Process of Entrepreneurship

Decision to Become an Entrepreneur Introduction to Entrepreneurship

Process of Entrepreneurship
Developing Successful Business Ideas
Recognizing Opportunities & generating Ideas Feasibility Analysis
Chapter 2-5

Industry & Competitor Analysis

Developing an Effective Business Model

Process of Entrepreneurship
Moving from an Idea to an Entrepreneurial Firm
Building a new Venture Team Assessing a new ventures financial strength & viability
Chapter 6-10

Preparing a proper ethical & legal foundation

Writing a Business Plan Getting Finance or Funding

Process of Entrepreneurship
Managing & growing an Entrepreneurial Firm
Managing & Growing an Entrepreneurial Firm
The importance of intellectual Property Preparing for & evaluating the challenges of growth
Chapter 11-15

Strategies for firm growth

Franchising

Part II - Developing Successful Business Ideas

Chapter 2

Recognizing Opportunities and Generating Ideas

Recognizing opportunities & generating ideas

Buyandhold.com: Filling a Void in the Online Investing Marketplace

Geoffery M. Tudisco worked for shareholder Communication Corporation SCC worked for Dividend Reinvestment Plan.(DRIP). Enable individuals to purchase stock directly from company with investment as low as $25. The company offers service called Direct Purchase plan Clearing House . Soon after Tudisco was hired SCC made an effort to offer clearing house facility through website while partnering a company Netstockdirect.com. However when Netstock redesign a website just remove all indication that clearing house was a partner. Tudisco highlighted the issue to Peter Breen the boss. On the approval he made within 30 days a new website having all DRIP plans. One step ahead he also develop an idea of buy & hold brokerage services. Once been forwarded to the higher management both Peter Breen & Tudisco didnt get a positive response. In response to that both have left the company and started their own company with the name buyandhold.com to pursue their own idea. SCC failed to recognize the idea and the people who did it get it successful as they can see the dire need of the people who would like to have save investment of $20/trade and can subscribe the service by $6.99/month. SSC has failed to realized & created an opportunity Gap which was filled by both Breen & Tudisco by generating an idea and recognizing the need of the customer.

Identifying & Recognizing Opportunities

Entrepreneurs recognize an opportunity and turn it into a successful Business. An opportunity is a Favorable set of Circumstances that creates a need for a product, service or a business. Most entrepreneurial firms are started in either of the ways
Externally Stimulated: An entrepreneur decides to launch a firm, search for & recognize an opportunity and then starts a Business. Internally Stimulated: An entrepreneur recognized a problem or an opportunity gap and creates a business to fill it. Eg. Buyand hold.com

Opportunities for any product , service or business are always tough to find.
Opportunity recognition is part art & science. Relying on instinct is an art, while having analytical examination is science.
Opportunity has 4 essential qualities 1) Attractive 2) Durable 3) Timely 4) anchored in a product service or business that creates a value to its customer.

Identifying & Recognizing Opportunities

Difference between an opportunity & Idea

Idea is a thought, impression or notion. It may or may not meet the criteria of an opportunity.

Window of Opportunity

The term window of opportunity is a metaphor describing the time period in which a firm can realistically enter a new market.
Once the market for a new product is established, its window of opportunity opens, and new entrants flow in. At some point, the market matures, and the window of opportunity (for new entrants) closes.

2 Ways to identify an opportunity

Observing Trends Solving a Problem

Observing Trends

The first approach to identifying opportunities is to observe trends & study how they create opportunities for entrepreneurs to pursue. Economic Factors, Social Factors, Technological advances, and political and Regulatory changes are the most important trends to follow. 2 ways to handle the trends are;
They can study and observe them. Some are better at this than others, depending on their personal characteristics & levels of motivation. Understand emerging trend is to purchase customized forecasts & market analysis from independent research firms.

Environmental Trends Suggesting Business or Product Opportunity Gaps

Economic Forces State of the economy level of disposable income consumer spending patterns Social Forces Social & cultural trends demographic changes what people think is in Technological Advances New technologies emerging technologies New user of old technologies

New Business, Product and Service Idea

Business, Product or Service Opportunity Gap

Difference between what's available & What's possible

Political & Regulatory Changes New changes in Political arena New Laws & Regulations

Environmental Trends Suggesting Business or Product Opportunity Gaps Economic Forces:

It affects consumers level of disposable income. When incomes are high, people are most likely to spend on buying products or services that enhance their lives. Individual sector s of the economy have a direct impact on consumer buying patterns. Eg, decrease in interest rate leads to new home construction and furniture sale. Decrease in stock market has a reverse impact of reduction in demand of new products or services. Many entrepreneur took advantage of this trend in coming ahead while bringing new ideas in filling this economic despondency. They provided consultancy or make their own firm to give solutions or provided with product or services to fill the gap eg; is the online marketplace by developing web solution to buy & sell products or services.

