Entrepreneurship and

Innovation
Chapter 2: Recognizing Opportunities And
Generating Ideas
 1. Explain the difference between opportunities and
ideas.
2. Describe the three general approaches entrepreneurs
Chapter's Learning use to identify opportunities.
objectives 3. Discuss the personal characteristics of entrepreneurs
that contribute to their ability to recognize business
opportunities.
4. Identify and describe techniques entrepreneurs use
to generate ideas.
 Chapter 2: Recognizing
Opportunities and Generating
ideas
Opportunities And How They Are Different From Ideas.
What is an Opportunity
• An opportunity is a favorable set
of circumstances that creates a
need for a new product, service,
or business.
• Most entrepreneurial ventures
are started in one of two ways:
• Externally stimulated:
decision to launch a firm,
searches for opportunity,
and then start a business
• Internally stimulated:
recognize a problem or an
opportunity gap and creates
a business to address the
What is an Opportunity?
• A common mistake entrepreneurs make in the opportunity recognition
process is picking a currently available product or service that they like or are
passionate about and then trying to build a business around a slightly better
version of it
• 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
• The four essential qualities of an opportunity are (1) attractive, (2) timely, (3)
durable, and (4) anchored in a product, service, or business that creates or
adds value for its buyer or end-user
• Entrepreneurs should capitalize the windows of opportunity (the time period
in which a firm can realistically enter a new market)
• Several entrepreneurs have mistaken opportunity with ideas, which are their
thoughts, impressions, or notions that do not represent the market needs for a
 Chapter 2: Recognizing
Opportunities and Generating
ideas
General Approaches To Identify Opportunities.
Identify Opportunities
• There are three approaches to identify an opportunity their new venture can choose to pursue
• Once an entrepreneur understands the importance of each approach, she or he
will be much more likely to look for opportunities and ideas that fit each profile

Finding Gaps in the

Observing Trends Solving a Problem
Marketplace

• One thing entrepreneurs must remain mindful of in pursuing business opportunities, regardless of
whether the opportunity results from changing environmental trends, solving a problem, or finding
gaps in the marketplace, is that the opportunity must ultimately be fashioned into a successful
business
Identify Opportunities by Observing trends
“One of the most important attributes of a good entrepreneur is having a keen observation ability.
Basically seeing what’s needed in people’s everyday lives and coming up with innovative new ideas and
services that meet those needs . . . I always believe the entrepreneurs that anticipate trends and
maintain observations of what’s needed . . . to solve those needs will have a higher chance of
succeeding in the marketplace”

- Michael Yang, CEO of Become.com-

• Entrepreneurs could identify opportunities by observing trends: economic, social, technological, and
political action and regulatory trends
Identify Opportunities by Observing trends
(cont.)
• When observing trends in the
market, there are two caveats
to keep in mind:
• First, it is important to
distinguish between
trends and temporary
fads
• Second, trends are
interconnected and
should be considered
simultaneously when
brainstorming new
business ideas
• P-E-S-T model is a handy tool
for market analysis
Identify Opportunities by Observing trends
(cont.)
Economic forces: there are several factor to consider in this area, including:
• Personal income: affect the consumers’ spending and their willingness to
buy
• Who has the money to spend and what they spend it on: to target the right
segment with the right solutions
• International trade
• Interest rates…
Social trends: understand the social forces impacts on trends and how they
affect your decision for product/service development:
• Aging of the population
• Increasing diversity of the population
• Millennials and GenZ entering the workforce
• Growth in the use of mobile devices
• Increasing focus on health and wellness
• Sustainable development
• Desire for personalization in product and service development
Identify Opportunities by Observing trends
(cont.)
Technological advances: Any technological breakthrough has its strong impact
on the economic and social changes (as the Smartphone breakthrough)
• Technological advances help people to achieve their everyday tasks easier
• New products/services emerged from new technology
• Entrepreneurs could capitalize on the new technology to improve their
products/services and processes
Political and regulatory changes:
• Businesses have to adapt to the government regulation, nationally and
internationally
• Political regulations sometime limit the entrepreneurs, sometime pushing
new businesses to thrive
Environmental
trends and
opportunities
Identify Opportunities by Solving a Problem
“Look for problems. People complain about it being hard to sleep through the night, get rid of clutter in
their homes, find an affordable vacation, trace their family origins, get rid of garden weeds, and so on.
As the late John Gardner, founder of Common Cause, observed: “Every problem is a brilliantly disguised
opportunity.”

