OPPORTUNITY RECOGNITION,

SHAPING AND RESHAPING

 ENTREPRENEUR
 Would-be entrepreneur have one of two things in their
minds:

 How do I come up with a good business idea?

 Is this idea big enough to make a successful business?
 DIFFERENCE BETWEEN IDEA AND
OPPORTUNITY
 Ideas are a dime a dozen. Opportunities are much more
important. An opportunity is an idea that’s passed the test
of planning. It has potential. You can implement it. An
opportunity has some of the following elements:

 Industry and market potential: look at market

structure, industry structure, growth rate, margins, costs,
etc.
 DIFFERENCE BETWEEN IDEA AND
OPPORTUNITY
 Economics: capital requirements, fixed costs, cash flow,
return on investment, risk.

 Competitive advantage: degree of control, barriers to

entry, availability of sufficient resources.

 Management team: people who know the industry, the

market, the operations, the logistics, the road to market.
 HOW DO I COME UP WITH A GOOD
IDEA

 Most successful ideas are driven by the entrepreneur’s

personal experience. They gain exposure to their fields
through their jobs.
HOW DO I COME UP WITH A GOOD
IDEA
 How does a student find a worthy idea????

 Start by looking inside yourself and deciding what you

really enjoy.
 What gives you energy?

 What can you be passionate about for the many years?

 FINDING YOUR PASSION

 Think long term…..

 Where would you like to be after 5 years or 10 years?

 School is a time of self discovery.

FINDING YOUR PASSION
 How do you go about finding your passion?
 There are two primary way

 Think deeply about all the things that give you joy.
 What do you do in your spare time?
 What are your hobbies?
 What type of newspaper and articles or internet blogs do
you read?
FINDING YOUR PASSION
 Some times it is difficult for people to be introspective
about what they love.

 In that case, their strength may be clearer to those who

know them well.

 The first place is to start from family.

 if parents are somewhat biased, then ask your friends,
teachers and former work associates.
FINDING YOUR PASSION
 If you truly want to be an entrepreneur, you will need to
make countless sacrifices.

 One of the first may be by-passing a higher paying job

for the opportunity to roll up your sleeves and gain
hands-on experience in your field of choice.
 IDEA MULTIPLICATION
 Discuss about your idea with your fellow co-founders,
trusted mentors, friends and family.

 Spend as much time as possible brainstorming your idea

with this group. These informal conversations help you
think through the idea and flesh it out.
 IDEA MULTIPLICATION
 Avoid becoming a cocktail-party.

 A cocktail party entrepreneur is all talk and no action.

 Anybody can be a cocktail party owner because it

doesn’t require any effort or commitment, just a few
people who are willing to listen.
 EVALUATING OPPORTUNITIES FOR
NEW BUSINESS
 IDEO, founded by Stanford engineering professor David
Kelley, is hired by leading corporations world-wide to
develop and design new products.

 IDEO found four basic steps for idea multiplication.

 IDEO

 Gather stimuli
 Multiply stimuli

 Create customer concepts

 Optimize practicality.
 GATHER STIMULI
 You can gather stimuli by a process called customer
anthropology. In which you can go with a team to
observe customers in action in their natural environment
and identify their pain points.

 You can also ask question and record information.

 But beware the leading question.!!!

 MULTIPLY STIMULI
 Do brainstorming…..

 Multiplying stimuli requires the team to take the inputs

of others and build upon it.

 All ideas should be heard and build upon because, even

if you don’t incorporate them into the final concept, they
might lead to new insights that are ultimately important
to the products competitive advantage.
 MULTIPLY STIMULI
 Brain writing is useful technique than brainstorming.

 Process is brainstorming, but the focus is on written

rather than verbal communication.

 Brain writing ensures that everyone has a chance to

contribute ideas.

 You can use flip chart process to for brain writing.

 CREATE CUSTOMER CONCEPT
 To create customer concept, build a mock-up of what
product will look like.

 This helps the team visualize the final product and see
which features / attributes are appealing, which are
detrimental, and which are nice to have but not
necessary.

 Keep in mind that mock-up doesn’t need to be functional

 OPTIMIZE PRACTICALITY
 In this stage, the team will identify those features that are
unnecessary, impractical, or simply too expensive.

 In this stage, the team will have to create greatest value

for customer by the deeper understanding of customer
need, want and demand.
 IS YOUR IDEA AN OPPORTUNITY
 There are five major areas that need to fully understand
prior to your launch:

1. Customers
2. Competitors
3. Suppliers & Vendors
4. The government
5. The broader global environment.
 THE CUSTOMER
 Break your customer down into three categories.

1. Primary Target Audience (PTA)

2. Secondary Target Audience (STA)
3. Tertiary Target Audience (TTA)
 TRENDS

 To considering trends, look at broader macro trends and

then funnel down to a more narrow focus on how those
trends affect your consumer group.
COMMON DEMOGRAPHIC/PSYCHOGRAPHIC
CATEGORIES
Demographics Psychographics
Age Social group( white collar, blue collar,
etc)
Gender Life style (materialistic, active, athletic
etc)
Household income Personality traits (worriers, Type A’s,
Shy, extroverted)
Family size/Family life cycle Values ( liberal, conservative, open
minded, traditional)
Occupation
Education level
Religion
Ethnicity
Nationality
Social class
Marital status
 TRENDS
 Trend affects the potential demand for your product or
service.

 Trends create new product/service categories or

emerging markets, that can be specially fruitful places to
find strong entrepreneurial opportunities.
 TRENDS
 Trends also occur in smaller market segments and may
be just as powerful as macro trends.

