RECOGNIZING

OPPORTUNITIES AND
GENERATING IDEAS

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Chapter Objectives
.

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What is An
Opportunity?
An opportunity is a favorable
set of circumstances that
creates a need for a new
product, service or business.

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What is an
Opportunity?
An opportunity has four essential
qualities

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Three Ways to Identify
an Opportunity

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First Approach: 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.

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First Approach: Observing
Trends
Environmental Trends Suggesting
Business or Product Opportunity
Gaps

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 Trend 1: Economic
Forces

Example of Economic Trend

Economic trends Creating a Favorable
Opportunity
help determine • A weak economy favors
areas that are ripe startups that help
for new startups and consumers
areas that startups save money.
should avoid. • An example is
GasBuddy.com,
a company started to help
consumers save money2-8on
 Trend 2: Social Forces
Social trends alter Examples of Social
how people and Trends
• Aging of the population
businesses behave • The increasing diversity of the
and set their population
priorities. These • Millennials entering the workforce
• Growth in the use of mobile devices
trends provide • An increasing focus on health and
opportunities for wellness
new businesses to • Emphasis on clean forms of energy,
accommodate the including wind, solar, biofuels, and
others
changes. • Continual migration of people from
small towns and rural areas to cities
• Desire for personalization
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Trend 3: Technological
Advances

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

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Trend 3: Technological
Advances

Example: Rokit Boost

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

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 Trend 4: Political Action and
Regulatory Changes

General Example
Political action
Laws to protect the
and regulatory environment have
changes also created opportunities for
provide the basis entrepreneurs to start
firms that help other
for opportunities. firms comply with
environmental laws and
regulations.

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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.

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 Second Approach: Solving a
Problem

 A problem facing the

U.S. and other
countries is finding
alternatives to fossil
fuels.
 A large number of
entrepreneurial firms,
like this wind farm,
are being launched to
solve this problem.

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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

Specific Example
Product gaps in
In 2000 Tish Cirovolv
the marketplace
realized there were no
represent guitars on the market
potentially viable made specifically for
women. To fill this gap,
business
she started Daisy Rock
opportunities. Guitars, a company that
makes guitars just for
women.
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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

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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.

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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.
◦ In one survey of 65 start-ups, half the founders reported that
they got their business idea through social contacts.
Solo entrepreneurs (those who identified their business
ideas on their own) and Network entrepreneurs (those who
identified 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.)

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Social Networks
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.)

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 Social Networks
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 acquaintances,
individuals, tend to are not as apt to be
reinforce insights and between like-minded
ideas that people individuals, so one
already have. person may say
something to another
that sparks a completely2-22
new idea.
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
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

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Techniques For Generating
Ideas

Brainstorming Focus Groups

Library and
Internet Research

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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.
◦ Freewhelling is encouraged.
◦ The session should move quickly.
◦ Leap-frogging is encouraged.

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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.

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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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 Libraries and Internet Research
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Examples of Useful Search

Large public and Engines and Industry Reports
university libraries • Lexis-Nexis Academic
typically have access to • ProQuest
search engines and • IBISWorld
industry reports that would • Mintel
cost thousands of dollars • Standard & Poor’s Net
Advantage
to access on your own.

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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
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 to 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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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 its 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.

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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.

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THANK
YOU

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