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International Workshop
          Skills Development for SMEs and
                  Entrepreneurship

   Development of opportunities - Basic skill for
                entrepreneurs

Research Director Markku Virtanen
Aalto University School of Business
Small Business Center
Contents

•   Entity of Business and Business Know-how
•   Perspectives on new business development
•   Identification of opportunities
•   Development of opportunities
•   Summary and implications




                    2012 © Markku Virtanen
Regional development and business
know-how
• Basis for regional development: successful businesses
  are essential
• Successful businesses posses high level of business
  know-how
• Fostering regional development requires acquisition
  and/or development of business know-how
• What do we mean by business know-how and where
  from do we get it?




                    2012 © Markku Virtanen
Business Know-How

                                     •   Business Management Skills:
 Business                Operative
                         Business        – Management
Management
                          Skills         – Leadership
   Skills
                                     •   Operative Business Skills

              Business
             Know-How
                                     = Business Know-How 
                                     Mastery of Business Entity =
                                     Governance of business know-how in
                                       relation to risks involved in the
                                       business
              Success
Risk Management

• Tolerance of risks one entrepreneurial characteristic
• Risk attitude
   –   Risk averse
   –   Risk neutral
   –   Risk lover
   –   Entrepreneur / Business Manager
 Successful entrepreneurs keep the risks under their control
 Calculated risk taking
Where do you get business know-
             how?

•   Research  time span?!
•   Education  time span?!
•   Experience
•   Learning by doing
Where do you get business know-
                        how?



              Applied
 Basic       Research
                             Continuing
Research        Education:   Education Experience
                 Degree      Courses
                Programs
Where do we need and use business know-
                 how?
New business/venture development –
entrepreneurial and organisational perspective
• Entrepreneurial perspective on new business
  development
   – Schumpeter (1936; 1943): innovations, creative destruction


• Organisational perspective on new business
  development and entrepreneurial behaviour
   – Opportunity identification and development (Ardichvili et. al.,
     2003; Baron 2006; Shane and Venkataraman 2000;
     Sarashvathy 2003)




                         2012 © Markku Virtanen
How to identify opportunity / problem or need of
    a customer (Sarasvathy et. al. 2003) ?

 a) opportunity recognition: identification of an opportunity
    is matching of market demand and supply

 b) opportunity discovery: search for information about
    characteristics of market especially potential customers
    and competitors is essential

 c) opportunity creation: both demand and supply are
    unknown (test your idea)


                       2012 © Markku Virtanen
CHARACTERISTICS OF OPPORTUNITY
                       (Timmons 1999)
• OPPORTUNITY HAS THE QUALITIES OF BEING
  –   ATTRACTIVE: MARKET AND GROWTH LARGE ENOUGH
  –   DURABLE: LONG TERM BUSINESS
  –   TIMELY: OPPORTUNITY WINDOW OPEN FOR LONG TIME ENOUGH
• IS ANCHORED IN A PRODUCT OR SERVICE WHICH
  CREATES OR ADDS VALUE FOR ITS BUYER AND/OR
  END USER
• MARKET AND CUSTOMER FOCUS
  –   SOLVES CUSTOMER’S PROBLEM AND OFFERS THE
      SOLUTION TO THE CUSTOMER
• THE MANAGEMENT TEAM CAPABLE FOR SEIZING IT


                     2012 © Markku Virtanen
QUESTIONS IN DEFINING THE OPPORTUNITY
                         (Virtanen 2004)


1.   TO WHOM? WHO IS THE CUSTOMER? WHERE IS
     THE MARKET? (Listen to the customers!)
2.   WHAT AND WHY? WHAT IS THE PROBLEM OF THE
     CUSTOMER? HOW DO WE SOLVE IT?
     (PRODUCTS /SERVICES)
3.   WHEN? WHAT IS THE TIMING OF DIFFERENT
     ACTIONS? (OPPORTUNITY WINDOW!)
4.   WITH WHICH MEANS? HOW DO WE DO THAT?
5.   WHO? IS THE CAPABILITY OF THE TEAM
     APPROPRIATE?
6.   WHAT IS THE VALUE? HOW DOES THIS
     OPPORTUNITY ADD VALUE TO THE VENTURE / TO
     THE INVESTORS/TO THE CUSTOMERS?
                  2012 © Markku Virtanen
Market                 Industry
                                Market                 Industry
                 Macro          attractiveness         attractiveness
                 level

