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Chapter 2
Recognizing
Opportunities and
Generating Ideas
Bruce R. Barringer
R. Duane Ireland
Chapter Objectives
1 of 2
• Explain why it’s important to start a new firm when
its ―window of opportunity‖ is open.
• Explain the difference between an opportunity and
an idea.
• Describe the three general approaches
entrepreneurs use to identify opportunities.
• Identify the four environmental trends that are most
instrumental in creating business opportunities.
• List the personal characteristics that make some
people better at recognizing business opportunities
than others.
6. Identify the five steps in the creative process.
7. Describe the purpose of brainstorming and its use
as an idea generator.
8. Describe how to use library and Internet research to
generate new business ideas.
9. Explain the purpose of maintaining an idea bank.
10. Describe three steps for protecting ideas from being
lost or stolen.
Chapter Objectives
2 of 2
What isAn Opportunity?
1of 2
Opportunity Defined An opportunity is a favorable
set of circumstances that
creates a need for a new
product, service, or business.
What is an Opportunity?
2of 2
Four Essential Qualities of an Opportunity
Three Ways to Identify an Opportunity
First Approach: Observing Trends
1of2
• 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.
First Approach: Observing Trends
2 of 2
Environmental Trends Suggesting Business
or Product Opportunity Gaps
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.
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 baby boomers
• The increasing diversity of
the workplace
• Increasing interest in social
networks such as Facebook
and Twitter
•An increasing focus on health
and wellness
• Increasing interest in ―green‖
products
Trend 3: Technological Advances
1of 2
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
Trend 3: Technological Advances
2of 2
Once a technology is
created, products often
emerge to advance it.
Example: H20Audio
An example is H20Audio, a
company started by four
former San Diego State
University students, that
makes waterproof housings
for the Apple iPhone and
iPod.
Trend 4: Political Action and Regulatory
Changes
1of 2
Political action and
regulatory changes also
provide the basis for
opportunities.
General Example
Laws to protect the environment
have created opportunities for
entrepreneurs to start firms that
help other firms comply with
environmental laws and
regulations.
Trend 4: Political Action and Regulatory
Changes
2of 2
Specific Example
The No Child Left Behind
Act of 2002 requires states
to develop criterion-based
assessments in basic skills to
be periodically given to
students in certain grades.
Kim and Jay
Kleeman, two high school
teachers, started Shakespeare
Squared, a company that
helps high schools comply
with the act.
Company created to help
other companies comply
with a specific law.
Second Approach: Solving a Problem
1of2
• 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 change.
Second Approach: Solving a Problem
2of2
•A problem facing the U.S.and
other countries is finding
alternatives to fossil fuels.
•A large number of
entrepreneurial firms, like
this solar farm, are being
launched to solve this problem.
Third Approach: Finding Gaps in the
Marketplace
1of2
• 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.
ThirdApproach: Finding Gaps in the
Marketplace
2of 2
Product gaps in the
marketplace represent
potentially viable
business opportunities.
Specific Example
In 2000 Tish Cirovolv
realized there were no guitars
on the market made
specifically for women. To
fill this gap, she started Daisy
Rock Guitars, a company that
makes guitars just for women.
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 marketniche
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 leadto
recognizing new opportunities.
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 ―sixthsense‖is called entrepreneurial alertness, which
is formally defined as the ability to notice things without
engaging in deliberate search.
• 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.)
Social Networks
1 of 3
Social Networks
2of3
• 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.)
Social Networks
3of3
These relationships, which
typically form between like-
minded individuals, tend to
reinforce insights and ideas
that people already have.
These relationships, which
form between casual
acquaintances, are not as
apt to be between like-
minded individuals, so one
person may say something
to another that sparks a
completely new idea.
Why weak-tie relationships lead to more new business ideas
than strong-tie relationships
Strong-Tie Relationships Weak-Tie Relationships
Creativity
1of2
• 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.
Creativity
2of 2
Five Steps to Generating Creative Ideas
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
• Brainstorming
– Is a technique used to generate many ideas and solutions
to problems quickly.
– A brainstorming ―sessionaltypically 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.
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 the 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.
Library and Internet Research
1of3
• 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.
Library and Internet Research
2of 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
• LexisNexisAcademic
Library and Internet Research
3of3
• 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 with links to a
constant stream of newspaper articles, blog posts, and news
releases about the topic.
– Targeted searches are also useful.
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.
Encouraging New Ideas
Establishing
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 it’s 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
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.
