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RCA 204, Innovation & Entrepreneurship

Unit III: Opportunity / Identification and Product Selection (8 Hrs)

Meaning and concept of Entrepreneurial Competency, Developing Entrepreneurial


Competencies, Entrepreneurial Culture, Entrepreneurial Mobility, Factors affecting
Entrepreneurial mobility, Types of Entrepreneurial mobility. Entrepreneurial
Opportunity Search and Identification; Criteria to Select a Product; Conducting
Feasibility Studies; Project Finalization; Sources of Information
_____________________________________________________________________________________

MEANING OF ENTREPRENEURIAL COMPETENCY

The business operation is considered to be very complex in a competitive business


environment, which is constantly changing with fast technological advancements.
An entrepreneur is expected to interact with these environmental forces which
require him to be highly competent in different dimensions like intellectual,
attitudinal, behavioral, technical, and managerial aspects. Entrepreneurs are
therefore permanently challenged to deploy a set of competencies to succeed in
their entrepreneurial endeavors. Entrepreneurial competencies are defined as
underlying characteristics possessed by a person, which result in new venture
creation. These characteristics include generic and specific knowledge, motives,
traits, self-images, social roles, and skills that may or may not be known to the
person. That is, these characteristics may be even unconscious attributes of an
individual. Some of these competencies are innate while others are acquired in the
process of learning and training and development.

Definition

Entrepreneurial competencies can be defined as underlying characteristics such as


generic and specific knowledge, motives, traits, self-images, social roles, and skills
that result in venture birth, survival, and/or growth.

Bird (1995)

Types of Competencies:

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The competencies may be classified into following categories:

1. Personal entrepreneurial competencies


2. Venture initiation and success competencies
a) Enterprise launching competencies
b) Enterprise management competencies

Personal Entrepreneurial competencies

It is the personal characteristics of an individual who possess to perform the task


effectively and efficiently. Personal entrepreneurial competencies include the
following:

a) Initiative

The entrepreneur should be able to take actions that go beyond his job
requirements and to act faster. He is always ahead of others and able to become a
leader in the field of business. He Does things before being asked or compelled by
the situation and acts to extend the business into new areas, products or services.

b) Sees and acts on opportunities

An entrepreneur always looks for and takes action on opportunities. He Sees and
acts on new business opportunities and Seizes unusual opportunities to obtain
financing, equipment, land, work space or assistance.

c) Persistence

An entrepreneur is able to make repeated efforts or to take different actions to


overcome an obstacle that get in the way of reaching goals. An entrepreneur takes

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repeated or different actions to overcome an obstacle and Takes action in the face
of a significant obstacle.

d) Information Seeking

An entrepreneur is able to take action on how to seek information to help achieve


business objectives or clarify business problems. They do personal research on how
to provide a product or service. They seek information or ask questions to clarify
what is wanted or needed. They personally undertake research and use contacts or
information networks to obtain useful information.

e) Concern for High Quality of Work

An entrepreneur acts to do things that meet certain standards of excellence that


gives him greater satisfaction. An entrepreneur states a desire to produce or sell a
top or better quality product or service. They compare own work or own companys
work favorably to that of others.

f) Commitment to Work Contract

An entrepreneur places the highest priority on getting a job completed. They make
a personal sacrifice or take extraordinary effort to complete a job. They accept full
responsibility for problems in completing a job for others and express concern for
satisfying the customer.

g) Efficiency Orientation

A successful entrepreneur always finds ways to do things faster or with fewer


resources or at a lower cost. They look for or find ways to do things faster or at less
cost. An entrepreneur uses information or business tools to improve efficiency. He
expresses concern about costs vs. benefits of some improvement, change, or course
of action.

h) Systematic Planning

An entrepreneur develops and uses logical, step-by-step plans to reach goals. They
plan by breaking a large task into subtask and develop plans, then anticipate
obstacles and evaluate alternatives. They take a logical and systematic approach to
activities.

i) Problem Solving

Entrepreneurs identify new and potentially unique ideas to achieve his goals. They
generate new ideas or innovative solutions to solve problems and they take
alternative strategies to solve the problems.

