The document discusses identifying opportunities through observing trends in the external environment. It identifies the main trends as economic forces, social forces, technological advances, and political/regulatory changes. These trends suggest gaps in the market where new business opportunities may exist. Examples of trends discussed include the aging population and focus on health/wellness creating opportunities in healthcare, and busy lifestyles fueling demand for fast food and services that save time. Entrepreneurs are advised to monitor trends to recognize windows where opportunities align with customer needs and pain points.

1. Chapter 1
Introduction to
Entrepreneurship
Bruce R. Barringer
R. Duane Ireland
1-1

2. Introduction to Entrepreneurship
There is tremendous
interest in
entrepreneurship in the
U.S. and around the world.
According to the 2010 GEM
study, 7.6% of Americans
are actively engaged in
starting a business or are
the owner/manager of a
business that is less than
three years old.
1-2

3. The GEM study also identifies whether its respondents are
starting a new business;
To take advantage of an attractive opportunity
Or because of necessity to earn an income.

4. Indications of Increased Interest
in Entrepreneurship
• Books
– Amazon.com lists over 35,600 books dealing with
entrepreneurship and 62,700 focused on small business.
• College Courses
– In 1985, there were about 250 entrepreneurship courses
offered across all colleges in the United States.
– Today, more than 2,000 colleges and universities in the
United States (which is about two-thirds of the total) offer at
least one course in entrepreneurship.
1-4

5. What is Entrepreneurship?
• The word entrepreneur derives from the French words
entre, meaning “between,” and prendre, meaning “to
take.”
• The word was originally used to describe people who
“take on the risk” between buyers and sellers or who
“undertake” a task such as starting a new venture.
1-5

6. What is Entrepreneurship?
• Academic Definition (Stevenson & Jarillo)
– Entrepreneurship is the process by which individuals pursue
opportunities without regard to resources they currently
control.
• Venture Capitalist (Fred Wilson)
– Entrepreneurship is the art of turning an idea into a
business.
• Explanation of What Entrepreneurs Do
– Entrepreneurs assemble and then integrate all the resources
needed – the money, the people, the business model, the
strategy – to transform an invention or an idea into a viable
business.
1-6

7. Corporate Entrepreneurship
1 of 2
• Corporate Entrepreneurship
– Is the conceptualization of entrepreneurship at the firm
level.
– All firms fall along a conceptual continuum that ranges
from highly conservative to highly entrepreneurial.
– The position of a firm on this continuum is referred to as its
entrepreneurial intensity.
– entrepreneurial firms are typically proactive innovators and
are not averse to taking calculated risks.
1-7

8. Corporate Entrepreneurship
2 of 2
Entrepreneurial Firms Conservative Firms
• Proactive
• Innovative
• Risk taking
• Take a more “wait and see”
posture
• Less innovative
• Risk averse
1-8

9. Why Become an Entrepreneur?
The three primary reasons that people become
entrepreneurs and start their own firms
Desire to be their own boss
Financial rewards
Desire to pursue their
own ideas
1-9
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall

10. Characteristics of Successful Entrepreneurs
1 of 3
Four Primary Characteristics
1-10
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall

11. Characteristics of Successful Entrepreneurs
2 of 3
• Passion for the Business
– The number one characteristic shared by successful
entrepreneurs is a passion for the business.
– This passion typically stems from the entrepreneur’s belief
that the business will positively influence people’s lives.
• Product/Customer Focus
– A second defining characteristic of successful
entrepreneurs is a product/customer focus.
– An entrepreneur’s keen focus on products and customers
typically stems from the fact that most entrepreneurs are, at
heart, craftspeople.
1-11

12. Characteristics of Successful Entrepreneurs
3 of 3
• Tenacity Despite Failure
– Because entrepreneurs are typically trying something new,
the failure rate is naturally high.
– A defining characteristic for successful entrepreneurs is
their ability to persevere through setbacks and failures.
• Execution Intelligence
– The ability to fashion a solid business idea into a viable
business is a key characteristic of successful entrepreneurs.
1-12

