4

The window of opportunity

Baphicile Mbata

LEARNING OUTCOMES

After completion of this chapter, you should be able to

 differentiate between an idea and an opportunity

 understand why large organisations leave gaps in the market
 define and understand the concept of a window of opportunity
 identify and differentiate between the five stages of a window of opportunity
 understand the issues pertaining to the different stages of opportunity evaluation
 identify the facets of idea generation
 identify and understand the criteria used to evaluate an opportunity
 understand the integrated approach to opportunity evaluation.

4.1 Introduction
The aim of this chapter is to look at opportunity evaluation and utilisation from the perspective
of an entrepreneurial start-up. The chapter walks the entrepreneur through the different phases of
a window of opportunity, and highlights the different issues that the entrepreneur has to face and
overcome in order to successfully start and grow a venture.

A window of opportunity is divided into five phases: seeing, locating, measuring, opening and
closing the window. The generation of ideas is also touched upon, as are the important issues that
an entrepreneur has to consider when evaluating an opportunity so as to make the most of it, or
to be able to determine when an opportunity is not as lucrative as it may initially have seemed to
be.

4.2 The opportunity

According to Nieman and Bennett (2006), an opportunity is a gap left in the market by those who
currently serve it. An opportunity can have the qualities of being attractive, durable and timely.
A good idea is not necessarily a feasible and viable opportunity. For an idea to be a lucrative one,
besides being attractive, durable and timely, it must create and/or add value for the purchaser or
end-user (in terms of the product or service offering). There is no sense in reinventing the wheel;
among other characteristics, entrepreneurs should therefore be creative and innovative.

Entrepreneurs are generally seen as the drivers of economic growth in most countries. Their
contribution to the economy is commonly seen in the creation, establishment and growth of new
businesses. For these new businesses to be created, entrepreneurs need to identify new business
opportunities, new products and new ways to meet customer needs (Nieman & Bennett 2006). It
is not an easy task to identify and evaluate opportunities. This process demands that the
entrepreneur should search for ideas to be converted into a business opportunity in a creative and
innovative manner.

4.3 The role of ideas

Finding a good idea is the first step in the task of converting an entrepreneur’s creativity into an
opportunity. A good idea does not always automatically translate into an opportunity. More often
than not, potential entrepreneurs put too much emphasis on their ideas. This can result in myopia
on the part of the entrepreneur concerning the assessment and evaluation of the value that the
product or service can add.

In 1996, Peggy Mokhonto was involved in making clay pots. Unfortunately, the demand and
scope for this type of product were limited, which forced her to look for a better opportunity. In
her search, she made the acquaintance of Flora Mathebula, and together these two dynamic
African ladies approached the Department of Health and Welfare for financial assistance.

A grant of R10 000 was given to Peggy and Flora with which they were able to purchase
equipment necessary to manufacture fencing products. A sound business practice and the
production of high-quality fencing ensured that these two ladies were given a second grant worth
R100 000 by the Department of Health and Welfare. They invested in more equipment and
expanded their product range to include the manufacturing of bricks. Flora and Peggy are now
the employers of 23 mothers in their community. To further uplift and provide assistance to the
less privileged, labourers from the impoverished sector of their community are employed as
casual workers on a part-time basis (Ntsika Enterprise Promotion Agency 2001).

The first part of this example proves that a good idea does not necessarily translate into a
brilliant opportunity. However, these ladies were able to realise this at an early stage and could
find another idea that translated into an opportunity. The next logical question is: When is an
idea an opportunity?

4.4 When is an idea an opportunity?

According to Spinelli and Adams (2012), for an idea to be an opportunity it must be attractive,
durable and timely, as well as be anchored in a product or service, which creates or adds value
for its purchaser or end-user. Essentially this means that the idea must have the power to please
the consumer’s mind or eye and arouse his or her interest, thus drawing the consumer to
purchase the goods or service. For the idea to be durable, it must have the inherent ability to
continue in a particular condition and not wear out soon. Finally, for the idea to be timely, it
must be presented to the market at an opportune time – a time when the market is ready for it. It
must be an idea whose time has come. If an entrepreneur takes these factors into serious
consideration, he or she is effectively en route to establishing a sustainable business.
For example, in the early days of the Internet, it was considered improper to use it commercially.
From 1969 to the early 1990s, the Internet was restricted to military, academic and a few
corporate research users. The National Science Foundation (NSF) of the United States
maintained the main long-distance backbone of the Internet. The NSF had a use policy that
prohibited all but the most indirect commerce online.

Despite these restrictions, the Internet grew rapidly because many universities and laboratories
found it to be an effective way to communicate. The researchers, seeing the benefits of sharing
academic information, started arguing that the rest of society would benefit from this type of
technology transfer. A fundamental breakthrough occurred. Suddenly there was the World Wide
Web, which had web browsers and web servers. They provided key innovation in the ease of use
and the use of multimedia. It became much easier for individuals to use the Internet, because
obscure and complicated commands were eliminated and replaced by a simpler way to navigate
– clicking on links and typing in web addresses.

Firms and organisations found themselves in a position where they were able to create marketing
material that had global reach at a very low cost. Small firms could compete on a much more
even footing with the largest companies in the world. Customers found that they could use the
Web to communicate very effectively with each other. The new Web, combined with the power
of the earlier e-mail technology, created an entirely new and effective mechanism for relating to
customers. Between January 1994 and January 1999, Internet hosts grew from 2,2 million to
over 43 million worldwide. The growth rate in 1998 was 46 per cent.

