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Entrepreneurship: Successfully
Launching New Ventures

Sixth Edition, Global Edition
Chapter 2
Recognizing
Opportunities and
Generating Ideas
Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Learning Objectives
2.1 Explain the difference between opportunities and ideas.
2.2 Describe the three general approaches entrepreneurs use to identify
opportunities.
2.3 Discuss the personal characteristics of entrepreneurs that contribute to their
ability to recognize business opportunities.
2.4 Identify and describe techniques entrepreneurs use to generate ideas.

3
Identifying and recognizing Opportunities
An opportunity is a
favorable set of
circumstances that
creates a need for a new
product, service, or
business.
entrepreneurs
recognize an
An idea is a thought, an opportunity
impression, or a notion.
An idea may or may not
meet the criteria of an Getty Images
opportunity. 2a. What is an opportunity?

4
Ventures start in two ways

Externally stimulated Internally stimulated
• Decide to start a business • Recognize problem or
• Search for opportunity opportunity gap
• Recognize opportunity • Creates a business
• Start a business Ashish Rangnekar, started BenchPrep in 2009 when he was preparing for
the GMAT in New York City. It was difficult for him to find time to study
while working a full-time job, and was forced to lug around heavy test prep
How did Jeff Bezos start Amazon? Jeff Bezos quit his job textbooks everywhere he went to take advantage of any free time. He
at an investment bank in 1994 and moved to Seattle, talked to his friend about the problem. They decided to develop a mobile
Washington, to open a virtual bookstore. Working out of app for GMAT prep; this was the first ever test prep app of any kind for the
his garage with a handful of employees, Bezos began iPhone. More than 1,000 test takers purchased the app in the first month
developing the software for the site, which he called which helped them immediately realize there were likely many more people
Amazon.com. It sold its first book in 1995 who could benefit from an interactive, personalized learning experience on
their mobile devices.
5
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. As the market grows, firms enter and try to establish a
profitable position. At some point, the market matures, and the
window of opportunity closes.
Yahoo! the first search engine Google Bing

1995 1998 27% of market share

What is an Opportunity? (2 of 2)
Figure 2.1 Four Essential Qualities of an Opportunity
1. Attractive – is there a large market

that can earn profit?
2. Timely – is it needed now?
3. Durable – will the need for the
product / service continue or is it a
fad?
4. Adds value for the end user

Figure 2.2 Three Ways to Identify an Opportunity

First Approach: Observing Trends
Observing Trends
– Trends create opportunities for entrepreneurs to pursue.
There are two ways
– The most important trends are (PEST): that entrepreneurs can
▪ Economic forces get a handle on
changing
▪ Social forces environmental trends:
• They can carefully
▪ Technological advances study and observe
▪ Political and regulatory changes them.
• They can purchase
– It’s important to be aware of changes in these areas. customized
forecasts and market
analyses from
independent
research firms.
First Approach: Observing Trends

First Approach: Observing Trends (2 of 2)
Figure 2.3 Environmental Trends Suggesting Business, Product, or Service Opportunity Gaps
There are two caveats to keep in mind.

1. First, it’s important to
distinguish between trends and
fads. New businesses typically do not
have the resources to ramp up fast
enough to take advantage of a fad.
2. Second, even though we discuss each

trend individually, they are
interconnected and should be
considered simultaneously when
brainstorming new business ideas.

Trend 1: Economic Forces
Economic trends help determine areas that are ripe for
new start-ups and areas that start-ups should avoid.
Example of Economic Trend Creating a Favorable
Opportunity
• When the economy is strong , people have more money to
spend and are willing to buy discretionary products and
services that enhance their lives.
• A weak economy favors start-ups that help consumers save
money.
• An example is GasBuddy.com, a company started to help
consumers save money on gas.
Trend 2: Social Forces
Social trends alter how people and businesses behave
and set their priorities. These trends provide opportunities
for new businesses to accommodate the changes. https://www.bbc.co.uk/programmes/p09yjm17
Examples of Social Trends • The proliferation of fast-food

