2222

Opportunity analysisOpportunity analysisOpportunity analysisOpportunity analysis

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Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

• After reading this chapter, you should have a good understanding of:

- The role of opportunities, resources, and entrepreneurs in successfully pursuing new ventures.

- The role of new ventures and small businesses in the U.S. economy.- Three types of entry strategies—pioneering, initiative, and adaptive—commonly used

to launch a new venture.• How the generic strategies of overall cost leadership, differentiation, and focus are used

by new ventures and small businesses.

• After reading this chapter, you should have a good understanding of:

- How competitive actions, such as the entry of new competitors into a marketplace, may launch a cycle of actions and reactions among close competitors.

- The components of competitive dynamics analysis—new competitive action , threat analysis, motivation and capability to respond, types of competitive actions, and likelihood of competitive reaction.

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What Is An Opportunity?What Is An Opportunity?What Is An Opportunity?What Is An Opportunity?

A belief that A belief that A belief that A belief that achievement achievement achievement achievement of that state of that state of that state of that state is possibleis possibleis possibleis possible

Recognizing a Recognizing a Recognizing a Recognizing a desired future desired future desired future desired future state involving state involving state involving state involving

growth or growth or growth or growth or changechangechangechange

OOOOPPPPPPPPOOOORRRRTTTTUUUUNNNNIIIITTTTYYYY

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Opportunity identificationOpportunity identificationOpportunity identificationOpportunity identification

• How do we search for the right venture?- Never a straightforward task- Often accidental- Difficult to find deliberately- Can be driven to financial ruin trying ideasOpportunity identification1) The deliberate search2) The evaluation process3) Other sources of ideas

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THE DELIBERATE SEARCH THE DELIBERATE SEARCH THE DELIBERATE SEARCH THE DELIBERATE SEARCH

• Most appropriate way of finding a venture?- Systematic process

- clearly defined Five steps:1. Contact people in the know2. Read appropriate publications3. Do Market Research4. Use Government data5. Joint-venture with large companies

- Have more demands than time to fill them

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1. Contact 1. Contact 1. Contact 1. Contact the Right Peoplethe Right Peoplethe Right Peoplethe Right People

• Ask others to inform you of good ideas- Contact technology transfer organizations- Patent attorneys- Investment bankers- Venture capital firms

• Talk to people- Especially marketing, sales, service

• Talk to customers, see what they need• People are Most Important

- Ideas come from people- People struggle with the unfulfilled need- Customers are people- Designers are professional idea people- Practice makes better in idea searching

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2. 2. 2. 2. Read Appropriate PublicationsRead Appropriate PublicationsRead Appropriate PublicationsRead Appropriate Publications

• Read the Printed Word • Study your desired industry• Read the appropriate publications:

- Trade Indexes in the area- local business newspaper every day- Annual reports of industry public companies- Purchase professional reports

• Look for required improvements

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3. Research 3. Research 3. Research 3. Research the Marketthe Marketthe Marketthe Market

• What do people want, nobody is producing• Ask buyers what they have trouble finding• Determine what’s missing in trade catalogs• Ask store managers

- What do customers want but can’t buy• Attend trade shows

- Ask people about what may be needed- Good stimulation for new ideas!!

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4. Government4. Government4. Government4. Government, a Goldmine of Data, a Goldmine of Data, a Goldmine of Data, a Goldmine of Data

• Examine industry statistics- Select high-growth areas

• Consider legislation’s effect on business- May create needs for businesses to comply

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The Search CriteriaThe Search CriteriaThe Search CriteriaThe Search Criteria

• Criteria to evaluate ideas• What do you want out of the effort

- There will be sacrifices and costs• Weight the criteria to reflect importance• Depend on individual circumstances • Covers several basic issues

• Sample criteria�Amount of time required�Flexibility in hours worked�Income potential�Geographical location�Financial requirements�Personality preference�Personal satisfaction�Product or Service�Market Issues

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Other Sources of IdeasOther Sources of IdeasOther Sources of IdeasOther Sources of Ideas

• Besides deliberate thinking- Unplanned “Eureka!" ideas

• Hard to predict- Trends around you

• More about this in the next few slides- Opportunity from “lack” you see

• Always pay attention to everyday problems• Best ideas solve problems

- Government action• New programs, incentives• War

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Consider Current TrendsConsider Current TrendsConsider Current TrendsConsider Current Trends

• These are examples, trends always change- Aging population- Energy costs rising- Marital status changes- Families without children- Leisure time growing- Health & physical fitness- Personal care- Financial planning

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What is creativity??What is creativity??What is creativity??What is creativity??