The Internet user base has grown rapidly as well. In 1999, the number of worldwide Internet
users was estimated at over 160 million people. Much more growth is possible, as this constitutes
less than 4 per cent of the world’s adult population. The Internet with its limitless potential is an
idea that has translated into an extremely viable opportunity in a plethora of different ways
(Ward 2000).

4.5 Sources and drivers of ideas and

opportunities
There are countless sources of business opportunities and the entrepreneur, especially in a
rapidly developing and changing society such as South Africa, has numerous places to find these.
However, a good opportunity seldom falls out of the sky. Finding good ideas and converting
them into opportunities is a conscious, deliberate, creative process.

Nieuwenhuizen, Le Roux and Jacobs (2001) state that certain techniques can be used when
searching for a business idea. These can be divided into five broad approaches: the generation of
ideas from skills, expertise and aptitude, from common needs, from existing problems, from
everyday problems and from other sources. This is illustrated in Figure 4.1 and discussed in the
following paragraphs.
Figure 4.1 The generation of ideas

Source: Nieuwenhuizen et al. (2001)

Business opportunities can arise when entrepreneurs use their skills, expertise or aptitude to
provide a product or service to the market. Common needs among organisations or individuals
for a particular product or service can be met by entrepreneurs. Solving existing problems, i.e.
things that irritate, annoy or rile the general public, can become the source of a thriving business
opportunity.

Instead of getting caught up in a routine with firmly entrenched day-to-day activities, the desire
and ability of an entrepreneur to produce goods or services that enable people to do things
differently in a better or faster way can be another source or driver of opportunities.

Other sources from which entrepreneurs commonly obtain the inspiration for business
opportunities are, according to Nieuwenhuizen et al. (2001), business publications, inventors’
associations, expired patents, advertisements, trade shows, overseas products and the Yellow
Pages.

4.6 Opportunity evaluation

In order to determine whether or not a business idea will translate into a lucrative opportunity
which possesses the qualities of being timely, attractive and durable, the entrepreneur must
follow a strategy of evaluating or screening the revealed opportunity.

By screening potential opportunities, important issues and aspects that might be overlooked or
underemphasised to the detriment of the venture are brought to light. The process of screening
and evaluating opportunities helps the entrepreneur to see clearly whether his or her venture will
be a high- or low-potential one. Once this has been determined, the entrepreneur can decide
whether or not the opportunity is worth pursuing.

The criteria used to screen opportunities can be summarised as follows:

 Industry and market issues

 Economics
 Harvest issues
 Management team
 Fatal flaw issues
 Personal criteria
 Strategic differentiation

4.6.1 Industry and market issues

The market for higher-potential ventures usually comprises a niche market that caters for needs
that certain customers deem to be important, and is therefore sustainable. These products and
services must add and/or create great value to the customers.

The customers that make up the niche market tend to be accessible as well as willing to purchase
the product or service. They also tend not to display brand loyalty to other products or services.
An attractive market to enter into is one where the life of the product or service extends far
beyond the time period required to recover the investment in the venture, as well as make a
profit. With regard to customer need, lower-potential opportunities tend to be fragmented in
focus and customers are not easily accessible. More often than not, customers are brand loyal,
making it rather difficult to entice them to try new and/or different products. The attractiveness
of a market is determined by the following factors:

 Market structure
 Market size
 Market capacity
 Market share
 Cost structure

Market structure

When speaking of market structure, reference is made to the following:

 The number of sellers present in a market

 The size distribution of sellers
 Product differentiation
 Entry and exit conditions
 The number of buyers present
 Demand sensitivity to price changes

Market conditions that make it possible for higher-potential ventures to thrive are ones where
unfulfilled market niches are involved, i.e. there are not very many sellers present in the market
and differentiated products and services are prevalent. The entry conditions should be rather
difficult. This aids in eliminating competition, as not everybody has the ability to enter the
market and provide the same service or product. Ideal exit conditions, on the other hand, are ones
where it is easier for the entrepreneur to leave the market should the need or desire to do so arise.
Ideally, an abundance of buyers is present and they have substantial buying power. Further ideal
market conditions for a higher-potential venture would be the presence of information or
knowledge gaps, and profitable – but not overwhelming – competition.

An unattractive market, or one which promotes low-growth potential for entrepreneurial

ventures, is one in which there is a high concentration of buyers and sellers, mature or declining
industries and perfect competition. Demand sensitivity to price changes by the consumers is not
an ideal situation for the entrepreneur, as are facile entry conditions and difficult exit conditions.
Where there is low product differentiation, the entrepreneur may be faced with a scenario of
extreme brand loyalty by consumers who are unwilling to try out new or different products or
services.

Market size

A large and growing market is the type of market a high-potential venture seeks to engage in
and, more often than not, thrives in. A large and growing market refers to one in which
competitors do not perceive capturing a portion of the market to be a threat to them and where a
small portion of the market share can still translate into substantial and increasing sales volumes.

A small and stagnant market is not an attractive one to enter. This type of market stifles ventures,
leading to unrealised potential of both the venture and the entrepreneur.

Market capacity

A market at full capacity in a growth situation – where demand outweighs possible current
supply – is a very attractive one to enter. By virtue of its nature, this type of market encourages
ventures to reach their highest potential.

Market share

The potential and ability of a venture to become a market leader and capture a substantial portion
of the overall market are significant contributing factors to the firm becoming a high-growth
venture. A firm that is unable to become a market leader by capturing a substantial portion of the
overall market is a low-growth potential venture.

