Unit 2: Developing Business Ideas LH 5

Identifying and recognizing opportunities-

observing trends and solving problems,
personal characteristics of the
entrepreneur, techniques for generating
ideas, encouraging and protecting new
ideas; linking creativity, innovation and
entrepreneurship.
 Identifying and recognizing opportunities
• An opportunity is a chance to take advantage of a situation.
• Entrepreneurship is all about business opportunity.
• Business opportunities are the favorable conditions or situations
that are seen in the external environment that creates a need for
a new product, service, or business.
• Business opportunities are located in the external environmental
factors like economic, socio-cultural, political-legal,
technological factors.
• The entrepreneurs need to spot opportunities in these factors and
forces in the changing environment.
• Opportunity is an attractive project idea which is the basis of
investment decision of an entrepreneur.
• Alert and smart entrepreneurs can identify and recognize
opportunities everywhere and they can turn it into a successful
business.
• Finding out the possibilities of a business or industry is
generally regarded as identification of business opportunity.
• Entrepreneurs generally have different possibilities and
select only highest rewarding possibility for execution.
• Thus, a business possibility may take the shape of business
opportunity if it proves as commercially viable.
• The key to opportunity recognition is to identify a product
or service that people need and are willing to buy, not one
that an entrepreneur wants to make & sell.
• The main three approaches entrepreneurs can use to
identify an opportunity are as under,
A. Observing Trend
B. Solving a Problem
C. Finding Gaps in Marketplace
A. Observing Trends
The first approach to identify opportunities is to observe the economic
trends, social trends, technological advances, political actions and
regulatory changes and study how they create opportunities for
entrepreneurs to pursue. How entrepreneurs study these factors to help
them spot opportunity, is explained below,
i. Economic Forces
It includes, state of economy, level of disposable income, consumer
spending pattern, global economy, the state of business cycle, national
income, distribution of income, monetary policies, fiscal (tax) policies,
balance of payment, global economy, structure of industry, etc.. These
economic factors can help or hinder the functioning of the venture.
ii. Social Forces
It includes, values, beliefs, attitudes & customs of people in the society,
social & cultural trends, demographic changes, social concerns like
environment pollution, consumerism, family structure, role and status of
women, educational level, awareness, work ethics, consciousness of
rights, etc.. Changes in social trends alter how people & business
behave and how they set their priorities.
iii. Technological Advances
It includes equipments, techniques and procedures
for transformation of various inputs into outputs.
Technological and scientific advancement provide
opportunity and help people to perform their work
in more convenient way.
iv. Political Action and Regulatory Changes
It includes the constitution of the country,
philosophy of political parties, attitude of political
& government leaders & legislators, political
stability, law & order situation, etc.. Entrepreneurs
must identify, evaluate & respond to important
political and legal issues.
B. Solving a Problem
Different problems can be recognized by observing the challenges
people encounter in their daily lives & through more simple
means, such as intuition, serendipity, or chance. There are many
problems that are yet to be solved and noticing problems can lead
to the recognition of business ideas. Many people experience
problem in their own lives, & then realized that the solution to the
problem represent a business opportunity.
C. Finding Gaps in the Marketplace
Sometimes there are several gaps in the existing products and
services which are already available in the market. For example,
no fitness centers or gym that is open 24 hours a day, generally
they are open at morning and evening times, which may be
considered a gap in fulfilling the market demand. Thus finding a
gap may also act as an idea for entrepreneurial opportunities.
Personal Characteristics of the Entrepreneur
• Researchers have identified several characteristics that tend to
make some people better at recognizing opportunities than others.
Some specific characteristics shared by those who excel at
recognizing an opportunity are pointed below,
• 1. Motivator 11. Action Oriented
• 2. Risk-bearer 12. Prior Experience
• 3. Organizer 13. Cognitive Factors
• 4. Innovator 14. Social Networks
• 5. High Achiever 15. Creativity
• 6. Dynamic Agent
• 7. Future Oriented
• 8. Tolerance of Ambiguity
• 9. Sense of Urgency
• 10. Desire for Independence
 Techniques for Generating Ideas