• The generation of novel ideas and solutions • Is a mental process involving the generation of new ideas or

concepts, or new associations between existing ideas or concepts (Wikipedia encyclopedia)

• Simply the act of making something new • The ‘mental process that leads to solutions, ideas,. theories or

products that are unique and novel’ (Reber, 1985)• "Creativity, it has been said, consists largely of re-arranging

what we know in order to find out what we do not know." George KellerGeorge KellerGeorge KellerGeorge Keller

• Some say it is a trait we are born with; others say it can be taught with the application of simple techniques

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Three componentsThree componentsThree componentsThree componentsof individual creativityof individual creativityof individual creativityof individual creativity

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The systems modelThe systems modelThe systems modelThe systems model

Made up ofdifferent domains e.g.

Maths; music; religion etc.Social valuation of

Ideas; society validatesCreativeness; ideas

Environment; family traditionscognitive ability; cultural capital

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Managing creativity Managing creativity Managing creativity Managing creativity

http://wps.pearsoned.co.uk/ema_uk_he_bragg_newbusidea_1

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The idea developing processThe idea developing processThe idea developing processThe idea developing processSTEP 1 STEP 1 STEP 1 STEP 1 –––– SEEKING AND SHAPING SEEKING AND SHAPING SEEKING AND SHAPING SEEKING AND SHAPING

OPPORTUNITIES.OPPORTUNITIES.OPPORTUNITIES.OPPORTUNITIES.

Seeking and shaping opportunities•Exploring•Much greater insight into the market being explored•Avoid the temptation to implement the first idea immediately•Follow the steps to increase your chances•Avoid emotions and accept criticisms•No information or idea is wasted•Acid test is to be able to sell goods in sufficient quantity to generate sustainable cash flows•Combine rational and intuitive thinking

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Tools for seeking and shapingTools for seeking and shapingTools for seeking and shapingTools for seeking and shaping

• The power of ‘Why?’• Creative capacity of asking questions• Challenging assumptions• Creating additional perspectives on existing opportunities

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Step 2: Step 2: Step 2: Step 2: ‘‘‘‘Generating New IdeasGenerating New IdeasGenerating New IdeasGenerating New Ideas’’’’

- The mind gym – six mental workouts and their related routines

- look at the first three mental workouts

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Where Do Ideas Come From?Where Do Ideas Come From?Where Do Ideas Come From?Where Do Ideas Come From?

• Should you lie down, or sit under a tree waiting for the inspirational apple to fall?

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Thomas EdisonThomas EdisonThomas EdisonThomas Edison

• Surprisingly, little "al" Edison, who was the last of Surprisingly, little "al" Edison, who was the last of Surprisingly, little "al" Edison, who was the last of Surprisingly, little "al" Edison, who was the last of seven children in his family, did not learn to talk seven children in his family, did not learn to talk seven children in his family, did not learn to talk seven children in his family, did not learn to talk

until he was almost four years of age.until he was almost four years of age.until he was almost four years of age.until he was almost four years of age. Immediately Immediately Immediately Immediately thereafter, he began pleading with everythereafter, he began pleading with everythereafter, he began pleading with everythereafter, he began pleading with every adult he adult he adult he adult he

met to explain the workings of just about everything met to explain the workings of just about everything met to explain the workings of just about everything met to explain the workings of just about everything he encountered. If they said they didn't know, he he encountered. If they said they didn't know, he he encountered. If they said they didn't know, he he encountered. If they said they didn't know, he

would look them straight in the eye with his deeply would look them straight in the eye with his deeply would look them straight in the eye with his deeply would look them straight in the eye with his deeply set and vibrant blue-green eyes and ask them set and vibrant blue-green eyes and ask them set and vibrant blue-green eyes and ask them set and vibrant blue-green eyes and ask them

"why?""why?""why?""why?"

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The Arch-innovator Thomas Edison The Arch-innovator Thomas Edison The Arch-innovator Thomas Edison The Arch-innovator Thomas Edison

• 99% perspiration and 1% inspiration.• Shape, challenge, overturn, shock and surprise your way into

new sights.• This may be the hard way but is effective.• He went beyond original concept to develop an affordable light

bulb to developing an entire infrastructure for the electricity industry.

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Howard Head (Case Study)Howard Head (Case Study)Howard Head (Case Study)Howard Head (Case Study)

• Analogy between elements similar but different.• Aircraft engineer, took up skiing but very incompetent.• Decided to look at the make-up of the ski, convinced

that if he used the materials and technique applied in aircraft wing design.

• Persevered for over two years through 40 different designs and eventually developed one of the most popular equipment that transformed the sport.