j) Self-Confidence

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Entrepreneur with this competency will have a strong belief in self and own abilities.
They express confidence in their own ability to complete a task or meet a challenge.
They stick to their own judgment while taking decision.

k) Assertiveness

An entrepreneur confronts problems and issues with others directly. Entrepreneur


with this competency vindicate the claim to asset their own rights on others. They
demand recognition and disciplines those failing to perform as expected. They asset
own competence, reliability or other personal or companys qualities. They also
assert strong confidence in own companys or organizations products or service.

l) Persuasion

Entrepreneurs with this competency successfully pursue others to perform the


activities effectively and efficiently. An entrepreneur can persuade or influence
others for mobilizing resources, obtaining inputs, organizing productions and selling
his products or services.

m) Use of Influence Strategies

An entrepreneur is able to make use of influential people to reach his business


goals. Entrepreneurs with this competency influence the environment
(Individuals/Institution) for mobilizing resources organizing production and selling
goods and services to develop business contacts.

n) Monitoring

Entrepreneurs with this competency normally monitor or surprise all the activities of
the concern to ensure that the work is completed by maintaining good quality.

o) Concern for Employee Welfare

Entrepreneurs with this competency take action to improve the welfare of


employees and take positive action in response of employees personal concerns.

Reference: http://www.simplynotes.in/mbabba/entrepreneurial-competency/2/

2. Venture Initiation and success Competencies

In addition to personal competencies, Entrepreneur must also possess the


competencies required to launch the enterprise and for its growth and survival. It is
further divided into two categories of competencies:
a. Enterprise launching competencies
b. Enterprise management competencies

a) ENTERPRISE LAUNCHING COMPETENCIES

Competency to understand the nature of business

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-To analyze the personal advantage of owning a small business.


-To analyze the personal risks of owning a small business.
-To analyze how to maximize the opportunities and minimize the risks of owning a
business.

Competency to determine the potential as an entrepreneur


-To consider the personal qualification and abilities needed to manage own business.
-To evaluate the own potentials for decision-making, problem solving and creativity.
-To determine own potential for management, planning, operations, personnel and
public relations.

Competency to develop a business plan


-To identify how a business plan helps the entrepreneur.
-To recognize how a business plan should be organized.
-To identify and use the mechanisms for developing a business plan.

Competency to obtain technical assistance


-To prepare for using technical assistance.
-To select professional consultants.
-To work effectively with consultants.

Competency to a choose the type of ownership


-To analyze the type of ownership of business.
-To follow the steps necessary to file for ownership of the business.
-To define politics and procedures for a successful multi-owner.

Competency to plan the market strategy


-To use goods classification and life cycle analysis as planning tools for marketing.
-To develop and modify marketing mixes for a business.
-To use decision making tools and aid in evaluating marketing activities.
-To evaluate operations to improve decision making about marketing.

Competency to locate the business


-To analyze customer transportation, access, parking and so forth i.e. relative to
alternative site locations.
-To complete a location feasibility study for the business.
-To determine the cost of renovating or improving a site for the business.
-To prepare an occupancy contrast for the business.

Competency to finance the business


-To describe the source of information available to help in estimating the financing
necessary to start a new business.
-To determine the finance necessary to start a new business.
-To prepare a project profit and loss statement and a projected cash flow statement
for the new business.
-To prepare a loan application package.

Competency to deal with the business


-To determine the need for legal assistance.
-To select the provisions that is desired in the lease.

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-To prepare sales contract (such a s credit sales or long term sales) that may be
utilized in the contracts
-To evaluate contracts.
-To determine the need for protection of ideas and intentions.

Competency to comply with government regulations


-To appraise the effects of various regulations on the business operations.
-To acquire the information necessary to comply with the various rules and
regulations affecting the business.
-To develop policies for the business to comply with the Government rules and
regulations.

b) ENTERPRISE MANAGEMENT COMPETENCIES

Competency to manage the business


-To plan goals and objectives for the business.
-To develop a diagram showing the organizational structure for the business.
-To establish control practices and procedures for the business

Competency to manage human resources


-To write a job description for a position in the business.
-To develop a training programme online for employees.
-To develop a list of personnel for employees in the business.
-To develop an outline for an employee evaluation system.
-To plan a corrective interview with an employee concerning a selected problem.

