MODULE Ill: ENTERPRISE PLANNING

OPPORTUNITY IDENTIFICATION

Description
The first thing a start-up entrepreneur must do is identify the opportunities surrounding him.
Opportunities lead to ideas on what projects to undertake.

Objectives
This topic will enable the students to:
 study personal inclinations and interests to find possibilities for business undertakings
 use creative ways to conceptualize business ideas
 practice how to assess and grab the right opportunities

Where did these things come from?

Do you own a pencil? Do you know that the pencil is one of the oldest products on earth,
invented as early as 1564?

The "lead" pencil (which contains no lead) was invented in 1564 when a graphite (black carbon)
mine was discovered in Borrowdale, Cumbria, England. The pure graphite was sawn into sheets
and then cut into square rods. The graphite rods were inserted into hand-carved wooden
holders, forming pencils. They were called lead pencils by mistake - at the time, the newly
discovered graphite was called black lead or "plumbago," from the Latin word for lead ore - it
looked and acted like lead, and it was not known at the time that graphite consisted of carbon
and not lead. The English had a monopoly on the production of pencils since no other pure
graphite mines were known and no one had yet found a way to make graphite sticks.

In the world of business, these are called products. A product may be in form of good, service,
place, person, or idea. Products also provide non-tangible benefits. Holiday Inn's product is
service, since it provides people the benefit of a comfortable accommodation at a reasonable
price. Boracay’s product is place, for relaxation, sun, and sand. The Philippine Pediatric Society
is selling ideas. The benefits of polio vaccination for children.

Finding a solution to a problem when you want to do things faster or easier or with less
preparation can lead to a business idea

 A good business idea can be the seed for a successful business venture. Whoever invented
the water heater or the water dispenser had that idea and tried out many ways by which he
could solve the problem of heating water easily and speedily, too.
 Good business ideas, however, do not just pop up in a person's mind. The person who
pursues an idea and works to make the idea come true actually helps solve ordinary
problems and in the end, makes money from such activities. This person is an entrepreneur.
Good business ideas result from serious efforts and much creativity on the part of the
entrepreneur.
 Finding a good idea is the first step in transforming the entrepreneur's desire and creativity
into a business opportunity
 There is no limit to conceptualizing business ideas. You will discover that to conceptualize
good business ideas, you need to keep your mind and eyes open and be ready to study each
opportunity you find.
 An idea, whether weird or simple, will serve as a starting point. It just needs to be
transformed and developed into viable business opportunities.

What ideas can be turned into good business ideas?

 To generate and conceptualize useful and good business ideas a student needs ideas that will
last long. This means that the solution he conceptualizes will not be good only for a short
time the idea should be able to solve the problem in a more permanent way rather than
only for a short while. Longer or more permanent solutions will work better than short-term
solutions.
 On the other hand, market needs can also be fluctuating and therefore the solution should
be flexible to satisfy these needs. This means that the entrepreneur should balance between
long-term solutions and the fads or whims of a market segment.
 Changing fashions and requirements provide opportunities for entrepreneurs to respond to
demands with new ideas, products, and services.
 One needs to stay ahead of the competition. Remember, there are other people who may
think of the same solutions. One has to beat them at the game and market ideas, products,
and services ahead of time. The challenge is to be different from the rest.
 It is important to exploit technology. One can do things better with the use of the recent
discoveries in technology. Ideas will be easier to implement with the use of new technology.
 Remember that there is such a thing as product life cycle. Even new products grow old and
become outmoded. It all depends on the ability of the product to grow and satisfy more
needs for the intended markers.
 As an entrepreneur, one must also be open to suggestions. Other people are also a good
source of bright business ideas.

Active search in the environment can bring about amazing results

Product conceptualization is the creation of new products based on the human needs, wants,
and demands. Product modification involves the physical change of existing products in the
market in terms of design, color, size, package, and purpose. Innovation and creativity are key
factors in the development of products to satisfy human wants. Ideas come to us at anytime,
anywhere, and in any situation. But to become good business ideas there must be a match
between what the environment presents and needs and what the entrepreneur can do. There
are limitations in both. Finding the right "fit" will help the would-be entrepreneur start on
something with better chances to survive in the business world.

Turning ideas into opportunities

If an idea is not an opportunity, what is an opportunity? When does an idea become an
opportunity? A business opportunity is simply defined as an attractive investment idea or
proposition that provides the possibility of a return for the person taking the risk. Such
opportunities are represented by customer requirements and lead to the prov1s1on of a product
or service that creates or adds value for its buyer or end-user.