 According to Packaged facts, a market research

consultancy, the market for religious products (including
blockbuster movies, pop music, clothing, books and even
games and toys)
IMPORTANT TRENDS OVER THE LAST
50 YEARS
Trend Impact
Baby boom generation Pampers, rock n roll, television,
minivans, real estate etc

Personal computing Internet, media on demand, electronic

communication, electronic publishing.

Obesity Growth of diet industry, drain on

health care system, health club, home
gyms, changes in food industry

Dual income Child care, home-services.

Households House cleaning, prepared foods

 HOW BIG IS THE MARKET
 Trends suggests increasing market demand.

 Thus one of the question that distinguish ideas from

opportunities ask whether there is sufficient market
demand to generate the level of revenues necessary to
make this an exciting career option.
 HOW BIG IS THE MARKET
 An entrepreneur typically needs the new venture to
generate a minimum $600000 per year in revenue to
meet market rates on his her forgone salary of $70000
plus benefits.

 The larger your goals, the more important your market-

demand forecast.
 MARKET SIZE TODAY & INTO THE
FUTURE
 learning curve
 Market growth

 The S-curve
LEARNING CURVE
ADOPTION PROCESS
THE S-CURVE
 FREQUENCY & PRICE
 How often average customer buys our product or service
 How much he or she is willing to pay

 Elastic demand

 Inelastic demand

 Penetration pricing – classic mistake

 Finding the right price to charge is difficult

 Cost plus pricing

 MARGINS
 It is important to have higher gross margins early in the
venture’s life because operating costs during the early
years are disproportionately high due to learning curve.

 Another reason for keeping margins high is that new

venture will incur costs prior to generating sales
associated with these costs.
 MARGINS
 To keep cash flow positive, you need to make high
margins in early venture life.

 It typically takes three to five years for a firm to reach

stability and for operating costs to stabilize.

 If the net income margin is lower, it will be hard to

generate internal cash for growth.
 REACHING THE CUSTOMER
 Reaching the customer can be very difficult, even for the
most experienced entrepreneur.

 When the industry is consolidated and mature, large

product and food companies like Proctor & Gamble and
General Mills control much of the available shelf space,
due to their power and ability to pay the required slotting
fees.
 REACHING THE CUSTOMER
 One of the most overlooked keys to entrepreneurial
success is distribution. How do you reach the customer?

 It is important to understand the entire value chain for

the industry you are competing in.

 You need to lay out the distribution of your product from

raw materials all the way to the end customer.
 VALUE CHAIN
 A value chain is a set of activities that a firm operating in
a specific industry performs in order to deliver a
valuable product or service in the market.

 Value-chain analysis looks at every step a business goes

through, from raw materials to the eventual end-user.
The goal is to deliver maximum value for the least
possible total cost.
VALUE CHAIN
 PRIMARY ACTIVITIES
 Inbound logistics- involve relationships with suppliers
and include all the activities required to receive, store,
and disseminate inputs.

 Operations- all are activities required to transform

inputs into outputs.
 PRIMARY ACTIVITIES

 Outbound logistics- include all the activities required to

collect, store and distribute the out put.

 Marketing & Sale- activities inform buyers about

products and services, induce buyers to purchase them.
And facilitate their purchase.
 PRIMARY ACTIVITIES

 Service- include all the activities required to keep the

product or service working effectively for the buyer after
it is sold and delivered.
 SECONDARY ACTIVITIES

 Procurement- purchasing activities of inputs, or

resources, for the firm.

 Human resource management- consists of all activities

involved in recruiting, hiring, training, developing,
compensating(if necessary) dismissing or laying of
personnel.
 SECONDARY ACTIVITIES
 Technological development- pertains to the equipment,
hardware, software, procedures and technical knowledge
brought to bear in the firm’s transformation of inputs
into outputs.

 Infrastructure- serves the company’s needs and ties its

various parts together, it consists of function or
department such as accounting, legal, planning, public
affairs, government relations, quality assurance and
general management.
 SUPPLY CHAIN MANAGEMENT

 Supply chain management (SCM) is the management

of the flow of goods and services. It includes the
movement and storage of raw materials work-in-process
inventory, and finished goods from point of origin to
point of consumption. 

 The ultimate goal of SCM is to reduce inventory (with

the assumption that products are available when needed.)
SUPPLY CHAIN
 The difference between a value chain and a supply
chain

 is that a supply chain is the process of all parties

involved in fulfilling a customer request, while a value
chain is a set of interrelated activities a company uses to
create a competitive advantage. The idea of value chain
was pioneered by Michael Porter.
 THE COMPETITION
 To fully understand the competition, start with the
customer.

 How they currently fulfilling the need or want you

intended to fill?

 Find out market structure. (number and strengths of your

competitors.)

 Must identify direct competitors, indirect competitors

and substitutes.
THE COMPETITION
THE COMPETITION
THE COMPETITION

The competition
 SUPPLIERS & VENDORS
 Your suppliers can have tremendous power, and that will
directly affect your margins.

 For example, Microsoft, as the dominant operating

system and core software provider , and Intel, as the
dominant microprocessor supplier, have considerable
power over PC manufacturer.
 THE GOVERNMENT

 As an entrepreneur, you need to be aware of government

requirements and their impact on your business

 If the requirements are stringent, and the potential

margins you can earn are relatively low, it is probably
not a good opportunity.
 THE GLOBAL ENVIRONMENT
 What international customers fit within your PTA, STA,
and TTA

 How easy is it to reach them?

 When might you go international?

 Who is your international competitor?

 Have they entered your market yet?

THANK YOU
For patience