Competency to promote the business


-To create a long-term promotional plan.
-To describe the techniques used to prepare advertising and promotion
-To analyze competitive promotional activities.
-To evaluate promotional effectiveness.
-To plan a community relations programme.

Competency to manage sales efforts.


-To develop a sales plan for the business.
-To develop policies and procedures for serving the customers.
-To develop a plan for training and motivating sales people.

Competency to keep business records


-To determine who will keep the books for the business and how they will be
maintained.
-To describe double-entry bookkeeping.
-Select the types of journals and ledges that you will use in the business.
-To identify the types of records that will be used in the business to record sales,
cash receipts, cash disbursements, accounts receivable, accounts payable, payroll,
petty cash, inventory, budgets and other items.
-To evaluate the business records.
-To identify how a micro-computer may be used to keep he business records.

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Competency to manage the finances


-To explain the importance of cash flow management.
-To identify financial control procedures.
-To describe how to find cash flow patterns.
-To analyze trouble spots in financial management.
-To describe how to prepare an owners equity financial statement.
-To analyze financial management ratios applicable to a small business.
-To identify the components of breakeven point problem.
-To review microcomputer application for financial management.

Competency to manage customer credit and collection


-To analyze the legal rights and resource of credit guarantors.
-To develop a series of credit collection reminders and the follow up activities.
-To develop various credit and collection policies.
-To prepare a credit promotion plan.
-To discuss information resources and systems that applies to credit and collection
procedures.

Competency to protect the business


-To prepare policies for the firm that will help minimize losses due to employee theft,
vendor theft, bad cheques, shoplifting, robbery, injury or product liability.
-To determine the kinds, amounts and costs of insurance needed by the firm.

DEVELOPING ENTREPRENEURIAL COMPETENCIES

The competency results in superior performance. This is exhibited by ones distinct


behavior in different situations. The popular Kakinada experience conducted by
McClelland and winter (1969) has proved beyond doubt that the entrepreneurial
competency can be injected and developed in human minds through proper
education and training. Competency finds expression in human behavior.

How to develop and sharpen the entrepreneurial competency is suggested in the


following method or procedure consisting of four steps:

1. Competency Identification and Recognition


2. Competency Assessment
3. Competency Mapping
4. Development Intervention

A brief description about each of these follows in turn:

1. Competency Identification and Recognition:

Acquisition of a new behavior like entrepreneurial behavior begins with


understanding, identifying and recognizing of what entrepreneurial behavior means.
In other words, the first step involved in developing the entrepreneurial competency
is first to identify and recognize the set of competencies required to effectively
behave like an entrepreneur.

2. Competency Assessment:

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Once the set of competencies is identified and recognized to behave like an


entrepreneur, the next step is now to see what entrepreneurial competencies the
person actually possesses. In other words, the actual competencies possessed by
an entrepreneur are examined against the required set of competencies to
effectively behave or act like an entrepreneur.
Where one stands with respect to a set of required competencies to act like an
entrepreneur or what is the level of ones competence can be ascertained by asking
the relevant questions to a competence.

3. Competency Mapping:

Now, the actual competencies possessed by an entrepreneur are compared with the
competencies required to become a successful entrepreneur to ascertain the gap in
the entrepreneurial competencies of an entrepreneur (Cooper 2000). This is called
in the human resource training and development lexicon as Competency Mapping.
In other words, this is just like training needs identification in case of HR training.
This is presented as follows:

A popular performance tool used to map the (entrepreneurial) competency is based


on Skill to Do / Will to Do chart.Skill to Do refers to the entrepreneurs /
individuals ability to do the job and to Do refers to the entrepreneurs individuals
desire or motivation to do the job.

In other words, the Ability to Do / No Ability to Do dimension of this comes within


the purview of the Entrepreneurial Competence and the Will to Do /No Will to Do
dimension comes within the purview of the Entrepreneurial Commitment.

This may result in four possible situations as shown in the following Figure:

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These four situations mean the following:

(A) Ability to Do / Will to Do:

Among all four situations, this is the ideal one. The entrepreneur is fully able, i.e.
qualified and is performing his job as designed and desired. He is supposed to be
star or ideal performer as an entrepreneur.