13. Common Myths About Entrepreneurs
1 of 5
• Myth 1: Entrepreneurs Are Born, Not Made
– This myth is based on the mistaken belief that some people
are genetically predisposed to be entrepreneurs.
– The consensus of many studies is that no one is “born” to
be an entrepreneur; everyone has the potential to become
one.
– Whether someone does or doesn’t become an entrepreneur
is a function of their environment, life experiences, and
personal choices.
1-13

14. Common Myths About Entrepreneurs
2 of 5
Although no one is “born” to be an entrepreneur, there are common traits and
characteristics of successful entrepreneurs
• A moderate risk taker
• A networker
• Achievement motivated
• Alert to opportunities
• Creative
• Decisive
• Energetic
• Has a strong work ethic
• Lengthy attention span
• Optimistic disposition
• Persuasive
• Promoter
• Resource assembler/leverager
• Self-confident
• Self-starter
• Tenacious
• Tolerant of ambiguity
• Visionary
1-14

15. Common Myths About Entrepreneurs
3 of 5
• Myth 2: Entrepreneurs Are Gamblers
– Most entrepreneurs are moderate risk takers.
– The idea that entrepreneurs are gamblers originates from
two sources:
• Entrepreneurs typically have jobs that are less structured, and so
they face a more uncertain set of possibilities than people in
traditional jobs.
• Many entrepreneurs have a strong need to achieve and set
challenging goals, a behavior that is often equated with risk taking.
1-15

16. Common Myths About Entrepreneurs
4 of 5
• Myth 3: Entrepreneurs Are Motivated Primarily by
Money
– While it is naïve to think that entrepreneurs don’t seek
financial rewards, money is rarely the reason entrepreneurs
start new firms.
– In fact, some entrepreneurs warn that the pursuit of money
can be distracting.
1-16

17. Common Myths About Entrepreneurs
5 of 5
• Myth 4: Entrepreneurs Should Be Young and
Energetic
– Entrepreneurial activity is fairly easily spread out over age
ranges.
– While it is important to be energetic, investors often cite
the strength of the entrepreneur as their most important
criteria in making investment decisions.
• What makes an entrepreneur “strong” in the eyes of an investor is
experience, maturity, a solid reputation, and a track record of
success.
• These criteria favor older rather than younger entrepreneurs.
1-17

18. Common Myths About Entrepreneurs
• Myth 5: Entrepreneurs love the spotlight
• The vast majority of entrepreneurs do not attract public
attention.
– Entrepreneurs are source of launch of 2,850 companies
listed on the Nasdaq.
– How many of these you can name? W
– Bill Gates of Microsoft, Jeff Bezos of Amazon, Steve Jobs of Apple
and Mark Zuckerberg of Facebook
• Few of us could name the founders of Netflix, Twitter.
1-18

19. Types of Start-Up Firms
1-19

20. Changing Demographics of Entrepreneurs
1 of 3
Women Entrepreneurs
• There were 11.3 million women-owned businesses in the
United States. 2016 (the most recent statistics available)
•These businesses employ nearly nine million people and
generate over $1.6 trillion in annual sales.
•Between 2007 and 2016, the number of women-owned firms
increased by 45 percent.
•Over the past nine years, the number of women-owned
businesses has grown at a rate five times faster than the
national average.
• There are a growing number of organizations that support
and advocate for women-owned businesses.
1-20

21. Changing Demographics of Entrepreneurs
2 of 3
Minority Entrepreneurs
• There has been a substantial increase in minority entrepreneurs in
the U.S. from 2012 to 2016.
• There are eight million minority-owned firms in the United States
•The industry sectors in which minority-owned firms operate are:
•Healthcare and Social Assistance (13 percent),
•Administrative Support and Waste Management and Redemption (12
percent),
•Professional/scientific/technical services (10 percent),
•Construction (9 percent), Retail (8 percent),
•Transportation and Retailing (7 percent),
•Real Estate and Leasing (5 percent), and Other (37 percent).
•(Other is a catch-all for all remaining industries.)
1-21