Domains of                                          Ability to
                                         Mission
opportunity                              Objectives execute
                                         Risk atti- CSF
(Mullins 2006)                           tudes Team

                                              Connectedness
                                              Up and down in
                 Micro                        The value chain
                 level
                                Benefits and           Sustainable
                                Attractiveness         competitive
                                Of the target          advantage
                                segment


                     2012 © Markku Virtanen
Opportunity development (Ardichvili et. al. 2003)
VALUE CREATION CAPABILITY OF OPPORTUNITY
   UNDERUTILISED RESOURCES OR UNEMPLOYED SERVICES


                BUSINESS CONCEPT
      MARKET NEEDS DEFINED IN TERMS OF BENEFITS,
     VALUE SOUGHT AND RESOURCES MORE PRECISELY


                 BUSINESS MODEL
MATURE BUSINESS CONCEPT WHERE INFORMATION OF COMPETI-
 TORS, PRICING AND PROFIT-GENERATION MODEL IS INCLUDED


                  BUSINESS PLAN
  THE MOST ELABORATED FORM OF OPPORTUNITY INCLUDES
  BUSINESS CONCEPT AND BUSINESS AND FINANCIAL MODEL

                  2012 © Markku Virtanen
Basic skill of entrepreneur to create and
        develop opportunities
                    (Puhakka 2002, 2007)
• Collect a team – people are the most important, ability to
  execute CSFs
• Define together mission and values
• Recognize, identify or create opportunity
• Analyse your value creation capability and define
  business concept and business model
• Mobilize the other necessary resources to pursuit the
  opportunity



                     2012 © Markku Virtanen
Summary
• Business know-how is essential for fostering regional
  development
• Entrepreneurial and organizational perspective
  overlapping
• Opportunity identification = identifying of customer’s
  needs and solving customer’s problems or creation of
  opportunities  listen to your customers
• Development of opportunities from value creation
  capability via business concept and business model to
  business plan
• Mobilize resources for successful commercialisation

                    2012 © Markku Virtanen
Implications
• Regional development – fastest way to acquire business
  know-how is to recruit experienced business managers
• Policy makers should pay attention to the development
  of opportunities in addition to / instead of promotion of
  innovation inputs
   – Resources should be allocated more to encourage contacting
     and meeting the customers and sales efforts
   – Emphasize creativity and encourage to be different
     www.mindspace.fi
   – Encourage modernising and diversification in existing firms
   – Pay attention to succession processes and their novice
     entrepreneurs
• Allocation of resources in business degree education =
  you have to be patient
                        2012 © Markku Virtanen
THANK YOU!

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Ii d - virtanen development of opportunities-basic skills for entrepreneurs