(B) No Ability to Do / Will to Do:

In this situation, the entrepreneur is putting out his efforts to perform the job, but is
not getting the desired results out of his efforts. It means he is lacking ability or skill
to perform the job. Thus, it implies that the entrepreneur needs training, or say,
competency building.

(C) Ability to Do / No Will to Do:

Here, the entrepreneur is qualified or possesses the ability to do his job but is not
willing to perform the same. This implies the lack of desire or motivation. Thus, the
entrepreneur needs to be motivated to perform his job.

(D) No Ability to Do / No Will to Do:

The entrepreneur has deficiency in both ability and will (motivation). In a sense, he
is just like deadwood and his entrepreneurial job is in jeopardy. Thus, the
entrepreneur either needs to continue like this or disappear from the
entrepreneurial role.

4. Development Intervention:

After understanding, internalizing and practicing a particular behavior or


competence, one needs to make an introspection of the same in order to sharpen
and strengthen ones competency. This is called feedback.

In simple terms, feedback means to know the strengths and weaknesses of ones
new behavior. This helps one know how the new behavior has been rewarding. This
enables one to sustain or give up the exhibition of a particular behavior or
competence in his future life.

INCREASE ENTERPRISE VALUE BY MAINTAINING YOUR ENTREPRENEURIAL


CULTURE

Edgar Schein (1990) says that the only important thing that leaders do may well by
constructing culture. He says that an organizations culture is grounded in the
founders basic beliefs, values and assumptions. Values what is worth having or
doing and vision where we are going and how we will get there and how it is
communicated are vital ingredients in creating culture. Having entrepreneurship at
the core of these values is fundamental and essential for the success of the

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entrepreneurial organization. Values related to entrepreneurship include creativity,


achievement, ownership, change and perseverance.

To achieve this, the leader needs to:

Define clearly what the values and vision are. This provides a clear focus on
key issues and concerns for the organization.
Get everyone in the organization to understand the values and vision through
effective communication practices.
Guide the development of policies and programmes that support the vision.
Encourage the enactment of the values and vision through their own personal
actions walking the talk acting consistently over time to develop trust,
showing that they are reliable and can be trusted to do what they promise.
This reassures people who are concerned about change.
Show concern and respect for the members of the organization,
demonstrating through actions that they are important.

Bowman and Faulkner (1997) talk about organizational culture being formed or
embedded in an organization from three influences; organizational processes,
cognitive processes and behaviors. All these influences Burns represents in
following figure:

Burns talks about five high level elements that really set the culture of the
organization apart as being entrepreneurial. They represent the real DNA of the
entrepreneur:

creativity and innovation


empowerment
strong relationships
continual learning
Measured risk-taking.

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Examples:

Zappos: Zappos has become almost as well known for its culture as it is for the
shoes that it sells online. What does that culture look like? It starts with a cultural fit
interview, which carries half the weight of whether the candidate is hired. New
employees are offered $2,000 to quit after the first week of training if they decide
the job isnt for them. Ten core values are instilled in every team member as:
1. Deliver WOW Through Service
2. Embrace and Drive Change
3. Create Fun and A Little Weirdness
4. Be Adventurous, Creative, and Open-Minded
5. Pursue Growth and Learning
6. Build Open and Honest Relationships With Communication
7. Build a Positive Team and Family Spirit
8. Do More With Less
9. Be Passionate and Determined
10.Be Humble

Twitter
Employees of Twitter cant stop raving about the companys culture. Rooftop
meetings, friendly coworkers and a team-oriented environment in which each
person is motivated by the companys goals have inspired that praise. Employees of
Twitter can also expect free meals at the San Francisco headquarters, along with
yoga classes and unlimited vacations for some. These and many other perks are not
unheard of in the startup world.

Google
It would almost seem wrong not to mention Google on a list of companies with great
culture. Google has been synonymous with culture for years, and sets the tone for
many of the perks and benefits startups are now known for. Free meals, employee
trips and parties, financial bonuses, open presentations by high-level executives,
gyms, a dog-friendly environment and so on. Googlers are known to be driven,
talented and among the best of the best.