Cost structure

Generally, a firm that can provide low-cost goods and services while providing value for money
is attractive. However, a firm that faces declining cost conditions on a continual basis ceases to
be attractive or exhibit great growth potential.

4.6.2 Economics
Businesses that possess high and durable gross margins usually have high and durable profits
(after tax). A venture that achieves a positive cash flow quickly, i.e. within three years, is
attractive. Once the time to reach break-even and a positive cash flow takes longer than three
years, the potential for the venture to be attractive is substantially reduced. Ventures that require
low start-up funds and little or no initial capital equipment are attractive. Should a venture
require too much money for start-up or too much initial capital outlay, it ceases to be a
proposition. This is because the possibility of recovering returns on the investment and making a
profit within a reasonable time frame diminishes greatly.

4.6.3 Harvest issues

The eventuality that a venture will be sold is a reality most entrepreneurs should bear in mind.
Some entrepreneurs start and grow their businesses with the aim of selling them some time in the
future. This is referred to as an exit strategy. Attractive ventures in attractive markets tend to
have the harvest objective in mind. Unattractive ventures in not so attractive markets tend to
postpone drawing up a contingency plan of harvesting. Should the need then arise to dispose of
the venture by selling it, buyers are not willing to purchase the business due to the
unattractiveness of both the venture and the industry it is operating in.

4.6.4 Management team issues

It is both important and beneficial for a venture to have an entrepreneurial team that possesses
proven experience within the chosen industry. A team that possesses a complementary and
compatible skills base contributes to the attractiveness of the venture. Usually, when an
unattractive, low-potential venture is examined, it is found that it does not have such teams.

The members of the team should ideally exhibit qualities such as industry and technical
experience, integrity and intellectual honesty, commitment to excellence, tolerance of ambiguity,
opportunity obsession, creativity and innovativeness, internal locus of control, as well as
determination and perseverance.

4.6.5 Fatal flaw issues

The presence of one or more fatal flaws renders an opportunity unattractive. It would then go
without saying that attractive ventures do not have any fatal flaws.

Fatal flaws in the venture can be caused by

 markets that are too small

 markets with overwhelming competition
 markets where the cost of entry is too high
 markets where entrants are unable to produce a sustainable competitive advantage.

Other fatal flaws include the lack of an entrepreneurial team, non-existent industry or technical
experience, and the lack of or compromised intellectual honesty and integrity on the part of the
owner or the management team.

4.6.6 Personal criteria

Successful entrepreneurs have a good fit between what they wish to derive from the venture and
what the venture requires of them. An attractive opportunity does not have excessive downside
risks attached to it. An attractive opportunity is both desirable and good for the entrepreneur to
pursue. A successful entrepreneur takes calculated risks and has relatively high stress tolerance
levels, in addition to being opportunity obsessed, committed to excellence, exhibiting the need to
achieve, being creative and innovative, tolerant of ambiguity and uncertainty, and possessing an
internal locus of control.
4.6.7 Strategic differentiation
Strategic differentiation refers to how a venture positions itself to take advantage of the given
market conditions to its benefit, while at the same time differing from the competitors in terms of
the value added to consumers.

A high-potential venture tends to have an entrepreneurial team of the highest calibre, exhibits
excellent service management and is perceived by the customers to be a good service provider.
The timing of the product or service offering is opportune and the technology ground breaking or
exclusive. The venture management is very flexible and can make decisions on its feet, as well as
de-commit equally fast, should circumstances make it necessary to do so.

A high-potential venture is always searching for new opportunities and the pricing strategy
enables it to be the industry leader, or be positioned very near that prime position. A venture that
is conducive to high growth has distribution channels that are accessible, as well as networks that
are firmly in place. The culture of a high-potential growth venture has an integral strategy of
forgiveness, which allows for mistakes to be made and learned from by the owners, management
team and staff members.

4.7 The pursuit of opportunities

Generally, established businesses have a stronger position than smaller entrepreneurs in terms of
market entry and share. This is because established businesses have more experience; they have
a strong and secure network with suppliers, customers and intermediaries; and their costs are
lower due to their development of experience curve economies.

Larger organisations also attain positions of strength due to their possession of economy-of-scale
cost advantages. All of this said, entrepreneurs can (and do) take on the larger players
successfully. They manage to identify opportunities in the market and turn them into viable
business ventures regardless of the presence of the more established organisations.

There are numerous reasons for this. The most common ones can be attributed to

 organisational inertia
 organisational complacence
 bureaucracy.

Organisational inertia occurs when an organisation refuses to adapt in a responsive manner to

changes that occur in the marketplace. Organisational complacence refers to the organisation
resting on its laurels due to past successes and adopting a ‘we have made it’ attitude. This can
result in the organisation not exploiting opportunities as effectively and as efficiently as it could,
and as it used to in the past.

Once businesses grow and become larger and more successful, the levels in the hierarchy expand
due to increased financial, operational and human resources. Communication between the
different functions and departments becomes slow and cumbersome. Thus, these organisations
become bureaucratic. This can result in opportunity-seeking mechanisms and techniques used by
the organisation becoming rigid and inadequate for the needs of the market.

Wickham (2006) states that gaps left open due to the technological inertia, cultural inertia,
internal politics and economic inefficiency of large organisations enable smaller entrepreneurs to
take advantage of presented opportunities that these larger organisations have failed to grab and
exploit to their benefit.

