Because learning changes everything.

Chapter Four
Entrepreneurs and Ideas:
The Basis of Small Business

Copyright 2021 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
 Because learning changes everything. ®

Learning Objectives:
LO 4-1 Identify strategies for innovation in your business.
LO 4-2 Recognize the sources of opportunity entrepreneurs draw on to get
business ideas.
LO 4-3 Understand how creativity methods can help business owners
recognize new opportunities.
LO 4-4 Understand the five pitfalls that hinder innovation.
LO 4-5 Identify how to screen ideas for business potential.
LO 4-6 Describe how to construct a business model canvas to assess the
feasibility of your business idea.

4-2
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education
 Ideas, Opportunities, and Business

Opportunity recognition and entrepreneurial alertness help identify

good opportunities.
The opportunity identification process assesses whether the situation is
traditional or unexpected.

Access text alternative for this image.

Source: Adapted from C. M. Gaglio and J. A. Katz, “The Psychological Basis of Opportunity Identification: Entrepreneurial Alertness,” Small Business Economics 16, no. 2,
© McGraw-Hill Education (March 2001), p. 99. 3
 Ideas, Opportunities, and Business - Strategies

Doing the same thing as An incremental strategy

others, is pursuing an offers a slightly better way to
imitative strategy. do something.

A radical innovation
strategy presents a
different way to do things.

© McGraw-Hill Education 4
 Ten Sources of Business Ideas

1. Work/personal experience. 6. Magazines.

2. A similar business. 7. Idea sites.
3. Chance – retail arbitrage. 8. Side gigs.
4. Family and friends. 9. Make and sell, locally or online.
5. Education or expertise. 10. Going online to spot trends.

© McGraw-Hill Education 5
From Ideas to Opportunities through Creativity - SCAMPER

A pioneer in the field of creativity, who first coined

the word brainstorming, invented SCAMPER.
• What opportunities result from substituting or
replacing something that already exists?
• What separate products, services, or businesses
can you combine to create a distinct business?
• What could you adapt from other industries?
• What could you make more noticeable or different
in some way from competitors?
• What other uses might there be?
• What could you get rid of that would eliminate
something the customer has to do?
• What can you rearrange in the way your product
or service appears, or the way businesses in your
industry usually look or are decorated or located?

© McGraw-Hill Education Source: Michael Michalko, Thinkertoys: A Handbook of Business Creativity (Berkeley, CA: Ten Speed Press, 1991). 6
 From Ideas to Opportunities through Creativity

Thinking of other ways to be creative.

• Creative business owners question and challenge the way things
appear, to see if they can find a new way of doing things.
One process for organizing creative thinking consists of four steps.
• Preparation – explore problem/opportunity from all directions.
• Incubation – think about it in a “not-conscious” way.
• Illumination – bring ideas together to spark new insights.
• Verification – test the idea and reduce it to its most exact form.
Another variant is to use painstorming and ask people for pains or
aggravations they face in a situation you choose.

© McGraw-Hill Education 7
 Avoid Pitfalls

Identifying the wrong problem.

Judging ideas too quickly.

Stopping with the first good idea.

Failing to act.

Obeying rules that do not exist.

© McGraw-Hill Education 8
 Make Sure an Idea is Feasible

After screening, move to the “next-stage” issues, like financing.

• In general, the next step is to test feasibility.
• The extent your idea is viable and realistic.
• The extent you are aware of internal and external forces.
Business models are ways to identify and organize key information on
organizations and how they achieve their goals.

© McGraw-Hill Education 9
 The Business Model Canvas Approach

1. Customer
segment.
2. Problem – pain
and gain.
3. Solution.
4. Value
proposition.
5. Channels.
6. Customer
relationships.
7. Revenues –
freemium.
8. Key resources.
9. Key activities.
10. Key partners.
Access text alternative for this image. 11. Costs.

© McGraw-Hill Education 10
 Figure 4.7: Pet Élan’s Business Model Canvas

To analyze, we
compare the fit by
customer segment to
the value proposition,
problem, and
solution.
The four should
strongly reflect one
another and reflect
something the
customer will buy.

Access text alternative for this image.

© McGraw-Hill Education 11
 Ways to Keep On Being Creative

Keep yourself in an innovative state of mind.

• Read magazines or trade journals outside your area.
• Invite someone new to a meeting where you are solving a problem or
searching for a new opportunity – try a supplier or a friend.
• Have a “scan the environment” day to discuss trends.
• Try a mini-internship, spending a day with a colleague at their work.
• Put yourself in the customer’s shoes to see what frustrates them.
• Redesign your work environment to give you a new outlook.

© McGraw-Hill Education 12