Recognizing Opportunities and Generating Ideas
Part I
Chapter 2
Modified from: Barringer & Ireland (2006)
1
What is an Entrepreneurial Opportunity?


A favorable set of circumstances that creates the need for a
new product, service or business idea
An opportunity has five essential qualities:
1.
Attractive
i.
Serves a need
ii.
Solves a problem
iii.
Is in response to a external force/trend
2.
Durable (is sustainable over time and relative to competition)
3.
Timely (window of opportunity is open)
4.
Anchored in a product, service, or business that adds value to
buyer/end user
5.
Adds value to necessary network partners (e.g., those providing
resources necessary for venture success)
2
Two ways to Identify an Opportunity
1. Observing Trends in External Environment
 Economic
 Social
 Technological
 Political/Legal
2. Solving a Problem
3
Trend 1: Economic Forces


Affect consumers’ level of disposable income
Evaluate who has money to spend and who’s cutting
costs


An increase in the number of women in the workforce and
their related increase in disposable income
Many large firms are trying to cut costs

Entrepreneurs have taken advantage of this trend by starting firms
that help other firms control costs
4
Economic Trend: Teen Affluence
•
Last year teenage shoppers spent over $170
billion — double the amount just 10 years
earlier (ABC news, 2003).
•
Over the past five years, teen purchases …
have grown [more] than the teen population,
rising from $122 billion annually in 1997 to
$170 billion last year (The Sun Herald, 2003).
5
Economic Trend: Fuel Prices
Higher Gas Prices: The Next Motorcycle
Sales Boom Is In Sight
“…it’s evident we’ll see motorcycle sales
continue to increase in the coming months.”
Source: Mehren, 2004
6
Trend 2: Social Forces

Changes in social trends continually provide
openings for new businesses

The proliferation of fast-food isn’t because people
love fast food
 It’s
because people are busy, and have disposable
income

The Sony Walkman was not developed because
consumers wanted smaller radios but because
people wanted to listen to music while on the go
7
Trend 2: Social Forces—Examples
• Family/work patterns
• Childcare
• Scheduling
• Aging of the population
• Healthcare
• Financial management
• Increasing diversity in the workplace
• Training
• Globalization of industry
• Transportation
• Taxation
• Regulatory compliance
• Online shopping
• Focus on health care and fitness
• Weight management
• Trainers
• Computers and the Internet
• Hardware/software/training
• Shopping alternatives
• Number of cell phone users
• New technology/complimentary products
• New forms of entertainment
• Video games
• DVR
• Laser tag
• Fantasy sports teams
• Online entertainment
8
Social Trend: Health Conscious Consumers
Inside Story: 10 Candy Trends
“Fueled by popularity of the Atkins diet and a healthconscious uprising in America, products that are low in fat,
carbs, sugar and calories are hitting retail shelves at
lightening speed.”
“ACNielsen reports that in 2002, diet candies grew the
fastest, claiming 23 percent of the $24 billion candy market.”
Source: Carneal (2004), American Wholesale Marketers Association
9
Social Trend: `Tween Market
Kiddie calls are on the horizon for the growing 'tween market
“’Tweens [ages 8-12] constitute a lucrative retail market … 23 million
members … Retail studies say this demographic is on the leading edge
of the most-consumer-oriented generation in history. They increasingly
have disposable income, and their voice now factors heavily into family
purchases.”
“ … when they shop for themselves, ‘tweens ignore toys … preferring
clothes, video games and electronics.”
“ The world's No. 2 toymaker [Hasbro, Inc.] is going after the …
'tween market with a walkie-talkie-like device that resembles a mobile
phone.”
Source: St. Louis Tribune, February 12, 2005
10
Trend 3: Technological Advances

Technological Advances

Entrepreneurs must keep on top of how new technologies
affect current and future business opportunities

Industries have emerged due to technological advances


Computer industry, Internet, biotechnology, digital photography
Once, new firms form to take technology to higher level

RealNetworks was started to add video capability to the Internet

Massively Multiplayer Online Role Playing Games (MMORPG)



EverQuest
World of Warcraft
Second Life
11
Technological Trend: Computers
USB drives go beyond storage
“... a new company called U3 … said it
would promote the next generation in
flash drive technology.”
“Keychain drives are going beyond …
storage … They're going to … [run]
applications … [like] PowerPoint [,] …
and ScanDisk.”
“A few companies have already endorsed
the idea: McAfee … antivirus software
vendor [and] ... Zone Labs … the firewall
maker …”
Source: Hesseldahl (2005), Forbes
Economics of MMORPGs
“…supply-and-demand market
exists for virtual items … that it
crosses over with the real world.
[This includes:] …
•The purchase of in-game items for
real-world currency
• Exchanges of real-world
currencies for virtual currencies
Source: Castronova, E. Synthetic
Worlds: The Business and Culture of
Online Games. University Of Chicago
12
Press.
Technological Trend: Email
Text message essay baffles
British teacher
Monday, March 3, 2003 Posted: 10:17 AM EST (1517 GMT)
The girl's essay began:
"My smmr hols wr CWOT. B4, we used 2go2 NY
2C my bro, his GF & thr 3 :- kids FTF. ILNY, it's a
gr8 plc."
Source: CNN.com
13
Trend 4: Political Action and Regulatory Changes

Political action and regulatory changes provide the
basis for new business opportunities




EPA laws create opportunities to start firms that help other
firms comply with environmental laws and regulations
Non-smoking legislation in Ohio and other states
Legalization of gambling in some states
Periods of war/conflict
14
Legal/Political Trend: Legal Unrest
Source: CBSnews.com
High Condition
(Orange). A High
Condition is declared
when there is a high risk
of terrorist attacks.
Visitors wait in line to be fingerprinted
and photographed at the U.S. Customs
check point at San Francisco
International Airport in San Francisco.
Source: US Department of
Homeland Security
15
Legal/Political Trend:
FCC Indecency Regulations Breached
Legal Trend
FCC to investigate incident at end of halftime
show
Social Trend
Howard Stern Show Taken
Off Clear Channel Stations
Whoops!
Source: CNN.com
Tuesday, February 3, 2004 Posted: 7:58 AM
Source: Clear Channel
Communications, Inc. Press Release
Wednesday February 25, 2004
16
How Are Opportunities Identified?
#2 Solving a Problem
• Sometimes involves noticing a problem and finding a solution
• Problems identified via observing trends and intuition, serendipity,
or chance
• Problem: Airport security weak
• Solution: Finger print identification; more advanced customs software
• Problem: Computers are susceptible to viruses
• Solution: Symantec Corp. created Norton antivirus software to guard
computers against viruses
• Problem: People have less leisure time for watching TV on a schedule
• Solution: Tivo, DVR
17
Businesses Created to Solve a Problem
18