Chapter 2

Developing Successful
Business Ideas

Recognizing
Opportunities and
Generating Ideas
 Chapter Objectives
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1. What is an opportunity and how to create it.

2. Explain why it’s important to start a new firm when
its “window of opportunity” is open.
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.
 Chapter Objectives
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5. Identify the five steps in the creative process.

6. Describe the purpose of brainstorming and its use
as an idea generator.
7. Describe how to use library and Internet research to
generate new business ideas.
8. Explain the purpose of maintaining an idea bank.
9. Describe three steps for protecting ideas from being
lost or stolen.
 What is An Opportunity?
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Opportunity Defined
• Essentially, entrepreneurs For example
recognize an opportunity and An entrepreneur decides to launch a
firm, searches for and recognizes
turn it into a successful an opportunity, and then starts a
business. business, as Jeff Bezos did when he
• Time or set of created Amazon.com. In 1994,
circumstances Bezos quit his lucrative job at a New
that makes it possible to do York City investment firm and
headed for Seattle with a plan to find
something. an attractive opportunity and launch
• An opportunity is a an e-commerce company.
favorable
set of circumstances that
creates a need for a new
product, service or business.
 Common opportunity mistakes done by
new entrepreneurs
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• Entrepreneur starts a new business, opportunities are tough to

spot.
• Identifying a product, service, or business opportunity that
isn’t purely a different version of something already available
is difficult.
• A common mistake entrepreneurs make in the opportunity
recognition process is picking a currently available product or
service that they like or are passionate about and then trying to
build a business around a slightly better version of it, which is
okay, BUT!
• The key to opportunity recognition is to identify a product or
service that people need and are willing to buy, not one that
an entrepreneur wants to make and sell.
Four Essential Qualities of an Opportunity
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An opportunity has four essential qualities
of new business that creates or adds value
for its buyer or end user
 Four essential qualities..contd..
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• For example Launching of Private Ambulance Services

in Pakistan.
1. Attractive: Opportunity for new entrepreneurs to
launch pvt ambulance service in Pakistan.
2. Timely: Best time to launch pvt ambulance service
because at this time there is no services available 24/7
free of cost for patients.
3. Durable: After launching, window of opportunity is
open for other products and services and establish a
profitable position in the market.
4. Value creation: As the services satisfy the end users
(patients), product in the market matures, and the
window of opportunity closes for competitors!
Three Ways to Identify an Opportunity for
New Entrepreneur
 First Approach: Observing Trends
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• Observing Trends (Environmental factors)

• The first approach to identifying opportunities is to observe
market trends and study how they create opportunities for
entrepreneurs to pursue.
– The four most important trends are:
1. Economic forces.
2. Social forces.
3. Technological advances.
4. Political action and regulatory change.
– It’s important to be aware of changes in these areas.
First Approach: Observing Trends
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Environmental Trends Suggesting Business

or Product Opportunity Gaps
 Trend 1: Economic Forces
• Economic trends help
determine areas that are • Examples: When the economy is strong,
people have more money to spend and
suitable for new startups are willing to buy discretionary products
and areas that startups •
and services that enhance their lives.
In contrast, when the economy is weak,
should avoid. not only do people have less money to
spend, they are typically more reluctant
• Direction of to spend the money they have, fearing
the economy may become even worse—
the economic trend for the and that in turn, they might lose their
product markets and jobs because of a weakening economy.
• Paradoxically, a weak economy provides
countries in which they business opportunities for start-ups that
operate in order to make help consumers save money. For
example everything in 1£ shop &
more accurate and effective poundland.
plans for their company.
 Trend 2: Social Forces

• Social or culture trends alter how Examples of Social Trends

people and businesses behave and • The explosion of fast-food restaurants,
set their priorities according to for example, isn’t primarily because of
new product or business idea. people’s love of fast food but rather
• Social forces are any human because of the fact that people are
busy and often don’t have time to cook
created ways of doing things that
their own meals.
influence, pressure, • Similarly, social networking sites like
or force people to behave, interact Facebook and Twitter aren’t popular
with others, and think in specified because they can be used to post
ways. information and photos on a Web site.
They’re popular because they allow
people to connect and communicate
with each other, which is a natural
human tendency.
 Trend 3: Technological Advances
• Advances in technology
frequently create business
opportunities for new
Examples:
entrepreneurs. 1. Airstrip Tech a new startup - For
Doctors (Technologies can
• Positive technological develop products to help doctors
advances include increased remotely monitor their patients’
leisure time, improved conditions).
communication and better 2. LastMinute.com & Booking.com
management information web sites that allows users to
systems. make hotel and flight holiday
• Technological advances also reservations online and now
provide opportunities to help covers most of the countries
people perform everyday tasks globally.
in better or more convenient
ways.
Trend 4: Political Action and Regulatory
Changes
General Example
• Political action and
regulatory changes also 1. SIA companies in the UK to
provide the basis for protect businesses and Govt
opportunities. agencies.
• 2. Threat of terrorism -
New laws create
Security consulting,
opportunities for
explosives detection
entrepreneurs to start
devices, secure computer
firms to help companies,
networks and security and
individuals, and
surveillance companies.
governmental agencies
comply with these laws.
 Second Approach: Solving a Problem