Adobe
Adobe is a company that goes out of its way to give employees challenging projects
and then provide the trust and support to help them meet those challenges
successfully. While it offers benefits and perks like any modern creative company,
Adobe's is a culture that avoids micromanaging in favor of trusting employees to do
their best.

ENTREPRENEURIAL MOBILITY

Entrepreneurial Mobility means movement of entrepreneurs from one location to


another and similarly from one occupation to another, which affect the pace and
pattern of entrepreneurship development.
Based on the movement and settlement of entrepreneurs (being human beings),
entrepreneurial mobility may be classified as follows:

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1. Occupational Mobility - means movement or changes in occupation. This


may take place in two forms:
a) Inter-generation movement: When a person may move or leave from
the principle occupation of his/her father, is called Inter-generation
movement.
b) Intra-generation occupational movement: When a person may move or
leave from his/her own occupation during the operational career, is
called Intra-generation occupational movement.
2. Locational Mobility - means movement or changes in location. This
mobility depends upon some factors like availability of raw material,
infrastructure and labor, nearness to market, own resources, knowledge,
experience, socio political situation, etc.

FACTORS AFFECTING ENTREPRENEURIAL MOBILITY

There are following some important factors influence the entrepreneurial mobility in
a given situation and time:
1. Education: An entrepreneur must be educated person. He/she also enables to
adjust with the different conditions more easily and clearly and communicate
others in a better manner. Thus, an educated entrepreneur tends to be more
mobile than an uneducated one.
2. Training and Experience: An entrepreneur must be properly trained and must
have some past experience in business or industry. An experienced
entrepreneur better perceives the available opportunities, better analyses
his/her strengths and weaknesses and also understands the complexities
involved in running an enterprise. That technical knowledge and experience
influences the entrepreneurial mobility.
3. Availability of Facilities: The entrepreneurs may move from the areas with no
or less facilities to the areas with more and better facilities. These facilities
include -
a. Govt. facilities - availability of raw materials, labors, market facilities.
b. Infrastructural facility.
4. Political Conditions: The entrepreneurial mobility is also influenced by the
political factors, such as tax policy, employment laws, environmental
regulations, political stability, trade restrictions and tariffs.
5. Size of Enterprise: Entrepreneurial mobility is related to size of enterprise.
Larger business houses are found more mobile than smaller ones. Because a
large size of enterprise will have the capability to start a new business at a
new place.

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PRACTICE EXERCISES:

1. Explain the difference between opportunities and ideas.


2. Describe the three general approaches entrepreneurs use to identify
opportunities.
3. Discuss the personal characteristics of entrepreneurs that contribute to their
ability to recognize business opportunities.

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4. Identify and describe techniques entrepreneurs use to generate ideas.


5. Discuss actions to take to encourage continuous development of new ideas in
entrepreneurial firms.

OPPORTUNITY SEARCH AND IDENTIFICATION

Opportunity search means the extent to which possibilities for new ventures exist
and the extent to which entrepreneurs have the Smooth way to influence their odds
for success through their own actions.

Opportunity identification can be defined as the cognitive process or processes


through which individuals conclude that they have identified an opportunity. It is
important to note that opportunity identification is only the initial step in a
continuing process, and is distinct both from detailed evaluation of the feasibility
and potential economic value of identified opportunities and from active steps to
develop them through new ventures. It is essentially a situation in which new goods,
raw materials, markets and organizational strategies can be introduced through the
formation of new means, ends or means-ends relationships.

Let us try to understand the difference. An idea is like a seed, an impression of a


concept or a notion that revolves around seemingly successful product or service. A
thought that needs some amount of commercial validation before it shapes self into
an opportunity. Opportunity is the care and nurturing that a gardener has to
endeavor for to turn the seed into a sapling and then allow it to grow into a tall tree.
The gardener ensures that it gets good soil, sunshine, proper environment and
protection from harsh rains or weather conditions. Example: Colonel Sanders tried
for many years to sell his chicken recipe idea but no one listened to him until he
repackaged it and KFC (Kentucky Fried Chicken) was born. The moral of this lesson
is that investors invest in business opportunities and ventures, not business ideas.