4.8 Why bigger businesses leave gaps in the

market
Bigger or established businesses tend to leave gaps in the market for numerous reasons. Once
these gaps (however small) are left open, it makes it very easy for smaller organisations to spot
the opportunity and make the most of it. Spinelli and Adams (2012) state that a good opportunity
may sometimes not look too attractive at first, but has the potential to blossom into one that is
bigger than the venture itself, even after the venture grows to a substantial size.

The most common reasons for bigger or more established businesses leaving gaps in the market
are the following:

 Failure to see new opportunities

 Underestimation of new opportunities
 Technological inertia
 Cultural inertia
 Politics and internal fighting
 Government intervention to support new and (smaller) entrants

A pharmacist in the cosmetics business

By Terri-Liza Fortein

Breaking into the highly competitive cosmetics market is not easy, and it becomes even harder
when you are operating from a tiny garage in Benoni, but Patrick Makhesha has cracked it.

Over the past eight years, his company, KM Cosmetics, has established itself in the local market
and even exports a small percentage of products to Botswana and Swaziland.

Makhesha, a qualified pharmacist, “fell in love” with the cosmetics industry while working in
research, development and marketing for large pharmaceutical companies. When he grew tired
of the corporate world, he decided to pursue his passion.

“I was intrigued by cosmetics. I had the expertise, interest and knowledge I needed, so I left the
corporate environment to start my own business.”
When he started out, his tenacity and optimism were the driving forces that propelled the
business.

“It is important always to have infinite hope in any project that one embarks on and optimism
has played a big role in the success I have achieved,” he says.

It is a mix of this optimism, hard work and developing unique quality products that has helped
KM Cosmetics, trading as African Image, enjoy high sales volumes and create a national demand
for the company’s products.

The oil moisturisers, curl activators, shampoos and tissue oils he produces give hair and skin a
healthy glow, but they also help with dandruff problems, and soothe dry and itchy scalps. This
gives customers an added bonus they do not find in many other products.

For years, KM Cosmetics supplied Pick n Pay, Diskom, Score Supermarkets and several corner
shops across the country from his garage.

Getting his foot in the door at Pick n Pay was not as difficult as one might expect as he had an
existing relationship with the supermarket.

“My relationship with Pick n Pay dates back to my student days when they paid my tuition and
accommodation fees. So it was easy when I approached them to list my products. The quality of
our brand and all it has to offer also played a role in convincing them.”

Makhesha’s products held such broad appeal that his business continued to expand and
eventually the modest garage premises became too small.

“We started outsourcing, but it was a problem, because we couldn’t get access to our own
product when we needed it and we were not coping with the demand.”

Makhesha then approached the Department of Trade and Industry for funding and subsequently
received a R500 000 loan. This money was used to buy machinery, and working capital was
secured form Pick n Pay’s social development division. The money allowed Makhesha to
advance to the next business level and KM Cosmetics now operates from fully equipped
premises in Jet Park, Ekurhuleni. The business also employs 11 permanent staff.

This is a far cry from the tiny garage in Benoni where Makhesha and two staff members initially
started out.

Makhesha uses below-the-line advertising to promote his products. “As a small business I can’t
really afford the big billboards and fancy adverts as I just don’t have the budget.”

Instead, he uses ‘razzmatazz’ to create excitement around the different trade names in his stable.
“We hire deejays, professional dancers and give away prizes to raise our products’ profile and it
really works.” Word of mouth, however, is the cornerstone of KM Cosmetics’ success – even
consumers in Botswana and Swaziland were introduced to the products by South Africans.
Makhesha also markets his own products personally and prides himself in introducing his
products to as many new customers as possible.

“If I go to a friend’s house and I see they are not using my product I will offer them free
samples,” he says with a gleaming smile.

This local success led KM Cosmetics to expand into neighbouring countries. Nevertheless,
Makhesha says he does not want to over-extend the business and create a demand that he will not
be able so supply. Makhesha believes that the business can grow by at least 10 to 20 per cent a
year. To facilitate this, KM Cosmetics is also expanding its product offerings and entering less
traditional markets. The new Nature’s Oil, a tissue oil product, is a prime example and can be
used by various ethnic groups. A new line of skin care products for younger consumers is also on
its way.

“My daughter is a teenager and she is having some problems with her skin so I am in the process
of developing a new line of products specifically for teenagers,” he explains. The product is in its
final stages and it is expected to hit the shelves soon.

When Makhesha is not cooking up cosmetics he dedicates his time to his other passion – long-
distance running. He uses lessons learnt in this endurance sport to keep him motivated in the
highly competitive cosmetics industry. “I think long-distance athletes have to persevere, be
patient and have a much higher tolerance level and pain threshold.

“This increases one’s endurance. So, the two Comrades Marathons I have completed, and the
lessons learnt from long-distance running in general, help me to soldier on in business regardless
of the difficulties.”

E-mail africanimage@mailbox.co.za for more information on KM Cosmetics.

Source: Gauteng Business (3–15 July 2007)

4.8.1 Failure to see new opportunities

As said earlier, opportunities must be consciously and actively sought by the entrepreneur. Large
organisations must, in order to grow and not fall prey to the trap of rigidity, bureaucracy and
stagnation, also actively search for new opportunities. Large businesses should scan the
environment for opportunities that they can make the most of by utilising their strengths. Failure
to do this may result in organisational inertia, which means the failure or inability to respond to
environmental changes as they occur. This quite often leads to the loss of the organisation’s
competitive edge. Once a large organisation exhibits this type of apathetic or lethargic behaviour,
it leaves a wide open gap that smaller entrepreneurs can, and usually do, take advantage of.