22. Changing Demographics of Entrepreneurs
2 of 3
Senior Entrepreneurs
• The percentage of U.S. individuals age 62 and older starting a
business increased from 4.2 percent in 1988 to 5.4 percent in 2015.
•The increase is attributed to a number of factors;
•Including corporate downsizing,
•An increasing desire among older workers for more personal
fulfillment in their lives,
•and growing worries among seniors that they need to earn
additional income to pay for future health care services.
1-22

23. Changing Demographics of Entrepreneurs
2 of 3
Millennial Entrepreneurs
• A desire to pursue an entrepreneurial career is high among
millennials.
•According to a Bentley University survey, 66 percent of
millennials have a desire to start their own business, 37 percent
would like to work for themselves, and 25 percent would like to
own a company.
•The biggest obstacles preventing them from acting on their
entrepreneurial desires are lack of finances, lack of desire to start a
business, fear of failure, and a lack of knowledge of the business
start-up process.
•One of encouraging force is entrepreneurship education.
1-23

24. 1-24

25. Economic Impact of Entrepreneurial Firms
• Innovation
– Is the process of creating something new, which is central to
the entrepreneurial process.
– Several studies have found that small businesses outperform
their larger counterparts in terms of obtaining patents.
• Job Creation
– Small businesses are the creators of most new jobs in the
U.S., and created nearly two million of the roughly three
million private sector jobs in 2014.
– According to a Kauffman Foundation survey, it is not the
size of a business that matters as much as its age. Companies
less than one year old have created an average of 1.5 million
jobs per year over the past 30 years. 1-25

26. Entrepreneurial Firms’ Impact on Society
and Larger Firms
• Impact on Society
– The innovations of entrepreneurial firms have a dramatic
impact on society.
– Think of all the new products and services that make our
lives easier, enhance our productivity at work, improve our
health, and entertain us in new ways.
– An example is NEUPOGEN®, a drug, which decreases the incidence
of infection in cancer patients who are undergoing chemotherapy
treatment.
– In addition to improved health care, consider smartphones, social
networks, Internet shopping, overnight package delivery, and digital
photography.
1-26

27. Entrepreneurial Firms’ Impact on Society
and Larger Firms
• Impact on Larger Firms
– Many entrepreneurial firms have built their entire business
models around producing products and services that help
larger firms become more efficient and effective.
– Many exciting new products, such as smartphones, digital
cameras, and improved prescription drugs, are not solely
the result of the efforts of larger companies with strong
brand names, such as Samsung, Apple, and Johnson &
Johnson.
– They were produced with the cutting-edge component parts
or research-and development efforts provided by
entrepreneurial firms.
1-27

28. The Entrepreneurial Process
The Entrepreneurial Process Consists of Four Steps
Step 1: Deciding to become an entrepreneur.
Step 2: Developing successful business ideas.
Step 3: Moving from an idea to an entrepreneurial firm.
Step 4: Managing and growing the entrepreneurial firm.
1-28

30. Chapter 2
Recognizing
Opportunities and
Generating Ideas
Bruce R. Barringer
R. Duane Ireland
2-30

31. Chapter Objectives
1 of 2
1. Explain why it’s important to start a new firm when
its “window of opportunity” is open.
2. Explain the difference between an opportunity and
an idea.
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.
5. List the personal characteristics that make some
people better at recognizing business opportunities
than others.
2-31

32. Chapter Objectives
2 of 2
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.
2-32

33. What is An Opportunity?
1 of 2
Opportunity Defined
An opportunity is a favorable
set of circumstances that
creates a need for a new
product, service, or business.
2-33

34. Opportunity Gap
• Externally Stimulated
• an entrepreneur decides to launch a firm, searches for
and recognizes an opportunity, and then starts a
business
• Jeff Bezos created Amazon.com
• Internally Stimulated
• an entrepreneur recognizes a problem or an
opportunity gap and creates a business to address the
problem or fill the identified gap.
• Wiivv, insoles and footwear company

36. Opportunity Gap
• An entrepreneur recognizes a problem or an
opportunity gap and creates a business to address the
problem or fill the identified gap.
• 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.

