Chapter 3: Creating and Recognizing New Opportunities M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. Learning Objectives • 3.1 Explain how the entrepreneurial mindset relates to opportunity recognition. • 3.2 Employ strategies for generating new ideas from which opportunities are born. • 3.3 Apply the four pathways to opportunity identification. • 3.4 Demonstrate how entrepreneurs find opportunities using alertness, prior knowledge, and pattern recognition. • 3.5 Connect idea generation to opportunity recognition. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 2 Part 1: The Entrepreneurial Mindset and Opportunity Recognition M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. M. Neck, P. Neck, and Murray, 3 The Entrepreneurial Mindset and Opportunity Recognition (1 of 6) • Entrepreneurial mindset positions entrepreneurs to identify opportunities and to take action. • Entrepreneurship: Openness to new ideas, new goals, and new ways of attaining them. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 4 The Entrepreneurial Mindset and Opportunity Recognition (2 of 6) What Is an Opportunity? • Three central characteristics of opportunity: • Potential value (for you and others) • Novelty or newness (unique in a particular context) • Perceived desirability (someone wants/needs it and is willing to give you something in exchange for it) M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 5 The Entrepreneurial Mindset and Opportunity Recognition (3 of 6) What Is an Opportunity? • Opportunity: Generating value through unexploited products, services, or processes. • Forms of value: • Economic value • Social and environmental value (unmet needs, preserve, protect social entrepreneurship) • Others? M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 6 The Entrepreneurial Mindset and Opportunity Recognition (4 of 6) What Is an Opportunity? • Entrepreneurial mindset enables us to be bale to envision how a product or service can generate value for a specific customer segment • Idea constituting an opportunity must • Target a customer (people or business) + • Capacity to pay + • Meet a need/desire, solves a problem M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 7 Idea Evaluation • Not all ideas are opportunities! • We need to be able to objectively evaluate an idea High Innovation Irrelevant Improvement Degree of Novelty • Degree of Novelty • Value and Usefulness Low M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. Invention Value and Usefulness High 8 The Entrepreneurial Mindset and Opportunity Recognition (6 of 6) Innovation, Invention, Improvement, or Irrelevant? • Inventions: a novelty for customers. • Improvement: enhanced existent products. • The irrelevant category: non-useful products. • Bizarre inventions can be marketable too. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 9 High Invention Innovation Irrelevant Improvement Degree of Novelty Low M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. Value and Usefulness High 10 High Invention Innovation Irrelevant Improvement Degree of Novelty Low M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. Value and Usefulness High 11 High Invention Innovation Irrelevant Improvement Degree of Novelty Low M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. Value and Usefulness High 12 High Invention Innovation Irrelevant Improvement Degree of Novelty Low M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. Value and Usefulness High 13 High Invention Innovation Irrelevant Improvement Degree of Novelty Low M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. Value and Usefulness High 14 High Invention Innovation Irrelevant Improvement Degree of Novelty Low M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. Value and Usefulness High 15 High Invention Innovation Irrelevant Improvement Degree of Novelty Low M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. Value and Usefulness High 16 End Part 1 M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 17 Part 2: Opportunities Start with Thousands of Ideas M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 18 Opportunities Start with Thousands of Ideas (1 of 4) • Idea generation is the first step toward finding strong opportunity. • Important to embrace the openness of an entrepreneurial mindset. • The initial difficulty lies in ascertaining whether an idea is a good or bad one. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 19 M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 20 How many uses for a pencil can you come up with? 21 Opportunities Start with Thousands of Ideas (2 of 4) The Myth of the Isolated Inventor • Ideas don’t spring fully formed into our minds. • Well-known inventions were worked upon in collaboration. • There is little reason to credit one person for the creation of a product or service. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 22 M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 23 Kirby Ferguson Embrace the Remix - 9:03-9:24 TedTalk, June 2012, Edinburgh 24 Opportunities Start with Thousands of Ideas (3 of 4) Seven Strategies for Idea Generation • Analytical strategies: break down into parts • Search strategies: using past experiences to solve current problems • Imagination-based strategies: Creating unrealistic or fantastic states. • Requires suspending disbelief, dropping constraints, challenging status-quo M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 25 Opportunities Start with Thousands of Ideas (4 of 4) Seven Strategies for Idea Generation • Habit-breaking strategies: Gaining a new perspective. • Relationship-seeking strategies: Making links between ideas. • Development strategies: Modifying existing ideas. • Interpersonal strategies: Building on others’ ideas as a group M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 26 End Part 2 M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 27 Part 3: Four Pathways to Opportunity Identification M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. M. Neck, P. Neck, and Murray, 28 Four Pathways to Opportunity Identification (1 of 3) • Favorable opportunities are those that are • Valuable: There is a market for customers. • Rare: They are a novelty for customers. • Fit: They are made based on skills and knowledge of the founding team. • Costly to imitate: Those which create barriers for other entrepreneurs. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 29 M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 30 TABLE 3.1 Discovering or Creating Opportunities DISCOVERY CREATION Opportunity pathways Find and Search Effectuate and Design Assumptions The opportunity exists and is The entrepreneur creates waiting to be identified the opportunity Be alert to and scan the Take action, build, iterate Role of the entrepreneur environment Level of experience and prior Low High Potential value of opportunity Lower Higher Action orientation Risky Uncertain knowledge needed to identify Source: Alvarez, S. A., & Barney, J. B. 2007. Discovery and creation: Alternative theories of entrepreneurial actions. Strategic Entrepreneurship Journal, 1(1–2): 11–26. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 31 End Part 3 M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 32 Part 4: Opportunities through Alertness, Prior Knowledge and Pattern Recognition M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 33 Opportunities through Alertness, Prior Knowledge and Pattern Recognition (1 of 7) • Access to the right information is one of the key influences to opportunity recognition. • How the information is used makes the real impact. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 34 Opportunities through Alertness, Prior Knowledge and Pattern Recognition (2 of 7) Alertness • Discoveries are made by those entrepreneurs who have alertness. • For example, Post-its and the origin of the football. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 35 Opportunities through Alertness, Prior Knowledge and Pattern Recognition (3 of 7) • Some entrepreneurs are more adept at spotting opportunities because • They have access to more information. • They are risk takers. • They may possess different cognitive styles from those of nonentrepreneurs. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 36 Opportunities through Alertness, Prior Knowledge and Pattern Recognition (4 of 7) • Cognitive styles attributed to successful entrepreneurs: • Intelligence. • Creativity. • Self-efficacy. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 37 Opportunities through Alertness, Prior Knowledge and Pattern Recognition (5 of 7) Building Opportunities: Prior Knowledge and Pattern Recognition • Prior knowledge is gained from life and work experiences and is unique to an individual • This is then applied to a venture • Important to keep an open mind and move from ideas to opportunities. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 38 39 End Part 4 M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 40 Part 5: From Idea Generation to Opportunity Recognition M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 41 From Idea Generation to Opportunity Recognition (1 of 4) • Three processes before identifying opportunity include: • Idea Generation: producing ideas for something new. • Creativity: producing ideas for something new and useful • Opportunity Recognition: new + potentially useful + potential to generate economic value M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 42 From Idea Generation to Opportunity Recognition (2 of 4) TABLE 3.2 The IDEATE Model for Opportunity Recognition Identify Identifying problems that customers are currently trying to solve, are spending money to solve, but are still not solved to the customers’ satisfaction. Also identify the underlying causes of the problem. Discover Actively searching for ideas in problem-rich environments where there are social and demographic changes, technological change, political and regulatory change, and/or changes in industry structure. Enhance Taking the ideas and expanding to new applications or adding innovative twists. Or simply enhancing existing ideas. Anticipate Studying change and analyzing future scenarios as they relate to social, technological, and other global changes and trends. Target Defining and understanding a particular target market, validating new ideas with early adopters. Evaluate Evaluating whether the solution solves a problem, size of target market, degree of personal interest by the entrepreneur, and skills and abilities of the entrepreneur. Source: Adapted from Cohen, D. Hsu, D. & Shinnar, R. (2018) Enhancing Opportunity Identification Skills In Entrepreneurship Education: A New Approach and Empirical Test (forthcoming); and Ideate: An empirically proven method for identifying and selecting high potential entrepreneurial ideas. Workbook. M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 43 Summary • Mindset = Identify Opportunities and take action (network, seek out needs, persist, build) • Idea generation is first: Seven strategies • How entrepreneurs identify opportunities: design, effectuate, search, find. • Entrepreneurial alertness: ready for opportunities to arise, knowledge and experience, connect seemingly unrelated things, pattern recognition • IDEATE M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 44 End of Presentation Chapter 3: Creating and Recognizing New Opportunities M. Neck, P. Neck, and Murray, Entrepreneurship: The Practice and Mindset, 2e. © SAGE Publications, 2020. 45
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