Be guided by the following facts that can tell you when an idea becomes an opportunity. An
opportunity has the following qualities:
 attractive
 durable
 timely
 anchored in a product or service
 capable of creating or adding value to what it can offer to its buyers or end-users.

Now, let us look for that opportunity. How do we start? As aspiring entrepreneurs, let us ask
ourselves:
• How do I find a good business opportunity?
• What business can I start with what I have?

Looking at the box below we can see two sources of opportunities. These are:
• Internal sources of opportunities come from the inner motivation of the person, the
mind, and heart of the person.
Mind -knowledge, talents, and skills one may have. These are the things that one
knows, that one is good at and that one values or believes in.
Heart-one's interests and passion, things one loves to do and what one enjoys
doing most.
 External sources of opportunities come from the environment and other external
possibilities. These include trends, crises, threats, irritants, festivals, seasons, credit
programs, and other business support services from government and private sources,
etc.
What is a business opportunity?

In the business sense, it is:

 an idea that has commercial potential;
 something you can give value to, make money with, and develop a business venture on.

This is why ideas and opportunities need to be screened and assessed for viability once they have
been identified or generated. This is not an easy task but is very important. It can make the
difference between success and failure, between making a fortune and losing everything that you
had.

In practice, to be more thorough, one can use the Inside-out and Outside-in Tactics below:

Inside-out
• Involves pulling all the skills one has and searching for a problem or market to which one
can apply those skills.
Outside-in
• Involves looking at the larger picture, evaluating the market where one wants to operate,
isolating a neglected problem, designing a creative and profitable way to solve the
problem, and locating the appropriate skills, talent, and resources to get it started.

To start and maintain a successful venture, make sure we can recognize a business opportunity
and respond to it effectively. This involve not only generating ideas or identifying opportunities
but also screening and evaluating them to determine the most viable, attractive propositions to
pursue. A business opportunity is an attractive investment idea or proposition that provides the
possibility of a return of investments for the person taking the risk. Opportunities are defined by
the customers who need a product or service. They create or add value for its buyer or end-user.
A good idea is not necessarily a good business opportunity. Consider for example that over 80%
of all new businesses fail. This is why all ideas and opportunities should be screened. This is not
an easy task, yet it must be done to minimize the risk of failure. Lastly, it should involve, in
essence, determining risks and rewards or returns for the entrepreneur.
• An opportunity has the following qualities: attractive, durable, timely, anchored in a
product or service, capable of creating or adding value to what it can offer to its buyers
or end-users.
• Market needs can also be fluctuating and therefore, the solution should be flexible to
satisfy these needs.
• Remember that there is such a thing as product life cycle.
• It is best to have ideas that will last long.
• There are external sources of opportunities.
• There are internal sources of opportunities.
• A good business idea must present itself as a solution to the problem
• You need to stay ahead of the competition.
• Changing fashions and requirements provide opportunities for entrepreneurs to respond
to demands with new ideas, product, and services.
• It is important to exploit technology.

Resource Article
OPPORTUNITY IDENTIFICATION
By Celso Noel D. Aban and Paz H. Diaz, Ph.D.

"The real magic of discovery lies not in seeking new landscapes but in having new eyes."
- Marcel Proust

The next important ingredient in setting up a business of one's own is find opportunities and
identify what business would be good to establish. There are more ways than one to find a
business opportunity. One school of thought says, "Examine the surroundings; find out what the
people there want and need; and start a business to satisfy that want or that need." The other
school of thought says, "Find out what you really want to do; a hobby or a skill that you are
very good at, and offer that to the people. Before you know it, they will be buying your product
or paying for your skill." Which one is the better approach? No one can tell outright. If you can
do it, combining the two approaches will be best.
Go to this source where the author, Dorie Clark, advises the would-be entrepreneur to start from
the outside. http://www.forbes.com/sites/dorieclark/2012/09/10/how-to- spot-opportunities-everyone-else-is-missing/

Clark says that it's rare for anyone simply to stumble upon a "golden" opportunity; one has to
create the opportunity actively. Here are the ideas she suggests:

1. Look for gaps. In your community, there may be goods and services that people need which
no entrepreneur is providing yet. One must therefore be alert and keep open for any sign of any
needed product or service in the community. Finding the "golden" gaps will be the better way
to start rather than waiting for the "golden" opportunities to come.

2. Look for more responsibility. When you want to offer something better or bigger for the
people in the community, you are taking the ordinary products and services to higher levels.
This means you are taking more responsibility to improve upon these goods and services, and
that is one way of finding new opportunities in starting a business.