Environmental Trends Suggesting Business or Product Opportunity Gaps

Social Forces:
An understanding of the impact of social forces on trends & how they affect new product, services and business ideas is a fundamental piece of the opportunity recognition puzzle. Example for this will be love of the people for fast food restaurants is because they are busy with their work have less time. Introduction of sony walkman is not because people wanted smaller radios but in actual they wanted to listen music while on the move. Some of the recent social trends that allow for new opportunities are;
Family & work patterns, the aging of the population, increasing diversity in the workplace, globalization of industry, increasing focus on health care and fitness, use of internet & computers, massive use of cell phones, new forms of music's & other types of entertainment.

Environmental Trends Suggesting Business or Product Opportunity Gaps

Technological Advances:
Acquiring the pace of technological changes it is important for the entrepreneurs to foresee the opportunities lies with the technological advances. Example of real networks was created to add video capabilities to the internet, which took the internet era into the next level. Advances in technology frequently dovetail with economic and social changes to create opportunities. Creation of cell phone is a technological achievement but it was motivated by an increasingly mobile population that found many advantages to having the ability to communicate with its coworkers, customers, friends and families from anywhere.

Environmental Trends Suggesting Business or Product Opportunity Gaps

Political Action & Regulatory Changes:

Political & Regulatory changes also provide the basis for opportunities. For example New laws create opportunity for entrepreneurs to start firms to help companies comply with these laws. Act of terrorism today have created an opportunity for data base designer firms to work for those companies, hotels or Government organizations to save & protect their secret data's somewhere on the servers where their interest can be served. This expands the backup data industry

Environmental Trends Suggesting Business or Product Opportunity Gaps

Changing Environmental Trend Resulting New Business, Product & service opportunity Companies that Resulted

Economic Trend
Teenagers with more cash & disposal Income Increased Interest in the stock Markets

Economic Trend
Designer cloths, compact discs, DVD players, games console Online Brokerage services, stock research, Magazine

Economic Trend
Gap, Banana republic, MTV saga, Palm Buyandhold.com, the street.com, motley fool.

Social Trend
Increasing job preoccupation by working parents or families Interest in Health care

Social Trend
Restaurants microwavable dinners, food delivery system Fitness Centers

Social Trend
McDonalds, KFC, Pizza Hut, Burger King Fitness Equipment, Curves Int.

Technological Trend
Development of the Internet services

Technological Trends
Ecommerce, Improved Supply Chain Management

Technological Trends
Yahoo, Amazon, aoline, Chem Connect

Political & Regulatory Trends

Development of new laws

Political & Regulatory Trends

Back up Data base development

Political & Regulatory Trends

Prima tech

How Are Opportunities Identified?

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Second Approach: Solving a Problem

Sometimes identifying opportunities simply involves noticing a problem and finding a way to solve it These problems can be pinpointed through observing trends and through more simple means, such as intuition, serendipity, or chance

Some business ideas are clearly initiated to solve a problem

For example, Symantec Corp. created Norton antivirus software to guard computers against viruses
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Second Approach: Solving a Problem

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A problem facing the U.S. and other countries is finding alternatives to fossil fuels. A large number of entrepreneurial firms, like this wind farm, are being launched to solve this problem.

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Solving a Problem

Sometimes identifying opportunities simply involves noticing a problem & finding a way to solve it. These problems can be pinpointed though observing trends & through more simple means, such as intuition or chance. There are many problems that have yet to be solved. Some business ideas just emerged from the recognition of problems in emerging trends. Example of Norton antivirus to rid computer for viruses, while McAfee develop software's to save computers from hackers. Rob Glaser 1995 sees the problem of No way to play audio & video on the internet have developed software while seeing the opportunity & business resulted is Real networks. Same is the case with Jerry Yang while seeing the need of organize directory of favorite websites come with an idea of yahoo.com

Third Approach: Finding Gaps in the Marketplace

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Specific Example

Product gaps in the marketplace represent potentially viable business opportunities.

In 2000 Tish Cirovolv realized there were no guitars on the market made specifically for women. To fill this gap, she started Daisy Rock Guitars, a company that makes guitars just for women.

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Personal Characteristics of Entrepreneur

Researchers have identified several characteristics that tend to make some people better at recognizing opportunities than others. Opportunity Recognition refers to the process of perceiving the possibility of a profitable new business, product or services. Characteristics are;
Prior Experience Cognitive Factor Social Networks Creativity

Personal Characteristics of Entrepreneur

Prior Experience
Several studies shows that prior experience in an industry helps entrepreneurs recognize business opportunities. Normally entrepreneurs develop new business, product or services ideas while working in the same industry. By working in an industry an individual may spot a market niche that is underserved. Example of buyandhold.com by Tudisco is based on prior experience. Once an entrepreneur starts a firm new venture opportunities became apparent. This is called the corridor principle.