4.8.2 Underestimation of new opportunities

Most firms view opportunities in terms of monetary value. This means that the value of the
opportunity is analysed in relation to the size of the business that will potentially pursue it. Large
organisations with substantial turnovers tend not to regard opportunities that only represent a
fraction of their turnover as being lucrative.

Alternatively, smaller firms will pursue opportunities that a larger firm would not, because to the
smaller firm these opportunities are ones with value and are thus attractive. For example, for a
business with an annual turnover of R25 million, an opportunity worth R250000 may not be
viewed as substantial in monetary terms. However, to a smaller firm with a turnover of R2,5
million, the same opportunity of R250000 would be attractive as it would add value to the firm.

This attitude exhibited by larger organisations has been instrumental in providing gaps for small
firms. What may seem to be an insubstantial opportunity on the surface to the myopic larger
firm, could actually turn into an extremely durable and profitable one for the smaller firm. The
smaller firm taking advantage of the opportunity could end up making a lot of business and
money.

4.8.3 Technological inertia

According to Wickham (2006: 206), opportunities are pursued by innovation. Innovation
involves doing something different in a radical or incremental manner. Radical innovation refers
to unprecedented breakthroughs, while incremental innovation can be defined as a systematic
evolution of a product or service into newer or larger markets (Pinchot 2000). An innovation is
founded on some technological approach.

Technology simply refers to the methods and ways used to do certain things or to achieve certain
objectives or goals. Needless to say, the world today has an extremely technologically dynamic
nature. Larger organisations that were the technological pioneers and trailblazers of yesteryear
tend to rest on their laurels and feel that they do not need to conform to the technological
changes that occur in the marketplace. This type of mindset could prove to be very detrimental to
big businesses in the medium to long term. Owing to the agility and flexibility of small
businesses and their need to survive, they tend to be very quick to spot new technologies and run
with them. This often leaves big businesses in a very precarious position.

4.8.4 Cultural inertia

Organisational culture refers to the beliefs, norms and values that an organisation upholds and
lives or operates by. Organisational culture and technology are very closely linked. An
organisation’s culture and its use of technology to a great extent determine how the firm
responds to changes within the environment in which it operates.

Once again, larger businesses tend not to be too keen to change the way they do things in order
to meet or surpass the challenges that the market environment may throw at them. Their
unwillingness to change puts them in a position of not being able to pursue new opportunities.
This leaves wide open gaps for technologically and culturally nimble smaller firms to take
advantage of the opportunities and cash in substantially.

4.8.5 Politics and internal fighting

Most organisations have some form of political state of affairs, whether subtle or blatant. The
more established an organisation becomes, the more entrenched political infighting and bickering
become. In order for there to be a healthy amount of harmony within an organisation, employees
should feel and exhibit a certain affiliation to, and alignment with, the organisation’s goals and
objectives. In turn, the organisation must also ensure that it does the same to the employees.

Once individual employees start feeling that their best interests are not being taken into
consideration by the organisation, infighting begins. If the firm does not work as a cohesive
whole from an internal perspective, then it becomes extremely difficult, if not impossible, to
pursue valuable opportunities because no general consensus has been reached. This may result in
the loss of a great opportunity that may never present itself again. The more focused and less
politically obsessed smaller firms will take advantage of these opportunities.

4.8.6 Government intervention to support new (and smaller)

entrants
Most governments the world over recognise the important role that small and growing businesses
play in national economies. Small, medium and micro enterprises (SMMEs) are responsible for
many new innovations and for job creation. The situation is no different in South Africa. At the
moment, the government is seriously involved in efforts to bolster and support SMMEs in
numerous ways.

This means that the smaller businesses tend to get more support and attention than big businesses
do. This support takes the form of skills training, financing, access to government tenders,
assistance with market access, as well as the development and implementation of SMME-
friendly legislation. This support clearly favours smaller businesses, which enables them to grab
opportunities that have been proverbially placed in their lap, while bigger firms are forced to
fend for themselves.

4.9 The window of opportunity

What is the window of opportunity? Nieman and Bennett (2006) state that the window of
opportunity refers to the time period available for creating new ventures. As a market grows,
more and more opportunities are revealed, in other words, the window opens. However, as the
market matures, the window begins to close and the available opportunities in the market begin
to dwindle and eventually peter out.

Wickham (2006) suggests that in order to effectively visualise the window of opportunity, it is
helpful to use a metaphor. Picture a solid wall. This wall represents the competitive nature of the
environment that the entrepreneur is endeavouring to penetrate. The solidity of the wall
represents competition from established businesses.

Going back to our earlier definition of an opportunity, these businesses have left certain gaps in
the market by not completely servicing all the needs of consumers. These gaps represent the
window that the entrepreneur can look and move through, thus enabling him or her to create a
new and better product or service for the buyer or end-user. Here the entrepreneur must
emphasise value addition, as this provides him or her with the ability to achieve a sustainable
competitive advantage. Sustainable competitive advantage allows the opportunity to be a durable
one, as opposed to becoming a momentary fad.

For an opportunity to possess the qualities of being attractive, durable and timely, the window of
opportunity must be opening. This is illustrated in Figure 4.2.

Figure 4.2 The window of opportunity

Source: Spinelli & Adams. 2012. New Venture Creation: Entrepreneurship for the 21st Century,
9th ed. McGraw-Hill. The material is reproduced with permission of The McGraw-Hill Irwin
Companies.