37. What is an Opportunity?
2 of 2
Four Essential Qualities of an Opportunity
2-37

38. Window of Opportunity
2 of 2
• The term window of opportunity is a metaphor
describing the time period in which a firm can
realistically enter a new market.
• Once the market for a new product is established, its
window of opportunity opens.
• As the market grows, firms enter and try to establish a
profitable position. At some point, the market matures,
and the window of opportunity closes.
• For an entrepreneur to capitalize on an opportunity, its
window of opportunity must be open.
2-38

39. Window of Opportunity
2 of 2
• Yahoo, the first search engine, appeared in 1995, with the
addition of Lycos, Excite, and several others.
• Google entered the market in 1998, sporting advanced search
technology. Since then, the search engine market has matured,
and the window of opportunity is less prominent.
• Today, it would be very difficult for a new start-up search
engine firm to be successful unless it offered compelling
advantages over already established competitors.
• Bing, Microsoft’s search engine, is gaining ground with
approximately 20.9 percent market share (compared to 63.9
percent for Google), but only after Microsoft has exerted an
enormous amount of effort in head-to-head competition with
Google. -39

40. Three Ways to Identify an Opportunity
2-40

41. First Approach: Observing Trends
1 of 2
• 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.
– Smartphones
2-41

42. First Approach: Observing Trends
2 of 2
Environmental Trends Suggesting Business
or Product Opportunity Gaps
2-42

43. Trend 1: Economic Forces
Economic trends help
determine areas that are
ripe for new start-ups and
areas that start-ups should
avoid.
•consumer spending is
rising or falling
•international trade
•interest rates
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.
• YouNeedaBudget, is an app
that helps users reduce debt
and manage their spending.
2-43

44. Trend 1: Economic Forces
Who has money to spend
and what they spend it on
•Increased number of
women in the workforce
•Baby boomers
•Health, Care, Travel, and
Consumer Packaged Goods
2-44

45. 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,
approximately 76 million in
United States
• The increasing diversity of
the workplace
•An increasing focus on health
and wellness
• Increasing interest in “green”
products
2-45

46. Trend 2: Social Forces
• The proliferation of fast-food restaurants, for example,
isn’t primarily because of people’s love of fast food,
but rather because people are busy and often don’t
have time to cook their own meals.
• Social networking sites like Facebook, Snapchat, and
Instagram aren’t popular because they can be used to
post information and photos on a website. They’re
popular because they allow people to connect and
communicate with each other.
2-46

47. Trend 2: Social Forces
■ 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
■ Emphasis on clean forms of energy,
including wind, solar, biofuels, and others
■ Continual migration of people from small
towns and rural areas to cities
■ Desire for personalization (which creates a
need for products and services that people can
tailor to their own tastes and needs)
Examples of Social
Trends
•Zipcar & Zagster
•Glaukos
•Worldwide
owned mobile
phones are over
2.87 billion
• CareZone
•Online Games
•PatientsLikeMe
2-47

48. Trend 3: Technological Advances
1 of 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
• Compatible devices.
2-48

49. Trend 3: Technological Advances
1 of 2
• According to Statista, the global market for wearable
devices is expected to reach 19 billion dollars in 2018,
more than 10 times its value in 2013.
• Valedo Back Therapy
• A wearable device that uses sensors to detect the nature of a
user’s lower back pain. Based on the data the sensors collect, the
device suggests exercises the user can complete in a game
format to relieve the pain.
• The Valedo system with lightweight wireless motion sensors,
provides the necessary clinical information and visual
information to learn proper movements and perform exercises
correctly. 2-49

