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IDENTIFYING ENTREPRENEURIAL OPPORTUNITIES

IDENTIFYING ENTREPRENEURIAL OPPORTUNITIES. The Entrepreneurs Club September 27, 2004. IDEAS …last for ever …are free …everybody has ideas …do not need customers to survive. OPPORTUNITIES …are perishable …require work …require fit …must create customer value.

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IDENTIFYING ENTREPRENEURIAL OPPORTUNITIES

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  1. IDENTIFYING ENTREPRENEURIAL OPPORTUNITIES The Entrepreneurs Club September 27, 2004

  2. IDEAS …last for ever …are free …everybody has ideas …do not need customers to survive OPPORTUNITIES …are perishable …require work …require fit …must create customer value Ideas are not the same as Opportunities Always consider investing in a Grade A man with a Grade B idea. Never invest in a Grade B man with a Grade A idea. George Doriot, ‘father’ of the VC industry

  3. Inventions – new technologies are not the same as Opportunities • The BAR CODE - method of automatic identification and data collection. • The first patent for a bar code type product (US Patent #2,612,994) was issued to inventors Joseph Woodland and Bernard Silver on October 7, 1952 • Bar code was first used commercially in 1966 • In June of 1974, the first U.P.C. scanner was installed at a Marsh's supermarket in Troy, Ohio. The first product to have a bar code included was a packet of Wrigley‘s Gum.

  4. What is an Opportunity? • An idea that is timely, attractive, durable anchored in a product or service that creates or adds value for its buyer and user • WINDOW - time sensitive (fleeting) occasion • ATTRACTIVE – to stakeholders (entrepreneurs, investors, clients) • DURABLE – sustainable over time or sustainable long enough to reap expected benefits

  5. The Concept of FIT PEOPLE AND RESOURCES FAVORABLE SOCIOLOGICAL FACTORS OPPORTUNITY APPROPRIATE EXPERIENCE CONTACTS SKILLS ATTITUDE APPROPRIATE RISK/REWARD ALLOCATION AND INCENTIVES INVESTOR-VALUE-ADDED CONTEXT FAVORABLE TECHNOLOGY MACROECONOMY FAVORABLE RULES OF THE GAME OPPORTUNITY PROJECT APPROPRIATE FINANCING OPTION PRESERVATION BUSINESS MODEL

  6. Context The Unexpected Incongruities Process need (Dell&Chang/Taiwan Semiconductors) Industry and Market structures Demographics Changes in perception (Case/AOL, Omidyar/eBay, Yang/Yahoo) New Knowledge (Noyce&Moore/Intel, Boyer&Swanson/Genentech) Others Reading trade publications (Gates&Allen/Microsoft) Engaging in consulting projects (Kelleher/SWA) Idea arbitrage (Schultz/Starbucks) Business Models (Amazon) Sources of Opportunities

  7. Perception Discovery Creation Development Evaluation Abortion Venture Formation People: Opportunity Identification • Personality Traits: • Creativity • Optimism + Opportunity Development Entrepreneurial Alertness + • Social Networks: • Weak ties • Partnerships • Inner circle + + • Prior knowledge: • Special interests • Industry knowledge • Customer problems • Ways to serve customers • Academic background + Source: Based on Fig.3 from Ardichvili, Cardozo, Ray (2003) "A theory of entrepreneurial opportunity identification and development« , Journal of Business Venturing

  8. Where 100 of the 1989 Inc. 500 founders got their ideas Systematic search 4% Swept in by PC revolution 5% Discovered by luck 20% Idea from previous job 71% Source: Amar Bhide (1994), “How entrepreneurs craft strategies that work,” Harvard Business Review (March-April).

  9. SIVI Customers 75% 25% Employees 59% 37% Professional acquaintanc 41% 49% Suppliers 47% 35% Trade publications 40% 38% Magazines, newspapers 26% 51% Good Opportunities come from NI • Investors 54% • Technical literature 64% • Hobby 63% • Libraries 78% • Patent Filings 84% Top of the list Bottom of the list VI= Very Important, SI= Somewhat Important, NI= Not Important, VI+SI+NI=100% Source: Hills and Schrader, « Successful Entrepreneur’s Insights into Opportunity Recognition », 1998

  10. Keep An Opportunity Register • Inventory of your entrepreneurial ideas • In a database or ‘diary’, record the following items: • Business concept, trends, key data, obstacles, competences & resources, competition (see McGrath & McMillan, Figure 2-1) • Technique applied by successful habitual entrepreneurs • Increases your chances of realizing the right opportunity at the right time at the right place

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