Entrepreneurship

Recognizing Ideas and Opportunities

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What is an Idea?

A business idea is a concept that can be

used for financial gain that is usually
centered on a product or service that can
be offered for money

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What is an Opportunity?

A business opportunity is a favorable set

of circumstances that creates a need for a
new product, service, or business.

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Difference Between Idea and Opportunity

Idea

Market Money

Management

Opportunity

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Techniques for Generating Ideas
• Brainstorming
• Focus Groups
• Library and Internet Research

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Brainstorming
• Brainstorming
– Is the process of generating several ideas about a
specific topic.
– 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.

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Focus Groups
• Focus Group
– Focus groups involve a group of people who are
familiar with a topic, are brought together to respond to
questions, and who are able to shed light on an issue
through the give-and-take nature of group discussions.
– They 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.

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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.

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Library and Internet Research (2 of 3)
Large public and university libraries typically have access to
search engines and industry reports that would cost thousands
of dollars to access on your own.
Examples of Useful Search Engines and Industry Reports
• BizMiner
• ProQuest
• IBISWorld
• Mintel
• LexisNexis Academic

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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 newspaper and magazine articles about the “hottest”
and “latest” 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.

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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.

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What is an Opportunity?
Four Essential Qualities of an Opportunity

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Three Ways to Identify an
Opportunity

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First Approach: Observing Trends
• Observing Trends
– Trends create opportunities for entrepreneurs to pursue.
– The most important trends are:
▪ Economic forces
▪ Social forces
▪ Technological advances
▪ Political and regulatory changes
– It’s important to be aware of changes in these areas.

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First Approach: Observing Trends
Figure 2.3 Environmental Trends Suggesting Business, Product,
or Service Opportunity Gaps

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Trend 1: Economic Forces
Economic trends help determine areas that are ripe for
new start-ups and areas that start-ups should avoid.
Example of Economic Trend Creating a Favorable
Opportunity
• A weak economy favors start-ups that help consumers
save money.
• An example is GasBuddy.com, a company started to help
consumers save money on gas.

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Trend 2: Social Forces
Social trends alter how people and businesses behave
and set their priorities. These trends provide opportunities
for new businesses to accommodate the changes.
Examples of Social Trends
• Aging of the population.
• The increasing diversity of the population.
• Millennials entering the workforce.
• Growth in the use of mobile devices.
• An increasing focus on health and wellness.

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Trend 3: Technological Advances
Advances in technology frequently create business
opportunities.
Examples of Entire Industries that Have Been
Created as the Result of Technological Advances
• Computer industry
• Internet
• Biotechnology
• Digital photography

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Trend 3: Technological Advances
Once a technology is created, products often emerge to
advance it.
Example: Rokit Boost
An example is Rokit Boost, a high-end mobile accessories
company that makes smartphone cases, headphones,
portable USB device chargers, and Bluetooth speakers.
Rokit Boost wouldn’t exist if it weren’t for the advent of the
smartphone.

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Trend 4: Political Action and Regulatory
Changes
Political and regulatory changes also provide the basis for
opportunities.
General Example
This happened with the passage of the Affordable Care Act
in 2010. The provisions of the act yielded opportunities for
entrepreneurs to launch electronic records start-ups, apps to
help patients monitor their medication, and similar
companies.

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Trend 4: Political Action and Regulatory
Changes
Political change also engenders new business and
product opportunities. For example, global political
instability and the threat of terrorism have resulted in many
firms becoming more security-conscious.
Specific Example
Evolv Technology is a start-up that has assembled a
multidisciplinary team of experts to identify, invent, and
apply new technologies to meet current terrorism-related
threats.

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Second Approach: Solving a Problem
• 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 chance.
– 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.

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Second Approach: Solving a Problem
Specific Example
Sometimes people aren’t able to access energy to recharge
their smartphones for a period of time. A number of
companies have solved this problem in innovative ways. An
example is the $70 Eton BoostTurbin 2000, which is a
device that weighs less than four ounces. It combines a
battery with a hand crank that provides enough power to
fully charge a typical smartphone.

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Third Approach: Finding Gaps in the
Marketplace
• 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.

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Third Approach: Finding Gaps in the
Marketplace
Product gaps in the marketplace represent potentially
viable business opportunities.
Specific Example
Tish Cirovolo realized there were no guitars on the market
made specifically for females. To fill this gap, she started
Daisy Rock Guitars, a company that makes guitars just for
women and girls. Daisy Rock guitars are stylish, come in
feminine colors, and incorporate design features that
accommodate a woman’s smaller hand and build.

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Personal Characteristics of the
Entrepreneur
Characteristics that tend to make some people better at
recognizing opportunities than others
• Prior Industry Experience
• Cognitive Factors
• Social Networks
• Creativity

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Prior Industry Experience
• Prior Industry Experience
– 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.

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Prior Industry Experience
• Prior Industry Experience
– It is also important to note that anecdotal evidence
suggests that people outside an industry can
sometimes enter it with a new set of eyes, and as a
result innovate in ways that people with prior
experience might find difficult.
▪ For example, Elon Musk, the founder of Tesla, had
no prior experience in the auto industry.
▪ Debbie Fields, the founder of Mrs. Fields Cookies,
had no prior experience in the food industry.

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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.

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Social Networks
• 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.)

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Social Networks
• Nature of Strong-Tie Vs. Weak-Tie Relationships
– Strong-tie relationships 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.)

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Social Networks
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 apt
reinforce insights and ideas to be between like-minded
that people already have. individuals, so one person may
say something to another that
sparks a completely new idea.

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Creativity
• 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.

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Creativity (2 of 2)
Five Steps to Generating Creative Ideas

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Full View of the Opportunity Recognition
Process
• Depicts the connection between an awareness of emerging
trends and the personal characteristics of the entrepreneur
The Opportunity Recognition Process

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