The window must remain open long enough for the entrepreneur to be able to take advantage of
the business opportunities it may provide. In order for the entrepreneur to take proper advantage
of the window of opportunity, he or she should enter the market with the right characteristics, as
well as have a management team or the personal skills and resources that make it feasible to do
so.

The size of the market and the length of the window of opportunity are important determinants of
the risk and reward involved in exploiting the presented opportunity. This is because different
markets grow at different rates over time. The quicker it takes for a market to grow, the sooner
more and more opportunities become available for entrepreneurs to take advantage of. As the
market becomes larger with more players in it, the opportunity is no longer as lucrative as it
initially was, thus resulting in less favourable conditions. The market becomes more structured
and competition becomes stiffer. This is when the window of opportunity begins to close,
although it may take some time before it does so completely.

The length of time that the window remains open is also of great importance. The longer it
remains open, the more time it allows the entrepreneur to determine whether or not the venture
will be a success, as well as providing the entrepreneur with adequate time to reap the sweet
fruits of his or her labours in exploiting the opportunity if the venture is indeed successful.

4.10 Seeing, locating, measuring and opening

the window of opportunity
Once the entrepreneur has spotted and located the window of opportunity, he or she must
measure, open and close it. This process is illustrated in Figure 4.3, and each stage is discussed
in this section

Figure 4.3 A holistic view of the window of opportunity

4.10.1 Seeing the window

It is important to return to the metaphor of the window of opportunity discussed earlier. Seeing
the window of opportunity involves an active approach to searching the solid wall for gaps that
have been left open by competitors, which the entrepreneur can proactively and productively
take advantage of in a manner that will be beneficial for him or her, while simultaneously adding
value for the consumer or buyer for a prolonged period of time. This means that the entrepreneur
must identify ways in which he or she can serve customer needs in the market while providing
and benefiting from a sustainable competitive advantage. The entrepreneur does this by being
creative and innovative, i.e. identifying and outlining how he or she can provide a better or
different product or service.

4.10.2 Locating the window

Once the window has been spotted, it is important to understand its location. The entrepreneur is
then required to fully comprehend the positioning of the novel product or service offering in
relation to competitors’ products and services that already exist in the market. This will enable
the entrepreneur to take the fullest advantage of the product or service offering in order to gain a
sustainable competitive advantage over existing competitors and prospective entrants to the
market.

4.10.3 Measuring the window

Measuring the window involves ensuring that the opportunity is feasible and viable. This is done
by means of a feasibility and viability study. A feasibility study is a general examination of the
potential of the idea to be converted into a new business venture. The issues primarily focused on
are the entrepreneur’s ability to pursue the idea in terms of his or her skills and abilities, and to
match these with the necessary requirements of the venture.

A viability study is conducted by critically determining whether or not the idea has the potential
to be converted into a new business venture. The entrepreneur must, as it were, put a finger on
the pulse of the market to determine its response to an innovation, i.e. is the market likely to
respond to innovative changes in a negative or positive manner? This is usually done by means
of market research, whereby the entrepreneur becomes in tune with market trends. Other
important demands placed on the entrepreneur at this stage of opportunity evaluation are to
determine how many consumers or end-users will be willing to pay for the products provided or
services rendered, as well as the risk that will be incurred by embarking on the venture.

4.10.4 Opening the window

The next logical step for the entrepreneur to take after seeing, locating and measuring the
window of opportunity is to open the window. This is a very important step for the entrepreneur
to take, as it represents entry to the market and the beginning of business activity. Revisiting the
window metaphor, this is the point at which the entrepreneur moves through the window and
starts the journey by actively taking advantage of the opportunity presented or revealed.

This step involves the entrepreneur obtaining the commitment of the venture’s stakeholders, as
well as coordinating their activities. These stakeholders are financiers, employees, suppliers,
customers and intermediaries, depending on the type of venture. This relationship and network
building that takes place between the entrepreneur and the stakeholders is imperative to the
existence and success of the venture.

4.10.5 Closing the window

On opening the window of opportunity, it is critical that the entrepreneur should promptly close
it afterwards. If he or she does not, the venture is left open to competitors who, more often than
not, are most willing to exploit the very same opportunity and capitalise on late mover
advantages. The competitors may not have had to face the challenges that the pioneering
entrepreneur had, and may take advantage of his or her pioneering moves. They may even usurp
his or her innovatively and creatively gained position.

Failure by the entrepreneur to close the window of opportunity effectively could reduce his or
her potential market share and business activity and, at worst, could render the venture obsolete.
The window can be closed by the entrepreneur creating and maintaining a sustainable
competitive advantage. The bases of competitive advantage are illustrated in Figure 4.4.

A competitive advantage exists when a firm offers a product or service that the customers
perceive to be superior to those of competitors. The bases for competitive advantage are unique
service features, value for money, customer convenience, customer experience and notable
product attributes. A sustainable competitive advantage is one that the competitors find very
difficult or even impossible to imitate, for example excellent customer service and ambience in a
restaurant, or patented products such as the Colonel’s eleven secret herbs and spices at KFC.

If an entrepreneur takes these factors into serious consideration, he or she is effectively en route
to establishing a sustainable business.

4.11 The real-time window of opportunity – a

holistic approach
It must be noted clearly that opportunities do not occur at a leisurely pace and wait for the
entrepreneur to grab them before they cease to exist. Mark Twain said: “I was seldom able to see
an opportunity until it ceased to exist.” The process of seeing, locating, measuring, opening and
closing the window of opportunity described previously gives the impression that the process of
identifying and utilising opportunities is a systematic one. The process can also involve very
dynamic and ad hoc occurrences in the market that the entrepreneur must evaluate and take
advantage of in a timely manner.

