Identifying entrepreneurial opportunities
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IDENTIFYING ENTREPRENEURIAL OPPORTUNITIES. The Entrepreneurs Club September 27, 2004. IDEAS …last for ever …are free …everybody has ideas …do not need customers to survive. OPPORTUNITIES …are perishable …require work …require fit …must create customer value.

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IDENTIFYING ENTREPRENEURIAL OPPORTUNITIES

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Identifying entrepreneurial opportunities

IDENTIFYING ENTREPRENEURIAL OPPORTUNITIES

The Entrepreneurs Club

September 27, 2004


Ideas are not the same as opportunities

IDEAS

…last for ever

…are free

…everybody has ideas

…do not need customers to survive

OPPORTUNITIES

…are perishable

…require work

…require fit

…must create customer value

Ideas are not the same as Opportunities

Always consider investing in a Grade A man with a Grade B idea.

Never invest in a Grade B man with a Grade A idea.

George Doriot, ‘father’ of the VC industry


Inventions new technologies are not the same as opportunities

Inventions – new technologies are not the same as Opportunities

  • The BAR CODE - method of automatic identification and data collection.

    • The first patent for a bar code type product (US Patent #2,612,994) was issued to inventors Joseph Woodland and Bernard Silver on October 7, 1952

    • Bar code was first used commercially in 1966

    • In June of 1974, the first U.P.C. scanner was installed at a Marsh's supermarket in Troy, Ohio. The first product to have a bar code included was a packet of Wrigley‘s Gum.


What is an opportunity

What is an Opportunity?

  • An idea that is timely, attractive, durable anchored in a product or service that creates or adds value for its buyer and user

    • WINDOW - time sensitive (fleeting) occasion

    • ATTRACTIVE – to stakeholders (entrepreneurs, investors, clients)

    • DURABLE – sustainable over time or sustainable long enough to reap expected benefits


The concept of fit

The Concept of FIT

PEOPLE AND

RESOURCES

FAVORABLE

SOCIOLOGICAL

FACTORS

OPPORTUNITY

APPROPRIATE EXPERIENCE

CONTACTS

SKILLS

ATTITUDE

APPROPRIATE RISK/REWARD ALLOCATION AND INCENTIVES

INVESTOR-VALUE-ADDED

CONTEXT

FAVORABLE TECHNOLOGY MACROECONOMY

FAVORABLE RULES OF THE GAME

OPPORTUNITY

PROJECT APPROPRIATE

FINANCING

OPTION PRESERVATION

BUSINESS MODEL


Sources of opportunities

Context

The Unexpected

Incongruities

Process need (Dell&Chang/Taiwan Semiconductors)

Industry and Market structures

Demographics

Changes in perception (Case/AOL, Omidyar/eBay, Yang/Yahoo)

New Knowledge (Noyce&Moore/Intel, Boyer&Swanson/Genentech)

Others

Reading trade publications (Gates&Allen/Microsoft)

Engaging in consulting projects (Kelleher/SWA)

Idea arbitrage (Schultz/Starbucks)

Business Models (Amazon)

Sources of Opportunities


People opportunity identification

Perception

Discovery

Creation

Development

Evaluation

Abortion

Venture Formation

People: Opportunity Identification

  • Personality Traits:

  • Creativity

  • Optimism

+

Opportunity Development

Entrepreneurial

Alertness

+

  • Social Networks:

  • Weak ties

  • Partnerships

  • Inner circle

+

+

  • Prior knowledge:

  • Special interests

  • Industry knowledge

  • Customer problems

  • Ways to serve customers

  • Academic background

+

Source: Based on Fig.3 from Ardichvili, Cardozo, Ray (2003) "A theory of entrepreneurial opportunity identification and development« , Journal of Business Venturing


Where 100 of the 1989 inc 500 founders got their ideas

Where 100 of the 1989 Inc. 500 founders got their ideas

Systematic search 4%

Swept in by PC revolution

5%

Discovered by luck

20%

Idea from previous job

71%

Source: Amar Bhide (1994), “How entrepreneurs craft strategies that work,” Harvard Business Review (March-April).


Good opportunities come from

SIVI

Customers75%25%

Employees59%37%

Professional acquaintanc41%49%

Suppliers47%35%

Trade publications40%38%

Magazines, newspapers26%51%

Good Opportunities come from

NI

  • Investors54%

  • Technical literature64%

  • Hobby63%

  • Libraries78%

  • Patent Filings84%

Top of the list

Bottom of the list

VI= Very Important, SI= Somewhat Important, NI= Not Important, VI+SI+NI=100%

Source:

Hills and Schrader, « Successful Entrepreneur’s Insights into Opportunity Recognition », 1998


Keep an opportunity register

Keep An Opportunity Register

  • Inventory of your entrepreneurial ideas

  • In a database or ‘diary’, record the following items:

    • Business concept, trends, key data, obstacles, competences & resources, competition (see McGrath & McMillan, Figure 2-1)

  • Technique applied by successful habitual entrepreneurs

  • Increases your chances of realizing the right opportunity at the right time at the right place


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