• Head the exponent of the why? Technique.

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DonDonDonDon’’’’t Wait for Inspiration t Wait for Inspiration t Wait for Inspiration t Wait for Inspiration

• Do not rely solely on inspiration

• Creative ides more likely from hard work and concentration apply both divergent and convergent

• The harder you practice the better you become.

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Why Bother With Idea-generating Why Bother With Idea-generating Why Bother With Idea-generating Why Bother With Idea-generating Technique?Technique?Technique?Technique?

• You are faced with cooking for a dinner party, would you opt for the tried and tested favourite dishes or you would try and experiment

• The winning formula which works syndrome!• Question these supposedly ‘winning formulas’ change and

challenge them

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Mental Work OutsMental Work OutsMental Work OutsMental Work Outs

• The four ground rules- Defer immediate judgement and evaluation; Successful

right-brain thinking relies on your ability to suspend analysis and judgement

- Quantity breeds quality; The more you defer judgement the more ideas likely to be generated

- The wilder the idea the better; Avoid cautious rationality- Take a break from the problem; Routine breaks from idea

generating are essential so one does not get immersed in the process

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Mental work-outsMental work-outsMental work-outsMental work-outs

Type of mental workoutType of mental workoutType of mental workoutType of mental workout Individual routineIndividual routineIndividual routineIndividual routine

Checklists Davis; Osborn; SCAMPER; The big four; Mapping the customer journey

Stimulus material (pile of junk)

Pictures/objects/words; keep seeking new and unexpected ways

Combinations Morphological analysisFour on the flat;

Free association Brainstorming; mind mapping

Analogical thinking Transferring the underlying principles etc

Upside-down thinking Rule reversal; assumption reversal

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Mental work-outs OneMental work-outs OneMental work-outs OneMental work-outs One

• Check lists- Provide effective way to be innovative by highlighting areas to

investigate and explore

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Davis product development listDavis product development listDavis product development listDavis product development list

• Applied to cameras- Add and /or subtract something- Change colour- Vary materials- Rearrange parts- Vary shape- Change size- Modify design or style

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Osborn product and service Osborn product and service Osborn product and service Osborn product and service development listdevelopment listdevelopment listdevelopment list

Checklist statementChecklist statementChecklist statementChecklist statement Key wordKey wordKey wordKey word

What other product or service could I adapt to my opportunity?

adapt

How could I change the existing product/service?

modify

How could I add to the product/service magnify

What could I take away from this product/service

minify

What could I use instead of this product/service

substitute

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The big four industry-level check listThe big four industry-level check listThe big four industry-level check listThe big four industry-level check list

• What factors can be reduced well below the industry standard?• What factors could be eliminated which industry has taken for

granted?• What factors could be created which the industry has never

offered?• What factors could be raised well above the industry standard?

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Mental Work-out TwoMental Work-out TwoMental Work-out TwoMental Work-out Two

• Stimulus materials- Continuously update and refresh your stock- To invent you need a good imagination and a pile

of junk- IDEO, a science of collecting junk, as a corporate

lending library of innovation ideas, the ‘tech box’- Collect as much pictures and materials placing

unrelated or diverse elements together

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Mental Workout ThreeMental Workout ThreeMental Workout ThreeMental Workout Three

• Combinations.- Sometimes a combination of products and services

can be a good generation tool.- Benjamin Franklin combining long and short-

distance spec into bi-focals.- Darryl Lenz, a stewardess with American airlines

strapped a child’s folding beach chair to her suitcase to make air travel with her young son less an ordeal.

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The disaster of headlong actionThe disaster of headlong actionThe disaster of headlong actionThe disaster of headlong action

• To go headlong to a market which does not exist• To stick to an unworkable business solution

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Give yourself time to develop Give yourself time to develop Give yourself time to develop Give yourself time to develop alternatives alternatives alternatives alternatives

• Bezos and Amazon’s success story- Benefits of investing time in assessing and shaping opportunities- Thoroughly investigated the full range of products categories- Generated 20 potentials but eventually narrowed and selected

two

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Stumbling at the first fenceStumbling at the first fenceStumbling at the first fenceStumbling at the first fence

• This mindset in businesses formation• Stumble at first fence• Gaining experience through failure than the earning fame and

good fortune

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Give yourself time to develop Give yourself time to develop Give yourself time to develop Give yourself time to develop alternativesalternativesalternativesalternatives

• Rising above solutions which will do- Research shows evidence that in 85% of decisions made no

viable search for alternatives was ever reviewed• Identify the opportunity before the solution

- Incorrect assumptions- Identification of the correct opportunity better than creating the

means to seize it

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Taking time to develop alternativesTaking time to develop alternativesTaking time to develop alternativesTaking time to develop alternatives