50. Trend 3: Technological Advances
1 of 2
2-50

51. Trend 3: Technological Advances
1 of 2
• OpenTable.com
• A website that allows users to make restaurant reservations
online and now covers most of the United States.
2-51

52. Trend 3: Technological Advances
1 of 2
• Rokit Boost
• A high-end mobile
accessories company
that makes smartphone
cases, headphones,
portable USB device
chargers, and Bluetooth
speakers.
2-52

53. Trend 3: Technological Advances
1 of 2
• Lumbo Body Tech
• A smartphone app that analyzes a user’s running
form and offers personalized coaching to help
the user exceed his or her running goals
2-53

54. Trend 3: Technological Advances
2 of 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.
2-54

55. Trend 4: Political Action and Regulatory
Changes
1 of 2
Political action and
regulatory changes also
provide the basis for
opportunities.
For example, new laws
often spur start-ups that
are launched to take
advantage of their
specifications.
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.
2-55

56. Trend 4: Political Action and Regulatory
Changes
1 of 2
• Affordable Care Act (ACA)
• The combination of new regulations, incentitives for
doctors and hospitals to shift to electronic records, and
the release of mountains of data held by the
Department of Health and Human Services (on topics
such as hospital quality and nursing home patient
satisfaction), yielded opportunities for entrepreneurs to
launch electronic medical records’ start-ups, apps to
help patients monitor their medications, and similar
companies.
2-56

57. Trend 4: Political Action and Regulatory
Changes
1 of 2
2-57

58. Trend 4: Political Action and Regulatory
Changes
1 of 2
• Evolv
• Assembled a multidisciplinary team of experts to
identify, invent, and apply new technologies to meet
current terrorism-related threats.
• Combining sensors, artificial intelligence, and human
IQ, the company developed Evolv Mosaiq, a security
platform which is currently one of the world’s most
advanced threat detection systems.
2-58

59. Trend 4: Political Action and Regulatory
Changes
1 of 2
2-59

61. Trend 4: Political Action and Regulatory
Changes
2 of 2
Company created to help
other companies comply
with a specific law.
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.
2-61

62. Second Approach: Solving a Problem
1 of 2
• 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.
2-62

63. Second Approach: Solving a Problem
1 of 2
• Java Jacket
• In 1991, Jay Sorensen dropped a cup of coffee in his
lap because the paper cup was too hot.
• This experience led Sorensen to invent an insulating
cup sleeve and to start a company to sell it. Since
launching his venture, the company, Java Jacket, has
sold over four billion cup sleeves.
2-63

64. Second Approach: Solving a Problem
1 of 2
2-64

65. Second Approach: Solving a Problem
1 of 2
• CitySlips
• After watching countless women walk home barefoot
after a long night in heels, New York University
finance students Katie Shea and Susie Levitt started a
company named CitySlips to make easily portable,
comfortable shoes.
• They created a pair of flats that fold up to fit into a
pocket-size zip pouch, which easily fits into most
women’s purses.
2-65

66. Second Approach: Solving a Problem
1 of 2
2-66
• City Slips

67. Second Approach: Solving a Problem
1 of 2
• GreatCall
• It is producing a line of a simple and easy-to-use mobile
phones targeted to sell to older users. For example, some
older people find traditional cell phones hard to use: the
buttons are small, the text is hard to read, and it’s often
difficult to hear someone on a cell phone in a noisy room.
• Kisa
• has created a cell phone designed specifically for kids. The
phone has a simple design and allows children to call up to 10
pre-set phone numbers.
• The back of the phone features an SOS button and can include
medical or contact information.
2-67