3. Look for bigger problems. Walk around your community and find out what bigger problems
there are for you and your business to solve. Look around and see what "bigger problems" you
can solve. Solving this problem will make the opportunity for a better business to emerge. Solving
a bigger problem typically would mean seizing a bigger opportunity.

4. Look for knowledge arbitrage. This is a term coined by Gary Hamel

(http://www.garyhamel.com/), who has been recently ranked by the Wall Street Journal as the
world's most influential business thinker and who has been called by Fortune magazine "the
world's leading expert on business strategy." In simple terms, knowledge arbitrage is the process
of applying knowledge from one field to another field. Using knowledge arbitrage the would-
be entrepreneur must go beyond what he sees in a company, industry, or trade. He must look
elsewhere in an unrelated field and see what's working. Then, he can apply that solution to the
new business he is planning to start.

5. Look to listen. Yes, it seems simple but most people don't listen. Barry. Either we are talking
or we are waiting to talk again." When one actively listens with an open mind, one will start
spotting opportunities sooner than later.

Rajesh Setty enumerated 10 ideas to get new ideas in this site https://rajeshsetty.com/2006/02/13/10-ideas-
to-get-new-ideas/

He says, "All of us want new ideas. In fact, some of us are just waiting for that one "killer" idea
that will take us to newer heights. So, where exactly can we get some new ideas? Here is my
attempt on this 10 ideas to get new ideas."

1. From the media. What is currently being discussed in the media would most probably be
something people dream of doing or having. The would-be entrepreneur must realize that
typically the areas that the media are paying attention to are the areas that matter most to
people. Therefore, it will be good to read the news and watch 1V because these may be the
sources of new opportunities.

2. Knowledge arbitrage. Knowledge arbitrage also works geographically - meaning one can
evaluate whether something that is extremely successful in one geographical location can be
suitably adapted and launched in another place.

3. Blogs. In the same way as one can get ideas from the traditional media, one can get ideas
from blogs. One cannot ignore blogs anymore. Blogs are one of the best things to happen on
the Internet. One can get direct access to some of the brilliant thinkers out there FREE. With the
choice of the right set of blogs and other website resources (like Squidoo and many more) one
can turn Internet into a virtual university. There are enough ideas put forward by these thinkers
almost on a daily basis. The entrepreneur should approach the world of blogs as a student rather
than a critic and start reaping higher benefits.

4. Harness the power of association. The entrepreneur is someone who can associate things faster
than others do and get new ideas from those associations. Knowledge arbitrage is one way of
associating things.
5. Talk to the customers. The customers are really the ones running the business. Talking to them
about their needs, wants, and aspirations will give the entrepreneur a sneak preview into the
world of the customers through the customers' eyes. That's a fresh perspective right there. The
more the entrepreneur has an open dialogue with the customers, the higher the chances of hitting
on something that will trigger new ideas and open the door of new opportunities.

6. Get tips from a coach. Good coaches have a great way of rising one level above any problem.
They look at a problem at a different altitude and hence get a different perspective. When
discussing a problem with a coach, the entrepreneur will get ideas to solve more problems that
he has not meant to discuss. As a bonus, the entrepreneur will get a few more ideas that will
open up new opportunities or will prevent a problem that has not occurred yet.

7. Listen. Anyone who is dominating a conversation may impress the other person but will
certainly not learn anything new. The entrepreneur must check the talk/listen ratio he is using
and if he finds that he is talking more than listening, he could make some changes.

Here's a tip: The general temptation when someone is talking is to figure out what one is going
to tell after the person finishes his sentence (or even pauses for a second.} Resist that temptation.
In fact, one must start figuring out what new question to ask the person so that one can make
him continue to talk.

8. Develop the right attitude. Yes, that's right. The entrepreneur needs to have an attitude, which
is a combination of humility, curiosity, inquisitiveness minus arrogance. Having the right attitude
can act as a catalyst to get new ideas. Giving up is a big no-no. Curiosity and inquisitiveness will
force the entrepreneur to dig deeper into issues. In a nutshell, who he is will determine what
opportunities will open up for him and his attitude makes up a large part of who he is.
9. Think. Yes, this may sound simplistic but as an entrepreneur, you can think about new ideas.
Let your imagination run wild. You can make up new stuff in your mind, even seemingly silly or
outrageous ones. Remember, you will not be implementing every idea that comes out so don't
put constraints on what you can think of. Real thinking is hard work and you need to set aside
some quality time to do that.

10. Ask for ideas. Just ask people for their ideas. When you meet someone bright, rather than
mindlessly talking about the weather, sports, and politics -you can ask them for their thoughts
where they think the new opportunities will be. You will be amazed at what you will discover.
This works for a simple reason. Most bright people have a ton of ideas but they won't start
dishing them out in random ways. They also don't have the time to execute all the ideas that
come into their mind. If you have a good relationship with them, most people won't mind
sharing their thoughts. All you need to do is ASK!