• More ideas are identified than opportunities. Ideas are the basis of new
business venture. Thus entrepreneurs should choose appropriate method
of generating new ideas. Some common methods of idea generation are,
• 1. Brainstorming
• It is an unstructured/less formal method of generating new ideas through
group creativity.
• A group of people meet together to generate ideas with focus on specific
product or market area.
• In this technique freewheeling (not limited by rules) of idea is
encouraged, wilder ideas are considered better, quantity in ideas is
encouraged, no criticism is allowed, no one dominates the discussion,
combination and improvement of ideas are encouraged.
• All ideas are recorded, information are pooled, judgments are derived
and consensus is achieved.
• (Reverse Brainstorming - Similar to brainstorming except criticism
is allowed)
• 2. Focus Group Technique
• This is a structured technique for making decisions
where members are invited and familiarized with new
venture related issues to be solved.
• A moderator leads the group through open and in-
depth discussion.
• Group members carefully listen & study the issues.
• They are given 5 to 10 minutes of time to work
independently to generate and write down their ideas.
• Then they describe and clarify their ideas to other
group members.
• Group members vote in order to reach an agreement.
• 3. Library and Internet Research Technique
• Best ideas emerge when general idea is merged with
extensive library and internet research. Best approach to
utilizing a library is to discuss your general area on interest
with a reference librarian, who can point out useful
resources, such as industry-specific magazines, trade journal
on a topic that can spark new idea.
• Surfing the Google or Yahoo in the internet in your topic of
interest may result in e-mail alerts, update of press release,
news article and blog posts based on your topic.
• 4. Problem Inventory Analysis
• It resembles focus group technique in generating new
product ideas. Instead of generating new ideas themselves,
consumers are provided with list of problems in a general
product category, and then asked to have discussion over it
and it ultimately results in a new product idea.
• 5. Others
• a. The Delphi Technique: It is a systematic
forecasting method that involves structured
interaction among group of experts on a subject.
• The experts answer questionnaires in two or more
rounds, they exchange ideas & converge towards the
common idea.
• b. Checklist Method: It is a method in which new
ideas are developed through a list of related issues
or suggestions.
• The entrepreneur can use a list of questions to guide
the direction of developing entirely new ideas.
• c. Big Dream Approach: New idea is developed by “thinking
big” through dreaming about problem and its solution.
• d. Attribute listing: New idea is developed by looking at positive
and negative aspects of an item or problem from a variety of view
points & areas of improvement are recognized.
• e. Scientific Method: New idea is developed through inquiry and
testing. It involves defining problem, gathering & analyzing data,
developing & testing alternative solution, and choosing the best
one.
• f. Forced Relationship: Forced relationship or forced analogies
(resemblance) are comparing two items that are seemingly
unrelated. It involves joining totally different ideas to come up
with a fresh idea.
• g. Value Analysis: It develops methods for maximizing value to
the entrepreneur and the new venture. Regularly scheduled times
are established to develop, evaluate and refine ideas.
 Encouraging and Protecting New Ideas
• Creative ideas are known as intellectual properties. They are any product
of human intellect that is intangible but has value in the marketplace.
Entrepreneurs should take following steps to encourage and protect new
ideas.
• Step 1: Establishing a Focal Point for Ideas
• Some firms encourage, collect and evaluate ideas by designating a
specific person to screen and track ideas. Another approach is to establish
an idea bank or vault, which is a physical or digital repository. Some
firms encourage employees to keep journals of their ideas.
• Step 2: Encouraging Creativity at the Firm Level
• Creativity is the process of generating a novel or useful idea. It is the raw
material that goes into innovation. There may be hundreds of creative
ideas but only one may be implemented. Creativity can be encouraged or
discouraged at the firm level. Creative outputs of employees are affected
by the extent to which an organization encourages and rewards creativity.
Creativity can be encouraged at the Firm Level with
the help of following points