Figure 4.4 The bases of competitive advantage

Source: Small Business Management, an Entrepreneurial Emphasis with CD-ROM, 12th edition,
by Longenecker, Moore & Petty. © 2003. Reprinted with permission of South-Western, a
division of Thompson Learning: http//www.thomsonrights.com Fax (091) 800 730-2215.

The process is best seen by the entrepreneur as a combination of opportunity evaluation and
actual activity in order to make the most of the different stages of the presented window.

4.12 Continuous opportunity evaluation and

utilisation
Once entrepreneurs have successfully moved through the different stages and motions of
opportunity evaluation, it is not good for them to rest on their laurels, thinking that they will
maintain their position forever. Competitors will continue to evaluate their situation and conduct
competitive analyses in order to become the market leader. Business opportunities will always
continue to exist for those who can produce products and services that the market desires.
Furthermore, as more and more entrepreneurs enter a particular industry, the market becomes
smaller, because the number of entrepreneurs selling a particular product or service is increasing
but the number of consumers may not be increasing. This results in market saturation and
eventual stagnation of the industry.

In order to have a durable and sustainable venture, it is critical for the entrepreneur to be on the
constant lookout for other opportunities that he or she can successfully take advantage of.
However, once entrepreneurs are used to the process of opportunity evaluation, it becomes
second nature to them, and they begin to see opportunities in almost every action and occurrence
in their everyday experience.

4.13 Conclusion
The aim of this chapter was to introduce the entrepreneur to the concept of the window of
opportunity, and to draw a distinction between an idea and a viable business opportunity. The
process of opportunity evaluation was elaborated on, as well as the stages of seeing, locating,
measuring, opening and closing the window of opportunity. Opportunity evaluation from the
perspective of the right time and right market was discussed, as were idea generation and the
criteria used to evaluate opportunities. The chapter also touched on the common reasons why big
businesses leave gaps in the market that small businesses can successfully exploit. Factors that
lead to the achievement of a sustainable competitive advantage by the entrepreneur were
highlighted, as well as the importance of constantly searching for and evaluating opportunities.

The process of opportunity evaluation is not always a clear-cut, straightforward one; it is usually
fraught with ambiguity and uncertainty. The aspects mentioned above are the issues that the
entrepreneur must be aware of, and take action to take advantage of or resolve in order to make
the most of the presented opportunity. He or she will then be able to start and grow a venture that
has all the qualities and potential for becoming a high-growth venture.

Looking back

1.What is the window of opportunity?

The window of opportunity is the time period available for creating new ventures.

2.When pursuing opportunities, what factors make it easy for smaller entrepreneurs to effectively
take advantage of opportunities overlooked by larger companies?

Larger organisations’

 organisational inertia
 organisational complacence
 bureaucracy.

3.For what reasons do larger organisations leave gaps in the market that smaller firms can
effectively take advantage of?

 Failure to take advantage of new opportunities

 Underestimation of opportunities
 Technological inertia
 Cultural inertia
 Politics and internal fighting
 Government intervention to support SMMEs

4.What is the difference between an idea and an opportunity?

 An idea does not necessarily automatically translate into an opportunity.

 An opportunity is an idea that is attractive, durable and timely and anchored in a product
or service that creates or adds value for the end-user.

5.What are the common generators of business ideas and opportunities in southern Africa?
  Skills, expertise and aptitude
 Common needs
 Existing problems
 Everyday problems
 Other sources

6.What criteria are used to screen opportunities?

 Industry and market issues

 Economics
 Harvest issues
 Management team
 Fatal flaw issues
 Personal criteria
 Strategic differentiation

7.What actions are required of the entrepreneur when ‘seeing’ the window of opportunity?

 Actively searching the market for gaps that have been left open by competitors
 Identifying ways that customer needs can be served while providing and making use of a
sustainable competitive advantage
 Creativity and innovation

8.What actions are required of the entrepreneur when ‘locating’ the window of opportunity?

 Understanding the location of the window of opportunity

 Positioning the product or service favourably in relation to competitors’ products and
services

9.What actions are required of the entrepreneur when ‘measuring’ the window of opportunity?

 Ensuring that the opportunity is feasible and viable by carrying out feasibility and
viability studies
 Performing market research in order to be in tune with market trends

10.What actions are required of the entrepreneur when ‘opening’ the window of opportunity?

 Starting the business activity

 Obtaining the commitment of the venture’s stakeholders
 Relationship and network building between the entrepreneur and stakeholders

11.What actions are required of the entrepreneur when ‘closing’ the window of opportunity?

 Creating and maintaining a sustainable competitive advantage

 Ensuring that the product or service offers unique service features, value for money,
customer convenience, customer experience and notable product attributes
12.What is a sustainable competitive advantage and what are the bases of competitive
advantage?

 Sustainable competitive advantage exists when a firm offers a product or service that
customers perceive to be superior to those of the competitors and one that the competitors
find very difficult or impossible to imitate.
 The bases of competitive advantage are:
o – Unique service features
o – Value for money
o – Customer convenience
o – Customer experience
o – Notable product attributes

Key terms

Ambiguity

Closing the window

Entrepreneur

Fatal flaw issues

Idea

Idea generation

Locating the window

Market

Market capacity

Market conditions

Market share

Market size

Measuring the window

Opening the window

Opportunity

Opportunity evaluation
Seeing the window

Stakeholders

Sustainable competitive advantage

Uncertainty

Value addition

Venture

Window of opportunity

Discussion questions

1.Why is ongoing evaluation and utilisation of opportunities important to the entrepreneur?