68. Second Approach: Solving a Problem
1 of 2
2-68

69. Second Approach: Solving a Problem
2 of 2
• 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.
2-69

70. Second Approach: Solving a Problem
2-70

71. Third Approach: Finding Gaps in the
Marketplace
1 of 2
• 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.
2-71

72. Third Approach: Finding Gaps in the
Marketplace
1 of 2
• Daisy Rock guitars
– A company, which makes guitars just for women.
– Daisy Rock guitars are stylish, come in feminine colors,
and incorporate design features that accommodate a
woman’s smaller hand.
Southpaw Guitars
– located in Houston, Texas, carries only guitars that are
designed and produced for left-handed players.
2-72

73. Third Approach: Finding Gaps in the
Marketplace
1 of 2
2-73
Daisy Rock guitars

74. Third Approach: Finding Gaps in the
Marketplace
1 of 2
2-74
Southpaw Guitars

75. Third Approach: Finding Gaps in the
Marketplace
1 of 2
• Bodacious
– Lorna Ketler and Barb Wilkins
– Became frustrated when they couldn’t find stylish “plus-
sized” clothing that fit. In response to their frustration, they
started Bodacious, a store that sells fun and stylish “plus-
size” clothing that fits.
2-75

76. Third Approach: Finding Gaps in the
Marketplace
1 of 2
2-76

77. Third Approach: Finding Gaps in the
Marketplace
1 of 2
• Simple Gum (Natural Chewing Gum)
– In 2012, Caron Proschan had just finished lunch of green
juice and salad with a friend when she reached into her
pocket for a stick of gum.
– When she looked at the gum, she realized it was a stark
contrast to the healthy meal she had just eaten. She started
looking for a healthy gum, but couldn’t find one.
– She decided to create one. A year later, Simply Gum was
born. It is now in approximately 1,200 stores across the
country and is consistently a top seller in the chewing-gum
category on Amazon.com.
2-77

78. Third Approach: Finding Gaps in the
Marketplace
1 of 2
2-78

79. Third Approach: Finding Gaps in the
Marketplace
1 of 2
2-79

81. Personal Characteristics of the Entrepreneur
• Opportunity Recognition
The term opportunity recognition refers to the process of
perceiving the possibility of a profitable new business or
a new product or service. That is, an opportunity cannot
be pursued until it’s recognized.
2-81

82. 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
2-82

83. 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.
2-83

84. Prior Experience
• Prior Industry Experience
– Although prior experience is important in an industry in
most instances, it is also important to say that there is
evidence suggesting that people outside an industry can
sometimes enter it with a new set of eyes.
– Similarly, Elon Musk, the founder of Tesla, had no prior
experience in the automobile industry. The takeaway is that
while prior industry experience may be preferable, it is not
always necessary for start-up success.
– In fact, in some cases it may actually work against an
entrepreneur by fixing his or her mind on the “traditional”
ways of doing things in an industry.
2-84

85. 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.
2-85

86. Cognitive Factors
• Cognitive Factors
– Alertness is largely a learned skill, and people who have
more knowledge of an area tend to be more alert to
opportunities in that area than others.
– A computer engineer, for example, could be expected to be
more alert to needs and opportunities within the computer
industry than a lawyer would be.
– The research findings on entrepreneurial alertness are
mixed.
2-86

87. Social Networks
1 of 3
• 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.
2-87

88. Social Networks
1 of 3
Solo Entrepreneurs
– those who identified their business ideas on their own and
Network Entrepreneurs
– those who identified their ideas through social contacts
– The researchers found that network entrepreneurs identified
significantly more opportunities than solo entrepreneurs,
but were less likely to describe themselves as being
particularly alert or creative.
• Strong Tie Vs. Weak Tie Relationships
– All of us have relationships with other people that are
called “ties.”
2-88