- Phillip Kotler -

• Opportunities might be found as entrepreneurs recognize problems and work for the ways to solve
them.
• Many problems that are right now existed on the market without any solutions to solve them.
• Problems might arise from:
• Advances in technology
• New emerging trends
• Obvious problems that are not solved effectively and efficiently…
Identify Opportunities by Solving a Problem
(cont.)
Identify Opportunities by Finding Marketplace gaps
• Finding products or services that customers need or want that are not available in the market yet
• Gaps in the marketplace are commonly recognized when people become frustrated because they
can’t find a product or service they need and recognize that other people feel the same way
• Sometime marketplace gaps can be identified via serendipity or chance
Entrepreneurs characteristics that help in
acknowledging business opportunities
Prior Industry Experience:

Knowing the products, services, and problems in an industry not only helps you avoid the pitfalls of
trial-and-error learning, but it also gives interested parties the confidence that you’re the right person
to build this business. Your experience and credibility are very important to potential team members,
investors, customers, suppliers, and strategic partners. If you don’t have the skills and experience to
build your business, you’ll be fighting an uphill battle
-Michael Glauser-
• Industry experience represents the founder capability in recognizing market insight, underserved
market niche.
• It also illustrates your credibility and expertise
• Although prior experience is important, in some instances, new entrepreneurs from outside of the
industry might be a better choice to provide a fresh perspective and innovation
Entrepreneurs characteristics that help in
acknowledging business opportunities
Cognitive factors:

• Opportunity recognition may be an innate skill or a cognitive process

• Entrepreneurial alertness: the capability to see opportunities where others miss
• 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
• The research findings on entrepreneurial alertness are mixed. However, it is acknowledged that
entrepreneurs may be better than others at sizing up the marketplace and inferring the likely
implications
 Chapter 2: Recognizing
Opportunities and Generating
ideas
Entrepreneurs’ Personal Characteristics That Contribute To Their
Ability To Recognize Business Opportunities.
Entrepreneurs characteristics that help in
acknowledging business opportunities
Social networks:

• People who build a substantial network of social and professional contacts will be exposed to more
opportunities and ideas than people with sparse networks, which might lead to new opportunities
and businesses.
• Previous research illustrates that 40% – 50% of the businesses got their ideas through social
contacts. Furthermore, network entrepreneurs have more opportunities, being more alerted, and
creative than solo entrepreneurs
• The relationships with other people are called “ties”. There are Strong-tie relationships vs Weak-tie
relationships
• Strong-tie relationships are characterized by frequent interaction, such as
ties between coworkers, friends, and spouses
• Weak-tie relationships are characterized by infrequent interaction, such as
ties between casual acquaintances
• People get more ideas through weak-tie relationships
Entrepreneurs characteristics that help in
acknowledging business opportunities
Creativity:

• Creativity is the process of generating a novel or useful idea. Opportunity recognition may be, at
least in part, a creative process.
• The creative process is illustrated below
Entrepreneurs characteristics that help in
acknowledging business opportunities
Creativity:

• Preparation is the background, experience, and knowledge that an entrepreneur brings to the
opportunity recognition process
• Incubation is the stage during which a person considers an idea or thinks about a problem.
Incubation might be a conscious or unconscious activities.
• 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.
• 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.
• 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.
 Chapter 2: Recognizing
Opportunities and Generating
ideas
Techniques for generating Ideas
Techniques for generating ideas
Brainstorming:

• Brainstorming is simply the process of generating several ideas about a specific topic.
• The approaches range from a person sitting down with a yellow legal pad and jotting down
interesting business ideas to formal “brainstorming sessions” led by moderators that involve a
group of people.

Four rules for a formal

brainstorming session
Techniques for generating ideas
Brainstorming:

• Brainstorming to generate new business

ideas are often less formal
• Brainstorming process will be benefitted by
using mind map, a diagram used to visually
organize information in a hierarchical way,
with the supportive ideas surround your
original concept at the center
• Bug report: asking students to report
things that bug them in real life
Techniques for generating ideas
Focus groups:

• A focus group is a gathering of 5 to 10 people who are selected because of their relationship to
the issue being discussed.
• Focus groups are used for a variety of purposes, including the generation of new business ideas.
• Focus group work best in combination with follow-up brainstorming session
• The focus group should:
• Be conducted by a trained moderators
• The primary goals are to keep the group focused to generate likely discussion
• The moderators should be trained to ask the right questions, acknowledge the valuable
ideas, and keep probing into customers minds:
• What is it that you like/ don’t like about our solutions?
• How would you like it to be?
• Why so?...
Techniques for generating ideas
Library and Internet research:

• A natural tendency in searching for opportunities is to start your own research

• Many ideas and opportunities are recognized in researching deeply on the Internet or in the
Library
• Libraries are often an underutilized source of information for generating business ideas. The best
approach to utilizing a library is to discuss your general area of interest with a reference librarian,
who can point out useful resources, such as industry-specific magazines, trade journals, and
industry reports
• Internet research is also important. If you are starting from scratch, simply type “new business
ideas” into Google. Taking this action will allow you to see links to newspaper and magazine
articles about the “hottest” and “latest” new business ideas. Although these types of articles are
general in nature, they represent a starting point if you are trying to generate new business ideas
from scratch
• Once an entrepreneur has an idea, the challenging process of converting the idea into a profitable
business.
Techniques for generating ideas
Other techniques:

• Customer advisory boards: creating an advisory board to meet customers on a regular basis to
discuss needs, wants, and problems that may lead to new ideas
• Day-in-life research: follow and observe customers through a typical day to acknowledge their
daily hardship, thus recognize problems and opportunities to solve them.
Thank you!