APT 2053

DEVELOPMENT AND MANAGEMENT

OF NEW ENTERPRISE

PROBLEM AND OPPORTUNITY: CREATING, SHAPING,

RECOGNIZING AND SEIZING
 When is an Idea an Opportunity
2–2

Entrepreneurship is the result of applying creativity and

innovation in exploiting opportunities in the market place.

Opportunity: Set of circumstances that profitably enables the

innovation of creative new products and services, processes or
business ventures
“If you can’t make a profit, you
don’t have a business opportunity.”

“If you can’t make a profit, you

can’t stay in business .”
 When is an Idea an Opportunity
2–3

 Real business opportunities have the following

anchors;
Create or add Fix a real Product or
significant value problem in the service is
to customers market pervasive

Robust market,
Experience that
margin and
matches the
profitability
opportunity
characteristics
 When is an Idea an Opportunity
2–4

Theory of Opportunity

1. Discovery Theory 2. Creation theory

- Context and behaviors.
- External factors in the
market - Actions, reactions,
experiments about new
- Government regulation,
products and services,
technology, customer
process, or entering new
preferences.
markets.
 The Role of Ideas
2–5

1. Ideas as Tools
 A good idea is nothing more than a tool in the hands of the
entrepreneur
 Findings a good idea is the first of many steps in the process
of converting an entrepreneur creativity into an opportunity.
2. The Great Mousetrap Fallacy
 Assume that success is possible if an entrepreneur can just
come up with a new idea.
3. Contributors to the Fallacy
 Tremendous psychological ownership attached to an
invention or to a new product.
 Pattern Recognition
2–6

1. The Experience Factors

 Time after time, experienced entrepreneurs exhibit an
ability to recognize patterns quickly and
opportunities while the idea is still taking shape.

2. Enhancing Creative Thinking

 Creative thinking is of great value in recognizing
opportunities, as well as other aspect of
entrepreneurship.
 Pattern Recognition
2–7

3. Approaches to Unleashing Creativity

 Since the 1950s, much has been learned about the workings
of the human brain
 Two sides of the brain process information a different ways
 Creativity process (brainstorming)

4. Team Creativity
 The creativity of a team of people is impressive, and
comparable or better creative solutions to problem evolving
from the collective interaction of a small group of people
have been observed.
 Pattern Recognition
2–8

5. Big Opportunities with Little Capital

 Dynamic free enterprise system, opportunities are

apparent to a limited number of individual

6. Real Time
 “Window of opportunity”- opportunities exists or created

in real time

7. Relation to Framework of Analysis

 Fit of the lead entrepreneur and management team
 Screening Opportunities
2–9

Opportunity Focus

 The screening process should not begin with strategy (which

derives from the nature of the opportunity), financial and
spreadsheet analysis, or estimations of how much the company
worth and who will own what shares.
 Many entrepreneurs who start business particularly those for
whom the ventures are their first-run out of cash faster than
they bring in customers and profitable sales.
 The reasons why this happen because, the entrepreneurs have
not focused on the right opportunity.
 Screening Opportunities
2–10

Criteria for Evaluating Venture

Opportunities
Industry and
Economics
Market
Competitive Advantages
Harvest Issues
Issues

Sustainability Management Team

Fatal Flaw Issue Personal Criteria

Strategic
Differentiation
 Screening Opportunities
2–11

Screening Criteria: The Characteristics of High-Potential Ventures

Industry and market issues

Market Market structure

Market size Growth rate

Market share attainable

Market capacity
(Year 5)

Cost structure
 Screening Criteria: The Characteristics of High-
Potential Ventures
2–12

Screening Criteria: The Characteristics of High-Potential Ventures

Economics
Breakeven/ cash
ROI Potential
flow
Capital Internal rate of
requirement return potential

Free cash flow Gross margins

Profit & Loss

 Screening Criteria: The Characteristics of High-
Potential Ventures
2–13

Screening Criteria: The Characteristics of High-Potential Ventures

Harvest Issues

Valuation
Value added
multiples and
potential
comparables

Exit
Capital market
mechanism
context
and strategy
 Screening Criteria: The Characteristics of High-
Potential Ventures
2–14

Screening Criteria: The Characteristics of High-Potential Ventures

Variable and
fixed costs

Competitive Degree of
Advantages Issues control

Entry
barriers
 Screening Criteria: The Characteristics of High-
Potential Ventures
2–15

Screening Criteria: The Characteristics of High-Potential Ventures

Management Fatal Flaw

Team Issues Issues

Industry and
Entrepreneuria
Technical
l Team
Experience

Intellectual
Integrity
honesty
 Screening Criteria: The Characteristics of High-
Potential Ventures
2–16

Screening Criteria: The Characteristics of High-Potential Ventures

Personal
criteria

Upside/
Goals and fit downside
issues

Opportunity
Desirability
cost

Risk / reward Stress

tolerance tolerance
 Screening Criteria: The Characteristics of High-
Potential Ventures
2–17

Screening Criteria: The Characteristics of High-Potential Ventures

Strategic Differentiation

Degree of fit Team

Service
Timing
management

Technology Flexibility

Opportunity
Pricing
orientation
Distribution
Room for error
channels
 Gathering Information
2–18

Finding Ideas
Factors suggest that finding a potential opportunity is most often a matter
of being the right person, in the right place, at the right time. Numerous
sources of information can help generate ideas.

1. Existing Business
Purchasing an ongoing business is an excellent way to find a new business ides.
Such a route to new venture can save time and money and can reduce risk as well.

2. Franchises
Franchising is another way to enter an industry, by either starting a franchise operation or
becoming a franchisee.
3. Patents
Patent brokers specialize in marketing patent that are owned by individual inventors,
corporation, universities or other research organizations to those seeking new commercially
viable products.
 Gathering Information
2–19

4. Corporations
 Corporations engaged in research and development often have inventions or
services that they do not exploit commercially.
5. Product Licensing
 A good way to obtain exposure to many product ideas available from
universities, corporation, and independent investors.
6. Non for profit research institutes
 These nonprofit organizations do research and development under contract to
the government and private industry as well as some internally sponsored R
&D of new product and process that can be licensed to private corporations for
further development, manufacturing, and marketing.
7. Universities
 A number of universities are active in research in the physical sciences and seek
to license inventions that result from this research either directly or through an
associated research foundation that administers a patent program.
 Conclusion
2–20

 The best opportunities often don’t start out that

way. They are crafted, shaped, molded and
reinvented in real time and market place.
 Trial and error or learning by doing alone, is not
enough for developing breakthrough ventures,
which require experience, creativity and
conceptualizing.