Now how do you turn a business idea into an opportunity? Well, you can turn a
business idea into a business opportunity by conducting market research and
feasibility study on your idea, writing a business plan and assembling a business
team that will work with you on your idea. Only then will such idea become an
opportunity that will attract investors and probably get the needed financing.
Successful entrepreneurs are good at turning ideas into opportunities.

Why most innovations are great big failures?

By Paynes lights, most innovations fail because their creators didnt ask tough
questions at the outset. He calls the problem putting the wow before the 'how.'"

Google Wallet. Intended as both a new convenience for consumers and a way to
harvest more customer data to drive targeted advertising, the product was
designed to replace your old leather billfold with an all-digital phone-based app.

Google Wallet had plenty of wow but the how has been its downfall. For one
thing, it involves digitizing credit cards, and the card companies demanded such big
fees for participating that Google reportedly lost money on every transaction. Phone

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companies, seeing Google Wallet as a competitor in the potentially lucrative mobile-


payments business, blocked the service.

The debacle has so far cost Google at least $300 million, and the executives who
led the team have left the company. Google Wallet is perhaps an idea ahead of its
time, though some of the structural factors impeding its success will be hard to ever
overcome, Payne writes. But for now, its a great case study in what can go
wrong with any companys world-beating idea when too many tough questions go
unansweredor unaskedat the start.

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.
An opportunity is a favorable set of circumstances that creates the need for a
new product, service, or business idea.
An idea, as we defined it, is Something imagined or pictured in the mind.
The difference is that an idea may or may not represent an opportunity.
An opportunity is attractive, durable, timely, and is anchored in a product or
service, which creates or adds value for its buyer or end user.
Jeffrey Timmons

Four Essential Qualities of an Opportunity

Attractive Opportunity: First and foremost, your idea needs to be attractive to your
target customers who will buy your idea. You first you need to identify who your
target customers are for this idea to work. The idea must also be attractive in the
industry in which it is going to compete. When I say attractive I do not mean just
aesthetics and a cool look and feel. I am also referring to the idea itself. Does it
create excitement? Does it have an attractive price point? Will the quality and ease
of use meet or exceed the users expectations? Is it unique? Does it have attractive
features and benefits? Basically, what about your idea would make people want to
buy it?

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Durable: Durability of an idea from a business standpoint means that it can last as a
business. A PRODUCT and a BUSINESS are two very different things. Businesses
create products, but a whole business built around one product that has little
scalability is pretty much a dead end. A scalable product can penetrate multiple
markets and sometimes industries with many ways to grow. A perfect example is
the invention of the microfiber textile. Some may see this as just a rag for cleaning
thus just a cleaning product. But it can also be cut into the shapes for clothing,
embroidered with corporate branding, and BOOM! Now that same rag is sold in the
clothing departments with minimal change to the textiles manufacturing and
production processes.

Creates Value: This is obviously one of the most important factors to generate sales.
Your idea must create value in order for people to purchase it, thus generating
revenue for your business to be sustainable. A big consideration here is the cost of
the idea in relation to the value it creates for the customer. If it costs more than the
value of the pain you are solving, then people will not want to buy it, aka willingness
to pay. Recently, consumers have been facing this issue with high-end smart
watches. They have a $700 phone in their pocket, so do they really want to spend
another $200-$400 to read a text on their wrist? Is the time they save from having
to pull their phone out of their pocket really worth $400? The watches do much
more than that, but the mass market does not see things the same way as the
innovators did. This is common in the early adoption stages, where products are
looked at through a very simplified lens by the mass consumer. However, now that
the prices have come down, more people are adopting this technology now that the
price is beginning to match the perceived value. So, again, does your product create
perceivable value that is affordable? Do some research and talk to people in your
target markets. Its amazing how much you can learn if you just ask the right
people.

Timely: Timely can get a little tricky as this is really an area of economics,
demographics, psychographics, and various other externalities. Basically, this
quality comes down to the question, Is this the right time for my idea? When
analyzing this, it is always best to look at various trends. Major trends to consider
are economic trends, social trends, technological trends, and industry trends.

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.

OPPORTUNITY IDENTIFICATION

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The first approach to identifying opportunities is to observe trends and study how
they create opportunities for entrepreneurs to pursue. There are two ways that
entrepreneurs can get a handle on changing environmental trends:
They can carefully study and observe them.
They can purchase customized forecasts and market analyses from
independent research firms.