restaurants isn’t primarily because
• Aging of the population. Baby Boomers currently 57-75 years old of people’s love of fast food but
• The increasing diversity of the population. because people are busy and often
don’t have time to cook their own
• Millennials entering the workforce. meals.
• Growth in the use of mobile devices. • Facebook and Twitter aren’t
popular because they can be used
• An increasing focus on health and wellness. to post information and photos but
• Increasing interest in “green” products because they allow people to
connect and communicate with
• Emphasis on clean forms of energy each other.
Trend 3: Technological Advances (1 of 2)
Advances in technology frequently create
business opportunities.
Examples of Entire Industries that
Have Been Created as the Result of
Technological Advances
• Computer industry
• Internet
• Biotechnology
• Digital photography
14
Trend 3: Technological Advances (1 of 2)

Advances in technology frequently create business opportunities.
1. Think how to harness technology to help satisfy basic or changing needs.

2. Once a technology is created, products often emerge to advance it.
3. Opportunities to help people perform everyday tasks in better or more
convenient ways.
H20Audio, a company that
Example: Rokit Boost makes waterproof housings
for the Apple iPhone and
An example is Rokit Boost, a high-end mobile accessories company that iPod.
makes smartphone cases, headphones, portable USB device chargers,
and Bluetooth speakers. Rokit Boost wouldn’t exist if it weren’t for the
advent of the smartphone.

Trend 4: Political Action and Regulatory
Changes (1 of 2)
Political and regulatory changes also provide the basis for
opportunities.
General Example
This happened with the passage of the affordable Care Act
in 2010. The provisions of the act yielded opportunities for
entrepreneurs to launch electronic records start-ups, apps to
help patients monitor their medication, and similar
companies.

Trend 4: Political Action and Regulatory Changes (2 of 2)
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.
Specific Example
Evolv Technology is a start-up that has assembled a
multidisciplinary team of experts to identify, invent, and
apply new technologies to meet current terrorism-related
threats.

17
Second Approach: Problem Solving
• 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 chance. Intuition is the ability 1991, Jay Sorensen:
to understand He stumbled upon a
serendipity is an
something problem by chance when
unsought, unintended,
instinctively, without
and/or unexpected, but
the need for
he spilled his coffee
fortunate, discovery because the disposable
conscious reasoning.
and/or learning cup was hot for his hand
"we shall allow our
experience that
intuition to guide us"
happens by accident.

Second Approach: Solving a Problem
Specific Example
Sometimes people aren’t able to
access energy to recharge their
smartphones for a period of time. A
number of companies have solved
this problem in innovative ways. An
example is the $70 Eton
BoostTurbin 2000, which is a
device that weighs less than four
ounces. It combines a battery with
a hand crank that provides enough
power to fully charge a typical
smartphone.
4. Explain how “solving a problem” can create a business opportunity.
19
Second Approach: Problem Solving

Entrepreneurs frame a problem differently than it’s
been thought of before, and then propose an
appropriate solution. The solution is often easier and
less expensive than traditional fixes
Solio
Advances in technology often result in

problems for people who can’t use the
Some problems are associated with emerging trends.
technology in the way it is sold to the
masses
Mirrors in elevators?
Third Approach: Finding Gaps in the
Marketplace (1 of 2)
• Gaps in the Marketplace
– 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 doesn’t represent a large enough
market to be of interest to mainstream
retailers or manufacturers.

Third Approach: Finding Gaps in the Marketplace (2 of 2)
Product gaps in the marketplace represent potentially
viable business opportunities.
Specific Example
Tish Cirovolo realized there were no guitars on the market
made specifically for females. To fill this gap, she started
Daisy Rock Guitars, a company that makes guitars just for
women and girls. Daisy Rock guitars are stylish, come in
feminine colors, and incorporate design features that
accommodate a woman’s smaller hand and build.