Looking for opportunities without a genuine interest in the field is like running a marathon after
fasting. The entrepreneur should keep his mind full of ideas to play around with until he can
narrow it down to a few workable ones. Here is another list, this time it begins from the inner
interests and skills of the entrepreneur. The author says, "The magic happens when you find the
sweet spot where your genuine interests, skills, and opportunity intersect."

Opportunity identification

The emergence of different technologies, the changing attitudes, behaviors, and preferences of
the consumers and the changes that occur within the environment generate new opportunities
to entrepreneurs. The need to understand individual capabilities, skills, network, and other
people to identify opportunity can become the foundation of a new business to be built.
However, all business opportunities are tied-up with danger.

Listening to customers can be a promising source of ideas too. Businesses should continuously
listen and get feedback from them in order to understand what they want, where they want it,
how the business can supply the product or service, when it will be provided and at what price.

According to Peter Drucker, ten specific areas of the business need to be constantly monitored
for changes, which can be converted into new opportunities. These are:
1. unexpected success
2. unexpected failure
3. unexpected external events
4. process weakness
 5. industry/market structure changes
6. high-growth areas
7. converging technologies
8. demographic changes
9. perception changes
10. new knowledge

There are multitudes of business opportunities within the environment; however, not all
opportunities are worth pursuing. Assess the opportunities and rank them in terms of their
potential in the organization.

Identification of opportunities
• The growth stage of a micro-small or medium-size enterprise (mSME) typically requires more
resources than the company commands.
• In order to grow in their competitive environments, mSMEs should proactively engage in
identifying opportunities.
• The management team should have criteria and procedures for assessing opportunities, as only
the most prom sing i and suitable should be pursued.
• Exploiting opportunities includes obtaining resources to implement the business s ' growth
strategy.
• The long-term health and survival of mSMEs depends on their ability to recognize, evaluate,
and pursue growth opportunities in competitive environments.

Robert Ronstadt (Frontiers of Entrepreneurship Research, 1984) coined the term "corridor
principle" to explain how mSME owners identify opportunities (Journal of Business Venturing
3:1 (1988): 31-40). When opening his first enterprise, the new entrepreneur can be likened to
someone who has been inside a room consisting of his life experiences and observations. Starting
the business is the equivalent of opening a door, stepping out, and discovering a corridor. Up
and down the corridor are other doors, each door representing a new opportunity. If the first
door- i.e., starting the business-is not opened, none of the other doors will be seen. Launching
the business allows the owner to enter new networks, obtain access to information, and
otherwise make discoveries that would never have happened without going into business.

Opportunity recognition is at the core of an entrepreneurial venture. The founder of a company

with growth potential will identify and seek to satisfy unmet customer needs. Creativity, new
technologies, and new marketing approaches are all characteristics of growing enterprises. A key
word in this stage is flexibility. The leaders of the company are finding new markets, sometimes
on the international scene. Growth may come not only from sales of products and services, but
also through acquisition. The growing firm gains recognition for its brand name and builds
customer loyalty.

From the strategic management literature, we learn about "environmental scanning" as a

technique for being alert to new events, trends, and changes that may result from legislation
and regulation, competitor initiatives and reactions, customer tastes, technological
developments, and many other occurrences. Some business executives look at environmental
disruptions as threat, but those disruptions are invariably viewed as opportunities for
entrepreneurial small and medium business owners. Rita McGrath and Ian MacMillan proposed
formalizing the scanning procedure by devising a register in which opportunities could be
categorized as one or other of the following:

• redesigning of products or services

• re-differentiating of products or services
• re-segmenting of the market
• reconfiguring of the market
• developing breakthrough competencies

Not all ideas will be good opportunities. Most of the time, the new entrepreneur will try to
venture into business only to fail. But others will succeed, and a few will excel. The question is
when is an opportunity a good business venture? Ideally, the discerning entrepreneur should:
1. Create or add significant value to customer or end-user.
2. Solve a significant problem, or meet a need or want for which someone is willing to pay.
3. Have a robust market and big profit margin; yearly growth of at least 20%, at least 40%
margin, strong and easy cash flow, at least 10-15% profit after taxes.
4. Have a good fit with the owner and management team at the time and in the market place
and with the risk/reward balance.

REFERENCE

Small Enterprises Research and Development Foundation. WINDOWS TO ENTREPRENEURSHIP

A TEACHING GUIDE