Economic factors in trend:

When looking at economic factors and how they affect opportunities, first you
should evaluate who has money to spend.

When incomes are high in a particular group or there is disposable money available,
people are more willing to buy products and services that enhance their lives. A
great example of this would be the teen and pre-teen market. When kids have
money, they buy stuff. Products and services such as designer clothing,
downloadable music services, new smart phones and all the other things that these
kids buy are a huge market and therefore have opportunistic possibilities. Another
gigantic market is the aging baby boomers. These folks have spent a lifetime saving
money and preparing for their retirement and they have disposable income.

Social Factors in trends

An understanding of the impact of social forces on trends and how they affect new
product, service, and business ideas is a fundamental piece of the opportunity
recognition puzzle. Often, the reason that a product or service exists has more to do

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with satisfying a social need than the more transparent need the product fills. The
proliferation of fast-food restaurants, for example, isnt primarily because of
peoples love of fast food but rather because of the fact that people are busy and
often dont have time to cook their own meals. Similarly, social networking sites like
Facebook and Twitter arent popular because they can be used to post information
and photos on a Web site. Theyre popular because they allow people to connect
and communicate with each other, which is a natural human tendency.
Changes in social trends alter how people and businesses behave and how they set
their priorities. These changes affect how products and services are built and sold.

Technological factors:

Given the rapid pace of technological change, it is vital that entrepreneurs keep on
top of how new technologies affect current and future business opportunities. Entire
industries have emerged as the result of technological advances. Airstrip
Technologies, a recent start-up, enables doctors to monitor critical patient
information remotely on a smart-phone or computer. The companys founding was
motivated by a desire on the part of doctors to stay in closer contact with their
critical care patients while away from the hospital and while those patients are
receiving treatment in locations outside a hospital. Advances in wireless
technologies made the system possible. In most cases the technology isnt the key
to recognizing business opportunities. Instead, the key is to recognize how
technologies can be used and harnessed to help satisfy basic or changing needs.
For example, OpenTable.com is a Web site that allows users to make restaurant
reservations online and now covers most of the United States

Political Factors:

Political change also engenders new business and product opportunities. For
example, global political instability and the threat of terrorism have resulted in
many firms becoming more security conscious. These companies need new
products and services to protect their physical assets and intellectual property as
well as to protect their customers and employees. The backup data storage
industry, for example, is expanding because of this new trend in the tendency to
feel the need for data to be more protected than in the past. An example of a start-
up in this area is Box.net, which was funded by Mark Cuban, the owner of the Dallas
Mavericks. Box.net allows its customers to store data offsite on Box.net servers,
and access it via any Internet connection.

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 change.
Many companies have been started by people who have experienced a
problem in their own lives, and then realized that the solution to the problem
represented a business opportunity.

GAPS IN THE MARKETPLACE

Prepared by Neelam Rawat


RCA 204, Innovation & Entrepreneurship

A third approach to identifying opportunities is to find a gap in the


marketplace.
A gap in the marketplace is often created when a product or service is
needed by a specific group of people but doesnt represent a large enough
market to be of interest to mainstream retailers or manufacturers.

CRITERIA TO SELECT A PRODUCT IN ENTREPRENEURSHIP

There are three basic stages/steps involved in product/venture selection. These are
idea generation, evaluation and choice.

Idea Generation: Product ideas or investment opportunities come from


different sources such as business/financial newspapers, research institutes,
consulting firms, natural resources, universities, competitors. etc
The starting point for idea generation could be a simple analysis of the
businesss strengths and weakness. Ideas could also be generated through
brainstorming, desk research and various types of management consensus
procedures.

Evaluation: Screening of the product ideas is the first step ill evaluation. Such
criteria as potential value of the product, time money and equipment
required, fitting of potential product into the businesss long range sales plan
and availability of qualified people to handle its marketability need be
thoroughly considered.

Each identified product/investment opportunity needs to be adequately


evaluated. A pre-feasibility study of the product market, technical and
financial aspect is necessary at this stage to have a clear picture of the
associated cost and benefits. A pre-feasibility is a preliminary version of a
feasibility study. It is similar to a feasibility study except that it is less
detailed. It is usually carried out for large and complex product/project to
determine whether to proceed to the more elaborate feasibility study.