2nd Lecture
3
Personal Characteristics of the Entrepreneur
Opportunity recognition:
refers to the process of perceiving the Prior
possibility of a profitable new business Experience
or a new product or service
4 Characteristics
6. What is meant by opportunity Social Cognitive
recognition? for recognizing
Network opportunities Factors
There are 4 characteristics that tend to

make some people better at Creativity
recognizing opportunities than others
4
Personal characteristics of Entrepreneurs
Prior Industry Experience

Several studies have shown that prior experience in
an industry helps an entrepreneur recognize business Prior
opportunities. Experience
• By working in an industry, an individual may spot

a market niche that is underserved. 4
• It is also possible that by working in an industry, Social Characteristics Cognitive
Network for recognizing Factors
an individual builds a network of social contacts opportunities
who provide insights that lead to recognizing
new opportunities.
Creativity
7. In what ways does prior industry experience provide an entrepreneur an advantage in

recognizing business opportunities?

Prior Industry Experience (2 of 2)
• Prior Industry Experience
– It is also important to note that anecdotal evidence suggests
that people outside an industry can sometimes enter it with a
new set of eyes, and as a result innovate in ways that people
with prior experience might find difficult.
▪ For example, Elon Musk, the founder of Tesla, had no prior
experience in the auto industry.
▪ Debbie Fields, the founder of Mrs. Fields Cookies, had no prior
experience in the food industry.

6
Cognitive Factors
• Studies have shown that opportunity
recognition may be an innate skill or Prior
cognitive process. As if entrepreneurs Experience
have a “sixth sense” that allows them to

see opportunities that others miss. 4
• This “sixth sense” is called Social Characteristics Cognitive
Network for recognizing Factors
entrepreneurial alertness: which is opportunities
formally defined as the ability to notice
things without engaging in deliberate
search. Creativity
Alertness is largely a learned skill
people who have more knowledge of an area tend
to be more alert to opportunities in that area

7
Social Networks
• The extent and depth of an individual’s social
network affects opportunity recognition.
Prior
(those with extensive network will be exposed Experience
to more opportunities and ideas than people
with sparse networks).
• Solo entrepreneurs: those who identified their 4
Social Characteristics Cognitive
business ideas on their own Network for recognizing Factors
• Network entrepreneurs: those who identified opportunities
their ideas through social contacts
• Research results suggest that between 40%
Creativity
and 50% of people who start a business got
their idea via a social contact.
10.In what ways does an extensive social network provide an entrepreneur an advantage in
recognizing business opportunities?
Why weak-tie relationships lead to more new
Social Networks (3 of 3) business ideas than strong-tie relationships
Strong-Tie Relationships Weak-Tie Relationships

These relationships, which typically form These relationships, which form between
between like-minded individuals, tend to casual acquaintances, are not as apt to be
reinforce insights and ideas that people between like-minded individuals, so one
already have. person may say something to another that
sparks a completely new idea.
• Strong-tie relationship are characterized by frequent

interaction and form between coworkers, friends, and
spouses.
• Weak-tie relationships are characterized by infrequent
interaction and form between casual acquaintances.

Creativity (1 of 2)
• Creativity
– Creativity 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 down into five stages, as
shown on the next slide.

Ch 2 part 3

https://www.yout-ube.com/watch?v=NugRZGDbPFU
Creativity (2 of 2)
Figure 2.4 Five Steps to Generating Creative Ideas

Full View of the Opportunity Recognition Process
• Depicts the connection between an awareness of emerging trends and the personal
characteristics of the entrepreneur
The Boy Who Harnessed the Wind: Lessons for Entrepreneurs

https://www.experts.ng/blog/lessons-for-entrepreneurs/

https://www.yout-ube.com/watch?v=z-gBnBfGVZk
Techniques for
Generating Ideas
Customer Brain Backwards
Advisory Board TRIZ -storming Brainstorming
• Brainstorming
• Focus Groups
• Library and Internet Research Focus
Six
Role-play Group Thinking
• Day-In-The-Life Research Hats
• Customer Advisory Board

Library
Day-In-The-Life SCAMPER
and Changing
Research Internet Perspective
Research