• Solving a Problem
• The second approach to identifying opportunities is to
recognize problems and find ways to solve them.
• Every problem is an opportunity for an entrepreneur
that lead to the recognition of business ideas.
• These problems can be recognized by observing the
challenges that people encounter in their daily lives.
• 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.
 Second Approach: Solving a Problem
For example
• A problem facing the Pakistan is
finding alternatives to cellular
devices electric chargers to smart
wireless chargers.
• This is an opportunity for
companies & new entrepreneurs
to develop cheaper efficient
wireless chargers or wireless
charging pads to solve the user
problem!
• Design chargers that are easy to
use and have wireless options.
 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. (Niche Marketing).
– There are many examples of products that consumers need
or want that aren’t available in a particular location or
aren’t available at all.
– A common way that gaps in the marketplace are recognized
is when people become frustrated because they can’t find a
product or service that they need and recognize that other
people feel the same way.
Class Activity – Solve Case Study
• Xhale and Vestagen: Solving the Same
Problem in Different Ways
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

 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.
• For example, evidence over time about the founders of firms
appearing on the Inc. 500 list, FTSE with highest market
capitalisation and NYSE shows that well over 40 percent of those
studied got the idea for their new businesses while working as
employees for companies in the same industries.
 Cognitive Factors
– Studies have shown that opportunity recognition may be an
innate skill or cognitive (intellectual) 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 careful search.
– Most entrepreneurs see themselves in this light, believing they are
more “alert” than others. Alertness is largely a learned skill, and people
who have more knowledge of an interest area tend to be more alert
to opportunities in that area than others. A computer engineer, for
example, would be more alert to needs and opportunities within the
computer industry than a lawyer would be.
 Social Networks
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• 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.
– In one survey of 65 start-ups, half the founders reported
that they got their business idea through social contacts.
– In UK, Research results over time consistently suggest that
somewhere between 40 percent and 50 percent of those
who start businesses got their ideas through social contacts
• Strong Tie Vs. Weak Tie Relationships
– All of us have relationships with other people that are
called “ties.” (See next slide.)
 Social Networks
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• Nature of Strong-Tie Vs. Weak Tie Relationships

– Strong-tie relationship are characterized by frequent
interaction and form between coworkers, friends, and
family.
– Weak-tie relationships are characterized by infrequent
interaction and form between casual associates, coworkers.
• Result
– It is more likely that an entrepreneur will get new business
ideas through weak-tie rather than strong-tie relationships.
(See next slide.)
 Social Networks
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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 form
typically form between like between casual associates, are not as
appropriate to be between like-
minded individuals, tend to minded individuals, so one person
strengthen or support may say something to another that
insights and ideas that sparks a completely new or different
people already have or with idea. They bring circles of networks
additional support without into contact with each other,
strengthening relationships and
effort! forming new bonds between
existing relationship circles.
 Creativity
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• Creativity
– Creativity is the process of generating a novel or useful
idea.
– Opportunity recognition may be, at least in part, a creative
process.
– It is easy to see the creativity involved in forming many
products,services, and businesses.
– Increasingly, teams of entrepreneurs working within a
company are sources of creativity for their firm.
– For an individual, the creative process can be broken down
into five stages, as shown on the next slide.
 Creativity
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Five-Steps to Generating Creative Ideas

Preparation is Incubation is Insight is the flash of Evaluation is Elaboration is the stage

the background, the stage recognition—when the the stage of the during which the creative idea
experience, and during which solution to a problem is seen creative process is put into a final form: The
knowledge or an idea is born. It is during details are worked out and the
a person
that an sometimes called the which an idea is idea is transformed into
considers an subjected to something of value, such as a
entrepreneur “eureka” experience. In a
brings to the idea or thinks business context, this is the scrutiny and new product, service, or
opportunity about a moment an entrepreneur analyzed for its business concept. In the case
recognition problem. recognizes an opportunity. viability. of a new business, this is the
process. point at which a business plan
is written.
 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

Brainstorming Focus Groups

Library and
Internet Research
 Brainstorming and Library Research
• 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.
• 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.
 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 they 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.
 Internet Case Study Research

• Internet Research
– If you are starting from scratch, simply typing “new
business ideas” into a search engine will produce links to
newspapers, case studies 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 to links to a constant
stream of newspaper articles, blog posts, and news releases
about the topic.
– Targeted searches are also useful such as Financial Times,
Business Insider and KMPG.
How To Be Creative | Off Book |
PBS Digital Studios
• https://www.youtube.com/watch?time_cont
inue=63&v=weIQIthC3Ks&feature=emb_lo
go