Process of Entrepreneurship Decision to Become an Entrepreneur • Introduction to Entrepreneurship
Process of Entrepreneurship
Decision to Become an Entrepreneur
• Introduction to Entrepreneurship
Process of Entrepreneurship
Developing Successful Business Ideas
• Recognizing Opportunities & generating Ideas
• Feasibility Analysis• Industry & Competitor Analysis• Developing an Effective Business
Model
Chapter
2-5
Process of Entrepreneurship
Moving from an Idea to an Entrepreneurial Firm
• Building a new Venture Team• Assessing a new ventures financial
strength & viability• Preparing a proper ethical & legal
foundation• Writing a Business Plan• Getting Finance or Funding
Chapter
6-10
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
• Strategies for firm growth• Franchising
Chapter
11-15
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 didn’t 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 ForcesState of the economy
level of disposable income consumer spending patterns
Social ForcesSocial & cultural
trends demographic changes what people
think is “in”
Technological AdvancesNew technologies
emerging technologiesNew user of old
technologies
Political & Regulatory Changes
New changes in Political arena
New Laws & Regulations
Business, Product or
Service Opportunity
Gap
Difference between what's available & What's possible
New Business,Product and Service Idea
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• Economic Trend
• Teenagers with more cash & disposal Income
• Increased Interest in the stock Markets
• Social Trend• Increasing job
preoccupation by working parents or families
• Interest in Health care
• Technological Trend• Development of the
Internet services
• Political & Regulatory Trends• Development of new laws
Resulting New Business, Product & service opportunity
• Economic Trend• Designer cloths, compact discs,
DVD players, games console• Online Brokerage services,
stock research, Magazine
• Social Trend• Restaurants microwavable
dinners, food delivery system
• Fitness Centers
• Technological Trends• Ecommerce, Improved
Supply Chain Management
• Political & Regulatory Trends• Back up Data base
development
Companies that Resulted• Economic Trend• Gap, Banana republic, MTV
saga, Palm• Buyandhold.com, the
street.com, motley fool.
• Social Trend• McDonalds, KFC, Pizza Hut,
Burger King• Fitness Equipment, Curves
Int.• Technological Trends
• Yahoo, Amazon, aoline, Chem Connect
• Political & Regulatory Trends• Prima tech
How Are Opportunities Identified?(1 of 1)
2-16
Second Approach: Solving a Problem
Sometimes identifyingopportunities simply
involves noticing a problemand finding a way to
solve it
These problems can bepinpointed through observing
trends and through more simplemeans, such as intuition,
serendipity, or chance
Some business ideas are clearlyinitiated to solve a problem
For example, Symantec Corp. created Norton antivirus
software to guard computersagainst viruses
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
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 EntrepreneurPrior 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 EntrepreneurCognitive 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 EntrepreneurSocial 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)
2-22
Strong-Tie Relationships
Weak-Tie Relationships
These relationships, which typically form between like minded individuals, tend to reinforce insights and ideas that people already
have
The relationships, which form between casual
acquaintances, are not as apt to be between like-minded individuals, so one person may say
something to another that sparks a completely
new idea
Why weak-tie relationships lead to more new business ideas than strong-tie relationships
Personal Characteristics of EntrepreneurCreativity
◦ 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 It’s 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
Preparation
Incubation
Insight
Evaluation
Elaboration
Opportunity Recognition Process
Environmental Trends
Economic Factor
Social FactorTechnological AdvancesPolitical & regulatory Changes
Personal Characteristics of an
Entrepreneur
Prior ExperienceCognitive FactorsSocial
NetworksCreativity
Business, Product
or service opportuni
ty Gap
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: 5 to 10 people together for generating new business idea
Surveys: gathering information through a sample of individuals
Other Techniques: Customer advisory Board
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.
2-27
Case Study Assignment No. 2Case 2.2
◦Align Technology: Making Braces More Bearable (Pg 48)
◦www.invisalign.com