5.opportunity recognition and_the_screening_process
TRANSCRIPT
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Opportunity Recognition and the Screening Process
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Today’s Objectives• Understand where business ideas
come from• Understand how to perform an initial
high level screening / evaluation of business opportunities
• Understand the influence of the external environment
• Take away action – screening checklist
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Business Creation & Start-up Process Adapted from Deakins (2006)
Idea formulation
Opportunity Recognition
Pre-start Planning and Preparation
Entry and Launch
Post-entry Development
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where can you find
BIG IDEAs?
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Sources of Ideas• Every day problems / needs / complaints
– E.g. Sports Division / Cisco / Netflix• Personal experience
– Work, home, education, skills and talents • Hobbies and interests
– Lifestyle entrepreneurs• Newspapers, magazines, media• Other countries• Deliberate Search
– Business Opportunity Profiles– On-line databases– Patents and licensing
• Factors of Change
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Pizza Express Case Study
• Founded Peter Boizot – 1965• Influenced by Italian and German
experiences - pizzaiolos• Formed an exclusive alliance with
London’s only mozzarella maker• By 2003 over 300 outlets in UK, Ireland,
Spain and France
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External Environment Drives Change• Political/Legal - legislation, taxation policy, employment
law, health and safety, foreign trade, terrorism, war • Economic - local, national, global, industry – inflation,
interest rates, employment rates, exchange rates, money supply, energy costs
• Socio-cultural – population demographics, income distribution, lifestyle changes, education levels, social mobility, values, attitudes
• Technological - new products, new processes, new and emerging discoveries, internet, etc
• Ecological/Environmental – Climate change, pollution, waste products, recycled technology, energy efficiency
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USA – Some Hot Recent Business Ideas (www.entrepreneur.com)
• Consulting services• Financial planning• Personal Trainer• Pet Products• Mobile computer training• Household cleaning• Doula service • Gardening • Health services
• Tech Education– For Kids– For Seniors
• Maternity Clothes• Online Learning• Life Coach• Security• Senior Care Market• Senior Clothes• Art services
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Drucker’s 7 Sources of Innovative Opportunities
Organisational / Sectoral• The unexpected (event or
success or failure)• The incongruity – between
what actually happens and plan
• The inadequacy in underlying processes
• The changes in industry or market structure
External• Demographic changes• Changes in perception,
mood and meaning• New knowledge (both
scientific and non scientific)
Last is most difficult, least reliable and least predictable
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Opportunity Recognition• Converting an idea into a business
opportunity is the key element of the process of business creation
• Entrepreneurs are attuned to opportunity• Opportunity must take priority over
innovation• Opportunities are generated by change
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Opportunity has Four Essential Qualities - Barringer and Ireland, 2006
• Attractive• Durable• Timely • Anchored in product/service which adds value to buyer/end user
“I never perfected an invention that I did not think about in terms of the service it might give others... I find out what the world needs, then I proceed to invent” Thomas Edison
Wow products /services such as the Dyson vacuum cleaner and the bar and massage service in Virgin Upper Class, Amazon
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One Product is Not Enough!• Dyson vacuum cleaner
took 5 years and 5,127 prototypes
• First product, G-Force, sold for $2000 each in Japan
• Vacuums, washing machines, Airblade hand dryer (sales $6 billion worldwide), Air Multiplier
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Window of Opportunity Varies
Internet Search Engines
• 1995 – Yahoo• Quickly followed by Lycos, Excite,
AltaVista, etc• 1998 – Google (advanced technology)
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Ideas not Innovative Opportunities
• Sinclair C5• E-stamps and Stamps.com• Tartan tanks
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Evaluating Idea / Opportunity• Must be a clearly defined market need
– Customer analysis, segments, motivations, unmet needs, gaps in market
• Idea needs to be economically viable– Market attractiveness e.g. size? growth? trends? entry
barriers?– Profit potential?– Resources needed / available?
• Technical feasibility• Competitive advantage / USP
– Competitor analysis• Fit with your personal / company objectives /
experiences / core competencies• Timing must be right – window of opportunity• Risks / threats – Environmental analysis
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What to look for
• Limitations of what’s currently available• Trends and changes (beware fads)• Something new and different• Unfilled niche• Technological advances• Speed to market
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Conclusions• Generating ideas and new products is easy - but
you need customers and markets• The real challenge is converting ideas into a
business opportunity• The better you understand your consumer the
better your chances of winning in the market place • Evaluation and assessment of markets is key to
developing business ideas and new products and services
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Screening Checklist
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Screening Check List – Market Factors
Is the market large? Yes No
Is the market highly competitive? (Direct/indirect)
Is this an emerging / growth market? Is there any pending legislation which might impact market demand?
Are there any obvious barriers to entry?Are there reachable / receptive customers close by? (Think about distribution channels, etc)
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Screening Check List – Competitive Advantage?
Is there a well identified market need for the product/service?Yes No
Can we establish a USP for our product / service? – Price? Quality? Speed of response? Unique features?
Is our product / service a significant improvement on our competitors?
Can we protect our product?
Can we establish first mover advantage?
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Screening Check List – Management Capability
Do we have personal knowledge / experience / the right skills / experience?
Yes No
Do we have an interest in the service?
Do we know other people who have the rights skills / experience?
Have we the right contacts and networks?
Is there specific training we can receive to improve our chances of success?
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Screening Check List – Resources / Economics
Is this a low cost start up business model?Yes No
Do we have access to the money necessary to start this business?
Is this a sizeable / scaleable business opportunity?
Is it worth doing?
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Screening Check List – Other
Yes No
European dimension?
Personal / corporate values? e.g. Environmental considerationsCultural barriers and attitudes?
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Summary
• Need to tailor checklist to individual idea• Seeking
– Large and growing market– Reachable customers– An innovative product which adds value– Right window of opportunity
• Assess whether to abandon, reform or enhance the idea