89. Social Networks
2 of 3
• 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.
2-89

90. Social Networks
3 of 3
Strong-Tie Relationships Weak-Tie Relationships
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
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91. Creativity
1 of 2
• Creativity
– Creativity is the process of generating a novel or useful
idea.
– For an individual, the creative process can be broken down
into five stages, as shown on the next slide.
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92. Creativity
1 of 2
• Preparation.
– Preparation is the background, experience, and knowledge
that an entrepreneur brings to the opportunity recognition
process. Just as an athlete must practice to excel, an
entrepreneur needs experience to spot opportunities.
– Over time, the results of research suggest that as much as
50 to 90 percent of start-up ideas emerge from a person’s
prior work experience
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93. Creativity
1 of 2
• Incubation.
– Incubation is the stage during which a person considers an
idea or thinks about a problem; it is the “mulling things
over” phase.
– Sometimes incubation is a conscious activity, and
sometimes it is unconscious and occurs while a person is
engaged in another activity.
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94. Creativity
1 of 2
• Insight
– Insight is the flash of recognition when the solution to a
problem is seen or an idea is born. It is sometimes called
the “eureka” experience.
– In a business context, this is the moment an entrepreneur
recognizes an opportunity. Sometimes this experience
pushes the process forward, and sometimes it prompts an
individual to return to the preparation stage.
– For example, an entrepreneur may recognize the potential
for an opportunity, but may feel that more knowledge and
thought is required before pursuing it.
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95. Creativity
1 of 2
• Evaluation.
– Evaluation is the stage of the creative process during which
an idea is subjected to scrutiny and analyzed for its
viability.
– Many entrepreneurs mistakenly skip this step and try to
implement an idea before they’ve made sure it is viable.
– Evaluation is a particularly challenging stage of the creative
process because it requires an entrepreneur to take a candid
look at the viability of an idea.
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96. Creativity
1 of 2
• Elaboration.
– Elaboration is the stage during which the creative idea is
put into a final form: The details are worked out and the
idea is transformed into something of value, such as a new
product, service, or business concept.
– In the case of a new business, this is the point at which a
business plan is written.
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97. Creativity
2 of 2
Five Steps to Generating Creative Ideas
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98. Full View of the Opportunity Recognition
Process
– There is a connection between an awareness of
environmental trends and the personal characteristics of the
entrepreneur because the two facets of opportunity
recognition are interdependent.
– For example, an entrepreneur with a well-established social
network may be in a better position to recognize emerging
technological trends than an entrepreneur with a poorly
established social network.
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99. 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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100. Techniques for Generating Ideas
Brainstorming Focus Groups
Library and
Internet Research
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101. 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.
• Freewheeling is encouraged.
• The session should move quickly.
• Leap-frogging is encouraged.
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102. Brainstorming
• While creating Proactiv, a popular
acne treatment product, Dr. Katie
Rodan, one of the company’s
founders, hosted dinner parties at
her house and conducted
brainstorming sessions with
guests.
• The guests included business
executives, market researchers,
marketing consultants, an FDA
regulatory attorney, and others

103. Brainstorming
• Coolest makes the Coolest Cooler
• Which is the world’s first rolling cooler with
1. A Built-in Blender,
2. Bluetooth Speakers,
3. Tie-down Straps (To Carry Items On Top Of The Cooler),
4. LED Lights, Oversized
5. Tires (Great For Sandy Beaches),
6. Built-in USB Charger, And
7. Built-in Storage.

104. Brainstorming
• In building their mind map, the founders of Coolest would
have put “New Innovative Cooler” at the center of their
mind map, and would have had branches that described
features to be built into the cooler.

105. 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.
– Focus groups usually work best as a follow-up to
brainstorming, when the general idea for a business has
been formulated—such as casual electronic games for
adults—but further refinement of the idea is needed.
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106. Focus Groups
• Focus Group
– 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.
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107. 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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108. 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.
An example is IBISWorld
(www.ibisworld.com)
•A company that publishes
market research on all major
industries and subcategories
within industries
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109. 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 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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110. 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.
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