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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Economic of Chapter 02 Presentation.pptx

  • 1. Chapter 2 Recognizing Opportunities and Generating Ideas Bruce R. Barringer R. Duane Ireland
  • 2. Chapter Objectives 1 of 2 • Explain why it’s important to start a new firm when its ―window of opportunity‖ is open. • Explain the difference between an opportunity and an idea. • Describe the three general approaches entrepreneurs use to identify opportunities. • Identify the four environmental trends that are most instrumental in creating business opportunities. • List the personal characteristics that make some people better at recognizing business opportunities than others.
  • 3. 6. Identify the five steps in the creative process. 7. Describe the purpose of brainstorming and its use as an idea generator. 8. Describe how to use library and Internet research to generate new business ideas. 9. Explain the purpose of maintaining an idea bank. 10. Describe three steps for protecting ideas from being lost or stolen. Chapter Objectives 2 of 2
  • 4. What isAn Opportunity? 1of 2 Opportunity Defined An opportunity is a favorable set of circumstances that creates a need for a new product, service, or business.
  • 5. What is an Opportunity? 2of 2 Four Essential Qualities of an Opportunity
  • 6. Three Ways to Identify an Opportunity
  • 7. First Approach: Observing Trends 1of2 • 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.
  • 8. First Approach: Observing Trends 2 of 2 Environmental Trends Suggesting Business or Product Opportunity Gaps
  • 9. 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.
  • 10. 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 baby boomers • The increasing diversity of the workplace • Increasing interest in social networks such as Facebook and Twitter •An increasing focus on health and wellness • Increasing interest in ―green‖ products
  • 11. Trend 3: Technological Advances 1of 2 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
  • 12. Trend 3: Technological Advances 2of 2 Once a technology is created, products often emerge to advance it. Example: H20Audio An example is H20Audio, a company started by four former San Diego State University students, that makes waterproof housings for the Apple iPhone and iPod.
  • 13. Trend 4: Political Action and Regulatory Changes 1of 2 Political action and regulatory changes also provide the basis for opportunities. General Example Laws to protect the environment have created opportunities for entrepreneurs to start firms that help other firms comply with environmental laws and regulations.
  • 14. Trend 4: Political Action and Regulatory Changes 2of 2 Specific Example The No Child Left Behind Act of 2002 requires states to develop criterion-based assessments in basic skills to be periodically given to students in certain grades. Kim and Jay Kleeman, two high school teachers, started Shakespeare Squared, a company that helps high schools comply with the act. Company created to help other companies comply with a specific law.
  • 15. Second Approach: Solving a Problem 1of2 • 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 change.
  • 16. Second Approach: Solving a Problem 2of2 •A problem facing the U.S.and other countries is finding alternatives to fossil fuels. •A large number of entrepreneurial firms, like this solar farm, are being launched to solve this problem.
  • 17. Third Approach: Finding Gaps in the Marketplace 1of2 • 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.
  • 18. ThirdApproach: Finding Gaps in the Marketplace 2of 2 Product gaps in the marketplace represent potentially viable business opportunities. Specific Example In 2000 Tish Cirovolv realized there were no guitars on the market made specifically for women. To fill this gap, she started Daisy Rock Guitars, a company that makes guitars just for women.
  • 19. 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
  • 20. 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 marketniche 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 leadto recognizing new opportunities.
  • 21. 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 ―sixthsense‖is called entrepreneurial alertness, which is formally defined as the ability to notice things without engaging in deliberate search.
  • 22. • 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.) Social Networks 1 of 3
  • 23. Social Networks 2of3 • 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.)
  • 24. Social Networks 3of3 These relationships, which typically form between like- minded individuals, tend to reinforce insights and ideas that people already have. These relationships, which form between casual acquaintances, are not as apt to be between like- minded individuals, so one person may say something to another that sparks a completely new idea. Why weak-tie relationships lead to more new business ideas than strong-tie relationships Strong-Tie Relationships Weak-Tie Relationships
  • 25. Creativity 1of2 • 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.
  • 26. Creativity 2of 2 Five Steps to Generating Creative Ideas
  • 27. Full View of the Opportunity Recognition Process Depicts the connection between an awareness of emerging trends and the personal characteristics of the entrepreneur
  • 28. Techniques for Generating Ideas Brainstorming Focus Groups Library and Internet Research
  • 29. Brainstorming • Brainstorming – Is a technique used to generate many ideas and solutions to problems quickly. – A brainstorming ―sessionaltypically 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.
  • 30. 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 the 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.
  • 31. Library and Internet Research 1of3 • 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.
  • 32. Library and Internet Research 2of 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 • LexisNexisAcademic
  • 33. Library and Internet Research 3of3 • 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 with links to a constant stream of newspaper articles, blog posts, and news releases about the topic. – Targeted searches are also useful.
  • 34. 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.
  • 35. Encouraging New Ideas Establishing 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 it’s 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 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.
  • 36. 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.