• a. Develop an Acceptance of Change

• b. Encourage New Ideas
• c. Permit More Interaction
• d. Tolerate Failure (DOUBT KILLS MORE DREAMS THAN FAILURE EVER WILL)
• e. Provide Clear Objectives and the Freedom
to Achieve Them
• f. Offer Recognition
• Step 3 Protecting Ideas from Being Lost or Stolen
• Creativity is the production of novel, valuable and useful idea or
doing something for the first time by creating something entirely
new. Scientists, poets, writers, artists, inventors, etc. have high
creativity talent. Their creation is an intellectual property which is
intangible but has value at market place. It can be protected through
tools such as patents, trademarks, copyrights and trade secrets.
• Following three steps should be taken to protect the idea generated,
– Step 1: Put the idea into a tangible form
– The idea should be put into a tangible form by either entering
into a physical idea logbook or saved on a computer disk and
dated. While entering in a physical logbook, make sure it is
bound properly and do not look like pages have been added
lately. Make all entries in ink and have them witnessed or even
notarize it. Such an idea may qualify as a ‘property right’ or
‘trade secret’ and can be legally protected under a variety of
statutes.
– Step 2: Record in a Physical Idea Logbook or Save in a
Computer File
– The idea, whether recorded in a physical idea logbook or
saved in a computer file, should be secured. Firm wants
new ideas to be discussed, so a certain amount of openness
in the early stages of refining business idea may be
appropriate. But if the idea has considerable potential and
may be eligible for patent protection, then access to the
idea should be restricted. Ideas stored on a computer
network should be password protected.
– Step 3: Keep as Intellectual Property or Voluntary
Disclosure
– Avoid making unintentional or voluntary disclosure of an
idea in a way that prohibits your claim to exclusive rights.
Intellectual property laws seek to protect and reward the
originator of the idea as long as it is secret and try to
protect the ideas.
• (T A EDISON FAILED THOUSANDS OF
TIMES BEFORE HE FOUUND A
SOLUTION FOR THE LIGHT BULB.
JAMES DYSON HAD OVER 5000 FAILED
PROTOTYPES FOR HIS VACUUM
CLEANER BEFORE HE FOUNDA
MARKETABLE VERSION)
 Linking Creativity, Innovation and Entrepreneurship
• Creativity, innovation & entrepreneurship are vital
for organization to successfully survive & thrive in
today’s dynamic & competitive global marketplace.
• Creativity requires ‘novelty’ & novelty requires
originality & newness, thus creativity is the ability to
come up with new & original ideas, or new & unique
solutions to problems.
• It refers to the ability to combine ideas in a unique
way or to make unusual associations between ideas.
• It is the ability to develop unique ways to work or
novel solutions to problems.
• It is function of knowledge, imagination &
evaluation.
• Innovation is doing something new.
• It is the process of taking a creative idea & turning it
into a useful product, service or work method.
• It is the transformation of creative ideas into useful
application.
• It implies doing some new activity, producing new
product, bringing in a new idea or implementing a new
technology.
• Innovation gives new capabilities to existing resources.
• It means doing things in a new & better manner, creating
new market, new methods of production, etc. that may
result in increased productivity, improved product
quality, new products for consumers, reduced production
cost & increased productivity.
• Generally creativity and innovation are understood to have the same meaning
but both have different meanings.
• Innovation is conversion of creative ideas into profitable practice whereas
creativity is a pre-requisite of innovation.
• Creativity may not necessarily be useful but innovation is the conversion of
ideas from the creative process into a benefit.
• This can include new or improved products, services, processes or social causes.
• Thus innovation certainly requires creativity, but to be called an innovation it
must be useful & add value.
• Creativity is the ability & opportunity to develop new ideas, while innovation is
the transfer of new ideas in new organization, new product, new service, new
process or new method of production.

• Entrepreneurs need new ideas and ideas seldom materialize accidentally.

• Ideas require proper imagination, thinking & perception.
• Imaginative people germinate ideas, nurture them, & develop them successfully.
• There is a close relationship among creativity, innovation and entrepreneurship.
Entrepreneurship essentially means innovation and creativity. Without creativity
and innovation , entrepreneurship is useless and vice versa.
• Creativity results in production of new ideas, innovations ensures
materialization of the idea into a business opportunity and the
entrepreneur creates value in the marketplace by exploiting the
opportunity commercially.
• The entrepreneur is therefore instrumental in linking creativity,
innovation and entrepreneurship by displaying a high propensity
(tendency/inclination) for both creativity and opportunity perception.
• It is necessary to encourage creativity in the organization, to develop
a positive attitude towards the change, to accept the idea that comes
from lower levels of the organization, to motivate employees to
greater interaction between each other, to tolerate failure, to allow
people to have freedom of achieving the goals and to reward
creativity.
• Entrepreneurs are willing to take action, risk and sacrifice to create
something that provides value and improves people lives.

• (Without notion of creating wealth, creativity and innovation

can’t find a place in the market.)