Choice: A choice is made of product which has been found to be commercially


viable, technically feasible and economically desirable. At this stage,
necessary machineries are set in motion.

In selecting product for your business venture, the following factors must be taken
into consideration:

1. Supply-gap: The size of the unsatisfied market demand which constitute a


source of business opportunity will dictate, to a great extent the need to
select a particular product. The product with the highest chances of success
as reflected in its demand will be selected. In essence, there must be existing
obvious demand for the selected product.

Prepared by Neelam Rawat


RCA 204, Innovation & Entrepreneurship

2. Fund: The size of the funds that can be mobilized is another important factor.
Adequate fund is needed to develop, produce, promote, sell and distribute
the product selected.

3. Availability of and Access to Raw Materials: Different products require


different raw materials. The source quality and quantity of the raw materials
needed are factors to be seriously considered, Are the raw materials available
in sufficient quantities? Where are the sources of raw materials located? Are
they accessible? Could they be sources locally or imported? Satisfactory
answers should be provided to these and many other relevant questions.

4. Technical Implications: The production process for the product needs to be


considered. There is need to know the technical implications of the selected
product on the existing production line, available technology and even the
labour force. The choice of a particular product may require either acquisition
of the machineries or refurbishing of the old ones. The product itself must be
technically satisfactory and acceptable to the user.

5. Profitability/Marketability: Most often, the product that has the highest profit
potential is often selected. However, a product may be selected on the basis
of its ability to utilize idle capacity or complement the sale of the existing
products. The product must be marketable.

6. Availability of Qualified Personnel: Qualified personnel to handle the


production and marketing of the product must he available. The cost of
producing the product must be kept to the minimum by reducing wastages.
This is achievable through competent hands.

7. Government Policies: This is quite often an uncontrollable factor. The focuses


of government policies can significantly influence the selection of product. For
instance, a package of incentives from government for a product with 100%
local input contents can change the direction of the businesss R & D and
hence the product selected.

8. Government objectives: The contributions of the product to the realization of


the companys short and long range objectives must be considered before
selection. For instance, the company goal maybe the achievement of sale
growth, sales stability or enhancement of the companys social value.

Causes of Product Failure

A wrong choice when made, often leads to product failure. Product failure may be
caused as a result of one or combination of the following:

Management oversight during the basic planning stages initial research


may be either inadequately done or bungled in the interpretation.
Subtle changes in the market. For instance, competitor may introduce a
competing product into the market unexpectedly.
Lack of sound market appraisal

Prepared by Neelam Rawat


RCA 204, Innovation & Entrepreneurship

Product problems and defect e.g. the manufacturing of a product that is too
costly or too complicated.
Inadequate marketing support. For Instance, the company may have rated
the product so high in the market that they cut back on promotion.
Lack of consumer education about the product.

Product Modification

Product selection is one thing, the sustainability of the product in the market is
another thing entirely. There need to at least stabilize the sale of the product. This is
where product modification comes in because of the dynamic nature of the business
environment. However, the technique to use to modify a product is dependent upon
the circumstance of the product in relation to the buyer. There are some possible
alternatives of product modification, namely:

Quality improvement which aims at strengthening the competitive position


of the product. The improvement may be in the appearance or end use.
Feature improvement- which is to increase the number of real or imagined
product benefits.
Style improvement aims at improving the aesthetic appeal of the product
rather than its functional performance.
Service improvement e.g. technical advice, faster supply, breaking bulk, etc.
Often used by smaller companies competing with large ones.
Promotional benefits e.g. giveaways competitions, etc. is used to add value to
the product.

Conducting Feasibility Study

Starting a new business project is inherently risky because there is no guarantee


that a new company, product or service will be profitable. A feasibility study is an
analysis that attempts to assess whether a new project has the potential to
succeed. Feasibility studies are commonly used in the early stages of planning new
ventures to help managers decide whether to go forward with new projects.
Feasibility studies technically aren't required to launch new ventures, but they can
provide valuable insights that help managers make better decisions and avoid
costly mistakes.

Prepared by Neelam Rawat