• Avoid ‘me-too syndrome- Establishing businesses without differentiation

• Open mind- The open approach allows for opportunities and ideas to

develop• Decide when to decide

- The creative procrastination zone- Neither too soon nor too late- Maximise the time for you to suspend judgement

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Look at all possibilitiesLook at all possibilitiesLook at all possibilitiesLook at all possibilities

• Treat your first idea as purely tentative- Gather clues- Remove blinkers- Detach yourself from emotions- Opportunity shaping step is investment

which will increase your chances of successful implementation

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The cardinal rule at this stageThe cardinal rule at this stageThe cardinal rule at this stageThe cardinal rule at this stage

• Pursue quantity- Total immersion unearthing aspects not previously

considered- Whole-brain thinking- Fact- finding to increase overall understanding- The detective- Rework the facts

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Creativity and problem solvingCreativity and problem solvingCreativity and problem solvingCreativity and problem solving

• Problems often described as varying in structure with Mintzberg et al (1976) defining an ill-structured problem as a task calling for decision processes that have not been encountered in quite the same form and for which no explicit set of ordered responses exists

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Phases in problem solvingPhases in problem solvingPhases in problem solvingPhases in problem solving

• Preparation- Understanding and identifying the problem- Defining the problem

• Production- Development of different solution alternatives

• Judgement- Choice of best solution

• Review - Evaluating past choices(Henry J)

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‘I like your vacuum cleaner, but when will you make one that you don’t

have to push around?’

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The 5 The 5 The 5 The 5 ‘‘‘‘WWWW’’’’ plus plus plus plus ‘‘‘‘HHHH’’’’

• Borrowed form journalism• Technique asks e.g. :-

- Who uses the product?- What are the biggest draw backs?- When is the product required ?- Why?- How?

• The effect is to deconstruct the opportunity into multiplicity of smaller elements, can then be reassembled.

• Break free from conventional thinking, challenging received wisdom

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Observing core usersObserving core usersObserving core usersObserving core users

• Patterns of usage by core users which run counter to conventional wisdom represent potential rich source of new business opportunities (Bragg, 2004)

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Lead-user techniqueLead-user techniqueLead-user techniqueLead-user technique

• Operating at the edge of the conventional market, lead user will always try the product for an extra capability that originally intended.

• Tracking these lead users provide opportunities for innovative ideas

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Boundary examinationBoundary examinationBoundary examinationBoundary examination

• Read this from Bragg, ch 3 pages 86 – 98.

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Taking Time to Develop AlternativesTaking Time to Develop AlternativesTaking Time to Develop AlternativesTaking Time to Develop Alternatives

• Avoid ‘me-too syndrome- Establishing businesses without differentiation

• Open mind- The open approach allows for opportunities and ideas to

develop- Choose from a wide range of predominantly divergent tools

• Decide when to decide- The creative procrastination zone- Neither too soon nor too late- Maximise the time for you to suspend judgement

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Creativity and workplaceCreativity and workplaceCreativity and workplaceCreativity and workplace

• Logic fits the work place• The intuitive and imaginative often overlooked• One-correct-logical answer!• Only about 2 – 10 percent of our creative potential being used

as a result• Creative without whole brain thinking results in half-brained

business ideas (Bragg 2005)

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The challengeThe challengeThe challengeThe challenge

• Reconnect with the more than 90 percent that has been educated out of us

Convergent thinking Logical analysis of problemsLeading to inexorably the correct answer

Divergent thinking: interestingand unexpected possible

directions in which to explorethe problem

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Creativity at the heart of idea development processCreativity at the heart of idea development processCreativity at the heart of idea development processCreativity at the heart of idea development process

Seeking and shapingopportunities

Idea generation

Evaluation and

selection

Planning for

implementation

Diverge Converge

Step 1 Step 2 Step 3 Step 4

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Thinking style at the different Thinking style at the different Thinking style at the different Thinking style at the different stages stages stages stages

Step Description Thinking styleSeeking and shaping opportunities

Identifying and exploring different opportunities, followed by analytical judgement

Divergent and convergent whole-brain thinking equally dominate

Generating new ideas

Creating significant volumes of innovative, imaginative ideas

Divergent thinking dominant

Evaluating and selecting ideas

Screening the best form the rest and then evaluating those few in detail

Convergent thinking dominant

Planning for implementation

Identifying and overcoming blocks to implementation

Divergent and convergent whole-brain thinking equal

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Steps to mastering whole-brain Steps to mastering whole-brain Steps to mastering whole-brain Steps to mastering whole-brain thinkingthinkingthinkingthinking

• Identify your preferred thinking style- Complete questionnaire on page 44, DNBI

• Strengthen your non-preferred thinking style- Deliberate stretching your non-preferred thinking style

(page 46-47 DNBI)• Make the most of divergent and convergent thinking

phases- Be aware of the ground rules for each of the thinking styles

(pages 49 – 50 DNBI)

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Evaluation Criteria for a StartupEvaluation Criteria for a StartupEvaluation Criteria for a StartupEvaluation Criteria for a Startup

• Marketing Factors (cont’d)- Market structure

• Emerging or mature• Market size (known or unknown?)• Market growth (how fast?)