  • 1. International Workshop Skills Development for SMEs and Entrepreneurship Development of opportunities - Basic skill for entrepreneurs Research Director Markku Virtanen Aalto University School of Business Small Business Center
  • 2. Contents • Entity of Business and Business Know-how • Perspectives on new business development • Identification of opportunities • Development of opportunities • Summary and implications 2012 © Markku Virtanen
  • 3. Regional development and business know-how • Basis for regional development: successful businesses are essential • Successful businesses posses high level of business know-how • Fostering regional development requires acquisition and/or development of business know-how • What do we mean by business know-how and where from do we get it? 2012 © Markku Virtanen
  • 4. Business Know-How • Business Management Skills: Business Operative Business – Management Management Skills – Leadership Skills • Operative Business Skills Business Know-How = Business Know-How  Mastery of Business Entity = Governance of business know-how in relation to risks involved in the business Success
  • 5. Risk Management • Tolerance of risks one entrepreneurial characteristic • Risk attitude – Risk averse – Risk neutral – Risk lover – Entrepreneur / Business Manager  Successful entrepreneurs keep the risks under their control  Calculated risk taking
  • 6. Where do you get business know- how? • Research  time span?! • Education  time span?! • Experience • Learning by doing
  • 7. Where do you get business know- how? Applied Basic Research Continuing Research Education: Education Experience Degree Courses Programs
  • 8. Where do we need and use business know- how?
  • 9. New business/venture development – entrepreneurial and organisational perspective • Entrepreneurial perspective on new business development – Schumpeter (1936; 1943): innovations, creative destruction • Organisational perspective on new business development and entrepreneurial behaviour – Opportunity identification and development (Ardichvili et. al., 2003; Baron 2006; Shane and Venkataraman 2000; Sarashvathy 2003) 2012 © Markku Virtanen
  • 10. How to identify opportunity / problem or need of a customer (Sarasvathy et. al. 2003) ? a) opportunity recognition: identification of an opportunity is matching of market demand and supply b) opportunity discovery: search for information about characteristics of market especially potential customers and competitors is essential c) opportunity creation: both demand and supply are unknown (test your idea) 2012 © Markku Virtanen
  • 11. CHARACTERISTICS OF OPPORTUNITY (Timmons 1999) • OPPORTUNITY HAS THE QUALITIES OF BEING – ATTRACTIVE: MARKET AND GROWTH LARGE ENOUGH – DURABLE: LONG TERM BUSINESS – TIMELY: OPPORTUNITY WINDOW OPEN FOR LONG TIME ENOUGH • IS ANCHORED IN A PRODUCT OR SERVICE WHICH CREATES OR ADDS VALUE FOR ITS BUYER AND/OR END USER • MARKET AND CUSTOMER FOCUS – SOLVES CUSTOMER’S PROBLEM AND OFFERS THE SOLUTION TO THE CUSTOMER • THE MANAGEMENT TEAM CAPABLE FOR SEIZING IT 2012 © Markku Virtanen
  • 12. QUESTIONS IN DEFINING THE OPPORTUNITY (Virtanen 2004) 1. TO WHOM? WHO IS THE CUSTOMER? WHERE IS THE MARKET? (Listen to the customers!) 2. WHAT AND WHY? WHAT IS THE PROBLEM OF THE CUSTOMER? HOW DO WE SOLVE IT? (PRODUCTS /SERVICES) 3. WHEN? WHAT IS THE TIMING OF DIFFERENT ACTIONS? (OPPORTUNITY WINDOW!) 4. WITH WHICH MEANS? HOW DO WE DO THAT? 5. WHO? IS THE CAPABILITY OF THE TEAM APPROPRIATE? 6. WHAT IS THE VALUE? HOW DOES THIS OPPORTUNITY ADD VALUE TO THE VENTURE / TO THE INVESTORS/TO THE CUSTOMERS? 2012 © Markku Virtanen
  • 13. Market Industry Market Industry Macro attractiveness attractiveness level Domains of Ability to Mission opportunity Objectives execute Risk atti- CSF (Mullins 2006) tudes Team Connectedness Up and down in Micro The value chain level Benefits and Sustainable Attractiveness competitive Of the target advantage segment 2012 © Markku Virtanen
  • 14. Opportunity development (Ardichvili et. al. 2003) VALUE CREATION CAPABILITY OF OPPORTUNITY UNDERUTILISED RESOURCES OR UNEMPLOYED SERVICES BUSINESS CONCEPT MARKET NEEDS DEFINED IN TERMS OF BENEFITS, VALUE SOUGHT AND RESOURCES MORE PRECISELY BUSINESS MODEL MATURE BUSINESS CONCEPT WHERE INFORMATION OF COMPETI- TORS, PRICING AND PROFIT-GENERATION MODEL IS INCLUDED BUSINESS PLAN THE MOST ELABORATED FORM OF OPPORTUNITY INCLUDES BUSINESS CONCEPT AND BUSINESS AND FINANCIAL MODEL 2012 © Markku Virtanen
  • 15. Basic skill of entrepreneur to create and develop opportunities (Puhakka 2002, 2007) • Collect a team – people are the most important, ability to execute CSFs • Define together mission and values • Recognize, identify or create opportunity • Analyse your value creation capability and define business concept and business model • Mobilize the other necessary resources to pursuit the opportunity 2012 © Markku Virtanen
  • 16. Summary • Business know-how is essential for fostering regional development • Entrepreneurial and organizational perspective overlapping • Opportunity identification = identifying of customer’s needs and solving customer’s problems or creation of opportunities  listen to your customers • Development of opportunities from value creation capability via business concept and business model to business plan • Mobilize resources for successful commercialisation 2012 © Markku Virtanen
  • 17. Implications • Regional development – fastest way to acquire business know-how is to recruit experienced business managers • Policy makers should pay attention to the development of opportunities in addition to / instead of promotion of innovation inputs – Resources should be allocated more to encourage contacting and meeting the customers and sales efforts – Emphasize creativity and encourage to be different www.mindspace.fi – Encourage modernising and diversification in existing firms – Pay attention to succession processes and their novice entrepreneurs • Allocation of resources in business degree education = you have to be patient 2012 © Markku Virtanen