2.Discuss why it is necessary for the entrepreneur to screen opportunities.

Case studies

Case study 1

Mr Richard Richman inherited R5 billion after his father’s death. He had abundant financial
resources to work with and vast freedom to experiment with finding business ideas and turning
them into business opportunities. He decided to venture into the rapid delivery business and
established a company called Quantum Leap Mail. This venture used satellite hook-ups to
connect faxes in Quantum Leap offices throughout southern Africa. Drivers collected customer
documents from their local office and then faxed the documents via satellite to another Quantum
Leap Mail site. Quantum Leap employees then drove the reproduction to the ultimate destination
– all within a period of two hours. For three-and-a-half years, Quantum Leap Mail continued to
encounter serious technological problems and home and office fax machines began to appear
everywhere. Finally, after losing R90 million, Mr Richman is wondering whether or not he
should terminate his venture.

Questions

1.Did Mr Richman perform his opportunity evaluation and analysis well? What should he have
done initially?

2.Is there any hope for Mr Richman’s venture? What should he do to save his venture?
Substantiate your answer.
Case study 2

Vusi Dlamini and Tshepo Molefe are fashion design and entrepreneurship graduates
respectively. The two young men were not able to find formal employment for nine months after
they graduated. The situation was initially frustrating until they started toying with the idea of
starting and managing their own business. Their dream was to establish a fashion house that
would manufacture and retail clothes that would have an urban youth culture feel to them, but
still be distinctively South African.

The two young men believed that although they met the requirements of being funky and
fashionable, the clothes available on the market at the time possessed too much of an overseas
influence. They performed a competitor analysis and found that there was a proliferation of
fashion houses and labels on the market that were designing and producing urban Afro-hip
clothes for women, but none of them had in mind the young male target market.

These findings represented a gaping and potentially highly profitable niche market for Vusi and
Tshepo, which was currently not being served by anyone. They then decided to interview a
number of hip, trendy, young, professional males who had substantial buying power. They asked
them how they would respond to the presence of such a fashion range in the market. The
response was overwhelmingly positive and encouraging to Vusi and Tshepo. The pair then
decided to take their savings – which was all they had between them and poverty – and bought
fabric. They designed and manufactured their version of what young, hip and trendy South
African men should be wearing in summer. From there on they were able to secure trial contracts
with leading upmarket department stores for their range of clothing. The stipulations of the trial
contracts state that if their clothing line reaches and maintains a certain sales volume within a
certain period, then the contracts will be extended for 24 more months. Vusi and Tshepo are
more than certain that they will be able to achieve and surpass the stipulated levels. They are also
working on ways and means of opening up their own outlet, so that they have more control over
their retailing to the public.

Questions

1.Is Vusi and Tshepo’s business a good idea or a viable opportunity?

2.Vusi and Tshepo have seen the window of opportunity. Advise them on how to exploit the
opportunity to their best advantage

Experiential exercises

1.Identify two entrepreneurs, one within the service industry and one within the retail industry.
Interview them to find out how they managed to turn their ideas into profitable business
opportunities. How did they go about evaluating their opportunities?

2.Think of a business you have always wanted to start or the one you have started already. What
criteria would you use to determine whether or not the opportunity you identified is a viable
endeavour?
Exploring the web

1.Visit http//www.entrepreneurmag.co.za/ startup where you can read more about opportunity
evaluation and business start-up.

2.Go to http//www.enterprisezone.co.za where you will find information on what South African
entrepreneurs are doing in terms of turning their ideas into valuable opportunities. You will also
find information on what business opportunities are currently available for entrepreneurs to
exploit.

3.At http//www.dti.gov.za you will find out more about what the South African government is
doing to support South African small businesspeople and entrepreneurs, and how you can benefit
from such initiatives.

4.You have performed your opportunity evaluation and are quite certain that your idea can be
turned into a potential business opportunity. Go to http//www.sefa.org.za to find out how you can
obtain financing for your venture.

References and recommended reading

Hisrich, R.D. & Peters, M.P. 2002. Entrepreneurship, 5th ed. Boston: McGraw Hill.

Longenecker, J.G., Moore, C.W. & Petty, J.W. 2003. Small business management: an
entrepreneurial emphasis, 12th ed. Mason, OH: Thomson.

Nieman, G.H. & Bennett, A. (Eds). 2006. Business management: a value chain approach, 2nd ed.
Pretoria: Van Schaik.

Nieuwenhuizen, C., Le Roux, E.E. & Jacobs, H.E. 2001. Entrepreneurship and how to establish
your own business. Small Business Management Series. Cape Town: Juta.

Ntsika Enterprise Promotion Agency (NEPA). 2001. Success stories. Pretoria: Ntsika.

Pinchot III, G. 2000. Intrapreneuring: why you don’t have to leave the corporation to become an
entrepreneur. New York: Harper Row.

Spinelli, S. & Adams, R. 2012. New venture creation: entrepreneurship for the 21st century, 9th
ed. Boston: McGraw-Hill Irwin.

Ward, H. 2000. Principles of internet marketing. Cincinnati: South Western.

Wickham, P.A. 2006. Strategic entrepreneurship: a decision-making approach to new venture

creation and management, 4th ed. London: Prentice Hall Financial Times.