Personal Characteristics of Entrepreneur

Cognitive Factors
Opportunity recognition may be an innate skill or a cognitive process. Entrepreneurs have entrepreneurial alertness which is the ability to notice things without engaging in deliberate search. Research finding says for alertness some times it needs purposeful efforts & sometimes its happen by innate skills. In other words entrepreneurs may be better than others at sizing up the marketplace & inferring the likely implication.

Personal Characteristics of Entrepreneur

Social Networks
The extent & depth of an individuals social networks affects opportunities recognition. People who build a substantial network of social & professional contacts will be exposed to more opportunities & ideas than people with sparse networks. This exposure can lead to new business starts. Network entrepreneurs identifies more opportunities than solo entrepreneurs but were less likely to be recognized as alert or creative as they work in networks rather than a single entity. Entrepreneurs normally got good ideas through weak tie relationships rather than strong tie relationships. Reason is that people you met every day or like minded individuals have similar ideology. While one can get a good idea even through a discussion with those whom we never give special attention in life, like servants, gardener, electrician.

Social Networks
(3 of 3) Why weak-tie relationships lead to more new business ideas than strong-tie relationships Strong-Tie Relationships These relationships, which typically form between like minded individuals, tend to reinforce insights and ideas that people already have Weak-Tie Relationships The relationships, which form between casual acquaintances, are not as apt to be between likeminded individuals, so one person may say something to another that sparks a completely new idea

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Personal Characteristics of Entrepreneur

Creativity
It is the process of generating a novel or useful idea. Opportunity recognition may be, at least in part, a creative process. For an individual the creative process can be broken into five stages.
Preparation
Preparation is the background experience & knowledge that an entrepreneur brings to the opportunity recognition

Incubation
Stage in which a person considers an idea or think about a problem

Insight
Its a flash of recognition- when the solution to a problem is seen or an idea is born

Evaluation
Idea is subjected to scrutiny & analyzed for its viability

Elaboration
Creative idea is put into a final form the details are worked out and the idea is transformed into something of value. In case of new business here business plan is normally been written.

Personal Characteristics of Entrepreneur

Incubation Preparation
Insight

Evaluation

Elaboration

Opportunity Recognition Process

Environmental Trends Economic Factor Social Factor Technological Advances Political & regulatory Changes

Business, Product or service opportunity Gap

Personal Characteristics of an Entrepreneur Prior Experience Cognitive Factors Social Networks Creativity

New Business Product & Service Ideas

Techniques for Generating Ideas

In general, Entrepreneurs identify more ideas than opportunities because many ideas are typically generated to find the best way to capitalize on an opportunity. Brainstorming: used to generate a number of ideas quickly,
not used for analysis or decision making. Focus Group: business idea Surveys: individuals Other Techniques: 5 to 10 people together for generating new gathering information through a sample of Customer advisory Board

Techniques For Generating Ideas

Brainstorming

Focus Groups

Library and Internet Research

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Brainstorming

Brainstorming
Is a technique used to generate a large number of ideas and solutions to problems quickly. A brainstorming session typically involves a group of people, and should be targeted to a specific topic. Rules for a brainstorming session:
No criticism. Freewhelling is encouraged. The session should move quickly. Leap-frogging is encouraged.

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Focus Groups

Focus Group
A focus group is a gathering of five to ten people, who have been selected based on their common characteristics relative to the issues being discussed. These groups are led by a trained moderator, who uses the internal dynamics of the group environment to gain insight into why people feel they way they do about a particular issue. Although focus groups are used for a variety of purposes, they can be used to help generate new business ideas.
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Library and Internet Research

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Library Research
Libraries are an often underutilized source of information for generating new business ideas. The best approach is to talk to a reference librarian, who can point out useful resources, such as industryspecific magazines, trade journals, and industry reports. Simply browsing through several issues of a trade journal or an industry report on a topic can spark new ideas.

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Libraries and Internet Research

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Large public and university libraries typically have access to search engines and industry reports that would cost thousands of dollars to access on your own.

Examples of Useful Search Engines and Industry Reports Lexis-Nexis Academic ProQuest IBISWorld Mintel Standard & Poors Net Advantage

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Library and Internet Research

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Internet Research
If you are starting from scratch, simply typing new business ideas into a search engine will produce links to newspapers and magazine articles about the hottest new business ideas. If you have a specific topic in mind, setting up Google or Yahoo! e-mail alerts will provide you to links to a constant stream of newspaper articles, blog posts, and news releases about the topic. Targeted searches are also useful.

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Protecting Ideas From Being Lost or Stolen

Step 1
The idea should be put in a tangible form such as entered into a physical idea logbook or saved on a computer disk, and the date the idea was first thought of should be entered.

Step 2
The idea should be secured. This may seem like an obvious step, but is one that is often overlooked.

Step 2
Avoid making an inadvertent or voluntary disclosure of an idea, in a manner that forfeits the right to claim exclusive rights to it.
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Case Study Assignment No. 2

Case 2.2
Align Technology: Making Braces More Bearable (Pg 48) www.invisalign.com