develop your creativity?
• Lateral thinking – purposefully generate new
ideas
• Vertical thinking – following logical steps
• Think outside the box – challenge
assumptions
• Recognise relationships
• Go with the flow
• Use your brains Albert Einstein statue
in his birthplace in Ulm,
Germany
Thinking outside the box

• Understand the problem

• Play a child
• Play an external observer
• Disassemble the problem
• Reframe
• Imagine the opposite
 Recognising relationships

• Seeing new and different

relationships among objects,
processes, materials, technologies
and people
• Look for different or unorthodox
relationships among the elements
and people around you

Australia II's Winged Keel totally changed

our view about America's Cup racing.
 Using your brains

The right brain hemisphere helps understand analogies, imagine things and synthesise
information. The left brain hemisphere helps analyse, verbalise and use rational approaches
to problem solving.
Ways to develop left- and right hemisphere skills
People are Inherently Creative

• Idea creativity
• Material creativity
• Organisation creativity
• Relationship creativity
• Event creativity
• Inner creativity
• Spontaneous creativity
Creating the right setting
for creativity
• Trustful management
• Open channels of communication
• Considerable contact and communication with
outsiders
• Variety of personality types
• Willingness to accept change
• Enjoyment in experimenting with new ideas
• Little fear of negative consequences
• The use of techniques that encourage ideas
• Sufficient financial, managerial, human, and "TotalTransportation PlayTown Rug"
time resources by kidcarpet.com
 Innovation and the entrepreneur

• Innovation is the
combination of an
Entrepre- inventive process and
Inventive
neurial an entrepreneurial
process process to create new
process economic value for
defined stakeholders’
–Kevin Hindle
The Innovation Process
• The process by which entrepreneurs
convert opportunities (ideas) into
marketable solutions.
• The means by which entrepreneurs
become catalysts for change.
• Most innovations result from a
conscious, purposeful search for new
opportunities
Disruptive technologies
Cristensen’s theory of
disruptive technologies

• A lower performance or
less expensive product
that starts at the bottom of
the market ultimately
displaces the market
incumbents.
 Four basic types of innovation
Invention • Totally new product, service or process

• New use or different application of existing

Extension product, service or process

Duplication • Creative replication of an existing concept

• Combination of existing concepts and

Synthesis factors into a new formulation or use
 Innovation
in action

New Zealand's Gibbs Aquada

was designed from the ground
up to perform well on land and
in water.
 Major Misconceptions About Innovation
• Innovation is planned and predictable.
• Technical specification must be thoroughly prepared.
• Innovation relies on dreams and blue sky ideas.
• Bigger projects will develop better innovations.
• Technology is the driving force of success.
 Follow these principles to learn innovation
• Be action oriented • Aim high
• Make the product, process or • Try/test/revise
service simple and • Learn from failures
understandable • Follow a milestone schedule
• Make the product, process or • Reward heroic activity
service customer-based
• Work, work, work
• Start small
Is climate change so irreversible
that entrepreneurs cannot tackle it?
• Entrepreneurs have already
created solutions:
– protecting against chemical and
nuclear accidents
– stemming the spread of disease
– stopping disasters and pandemics.
• Do we believe that runaway
climate change might defy
entrepreneurs’ history of positive
innovation?
Innovations that caused global
warming and innovations that
could save us
 Key concepts
• Opportunity identification
– Variety of sources, including disruptive technologies
• Creativity
– Varying aptitude, but can be developed
– Four phases and a range of techniques
• Innovation
– Four types and ten principles
– Concepts include cradle-to-cradle and social innovation