5
Techniques for Generating Ideas
15.Describe the brainstorming process. Why is

Brainstorming “no criticism” the number one rule for
• Is a technique used to generate a large brainstorming?
number of ideas and solutions to problems

quickly.
• A brainstorming “session” typically involves
a group of people, and should be targeted to
a specific topic.
• Rules for a brainstorming session:
1. Withhold criticism
2. Freewheeling is encouraged (Encourage wild ideas)
3. The session should move quickly(Go for quantity over quality)
4. Leap-frogging is encouraged. (combine and improve ideas)
https://www.yout-ube.com/watch?v=09_JdhFA2W0 https://business.tutsplus.com/tutorials/what-is-the-definition-of-brainstorming--cms-27997

6

First half of the video in the link is enough
Focus Group https://www.yout-ube.com/watch?v=3TwgVQIZPsw
• A focus group is a gathering people, who
have been selected based on their common
characteristics relative to the issues being
discussed.
• These groups are led by a trained moderator,
who uses the internal dynamics of the group
environment to gain insight into why people
feel the way they do about a particular issue.
• Although focus groups are used for a variety
of purposes, they can be used to help
generate new business ideas.
16.Describe how a focus group is set up and how it is used to generate
new business ideas.

7
Library and Internet Research

• Libraries are an often underutilized source
of information for generating new business
ideas.
• The best approach is to talk to a reference
librarian, who can point out useful
resources, such as industry-specific
magazines, trade journals, and industry
reports.
• Simply browsing through several issues of a
trade journal or an industry report on a topic
can spark new ideas. https://www.thoughtco.com/using-a-library-1857187
17.Describe how library and Internet research can be used to generate

new business ideas.
Library and Internet Research (2 of 3)
Large public and university libraries typically have access to
search engines and industry reports that would cost thousands
of dollars to access on your own.
Examples of Useful Search Engines and Industry Reports
• BizMiner https://www.bizminer.com/
• ProQuest https://www.proquest.com/
• IBISWorld https://www.ibisworld.com/
• Mintel
• LexisNexis Academic

Library and Internet Research (3 of 3)
• Internet Research
– If you are starting from scratch, simply typing “new
business ideas” into a search engine will produce links
to newspaper and magazine articles about the “hottest”
and “latest” new business ideas.
– If you have a specific topic in mind, setting up Google
mail alerts will provide you with links to a constant
stream of newspaper articles, blog posts, and news
releases about the topic.
– Targeted searches are also useful.

Other Techniques
• Customer Advisory Boards
– Some companies set up customer advisory boards that
meet regularly to discuss needs, wants, and problems
that may lead to new ideas.
• Day-In-The-Life Research
– A type of anthropological research, where the
employees of a company spend a day with a customer.

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Entrepreneurship: Successfully

Launching New Ventures

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Identifying and recognizing Opportunities

opportunity. 2a. What is an opportunity?

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Identifying and recognizing Opportunities

Ventures start in two ways

Identifying and recognizing Opportunities

The term window of opportunity is a metaphor describing the time

Yahoo! the first search engine Google Bing

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

1. Attractive – is there a large market

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

There are two caveats to keep in mind.

2. Second, even though we discuss each

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Examples of Social Trends • The proliferation of fast-food

Identifying and recognizing Opportunities

Trend 3: Technological Advances (1 of 2)

1. Think how to harness technology to help satisfy basic or changing needs.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Second Approach: Problem Solving

• Sometimes identifying opportunities

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Second Approach: Problem Solving

Advances in technology often result in

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Personal Characteristics of the Entrepreneur

There are 4 characteristics that tend to

Personal characteristics of Entrepreneurs

Prior Industry Experience

• By working in an industry, an individual may spot

7. In what ways does prior industry experience provide an entrepreneur an advantage in

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Personal characteristics of Entrepreneurs

have a “sixth sense” that allows them to

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Personal characteristics of Entrepreneurs

Strong-Tie Relationships Weak-Tie Relationships

• Strong-tie relationship are characterized by frequent

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

The Boy Who Harnessed the Wind: Lessons for Entrepreneurs

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

• Customer Advisory Board

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Techniques for Generating Ideas

15.Describe the brainstorming process. Why is

number of ideas and solutions to problems

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Techniques for Generating Ideas

Copyright © 2019 Pearson Education, Ltd. All Rights Reserved.

Techniques for Generating Ideas