• Competitive Advantage- Cost structure

• Control over price, costs, channels of supply• Barriers to entry: regulatory protection, response/ lead-time advantage,

legal, contacts and networks

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Evaluation Criteria for a StartupEvaluation Criteria for a StartupEvaluation Criteria for a StartupEvaluation Criteria for a Startup

• Economics- Return on investment?

• Investment requirements

• Break-even point

• Management Capability- Diverse skills or solo entrepreneur

with no related experience

• Fatal Flaws

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Types of Ideas That Develop into StartupsTypes of Ideas That Develop into StartupsTypes of Ideas That Develop into StartupsTypes of Ideas That Develop into Startups3-23-23-23-2

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Kinds of Startup IdeasKinds of Startup IdeasKinds of Startup IdeasKinds of Startup Ideas

• Type A- Are centered around providing customers with an existing product

not available in their market.• Type B

- Involve new ideas, involve new technology, centered around providing customers with a new product.

• Type C- Are centered around providing customers with an improved

product.

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Change-Based Sources of Entrepreneurial OpportunitiesChange-Based Sources of Entrepreneurial OpportunitiesChange-Based Sources of Entrepreneurial OpportunitiesChange-Based Sources of Entrepreneurial Opportunities3-43-43-43-4

Change FactorChange FactorChange FactorChange Factor Definition Definition Definition Definition Industry FactorsIndustry FactorsIndustry FactorsIndustry FactorsThe unexpected Unanticipated events lead to either enterprise success or

failure. The incongruous What is expected is out of line with what will work.

Process needs Current technology is insufficient to address an emerging challenge.

Structural change Changes in technology, markets, etc., alter industry dynamics.

Human and Economic Human and Economic Human and Economic Human and Economic FactorsFactorsFactorsFactors Demographics Shifts in population size, age structure, ethnicity, and

income distribution impact product demand. Changes in perception Perceptual variations determine product demand. New knowledge Learning opens the door to new product opportunities with

commercial potential.

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Applying Innovative Thinking to Business IdeasApplying Innovative Thinking to Business IdeasApplying Innovative Thinking to Business IdeasApplying Innovative Thinking to Business Ideas

1. Borrow ideas from existing products and services or other industries.

2. Combine two businesses into one to create a market opening.

3. Begin with a problem in mind.

4. Recognize a hot trend and ride the wave.

5. Explore ways to improve a product or service’s function.

6. Think of how to streamline a customer’s activities.

7. Adapt a product or service to meet customer needs in a different way.

8. Imagine how the market for a product or service could be expanded.

9. Keep an eye on new technologies.

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Step- 3 : Evaluating Step- 3 : Evaluating Step- 3 : Evaluating Step- 3 : Evaluating Entrepreneurial Entrepreneurial Entrepreneurial Entrepreneurial OpportunitiesOpportunitiesOpportunitiesOpportunities

• Outside-In Analysis- Studying the context of the venture to identify business ideas and

determine which ideas qualify as opportunities.• General Environment

- A broad environment, encompassing factors that influence most businesses in a society.

• Industry Environment- The combined forces that directly impact a given firm and its competitors.

• Competitive Environment- The environment that focuses on the strength, position, and likely moves

and countermoves of competitors in an industry.

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Segments of the General EnvironmentSegments of the General EnvironmentSegments of the General EnvironmentSegments of the General Environment3-53-53-53-5

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Competitor AnalysisCompetitor AnalysisCompetitor AnalysisCompetitor Analysis

• Who are the new venture’s current competitors?

• What resources do they control?

• What are their strengths and weaknesses?

• How will they respond to the new venture’s decision to enter the industry?

• How can the new venture respond?

• Who else might be able to observe and exploit the same opportunity?

• Are there ways to co-opt potential or actual competitors by forming alliances?

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Evaluating OpportunitiesEvaluating OpportunitiesEvaluating OpportunitiesEvaluating Opportunities………… (cont (cont (cont (cont’’’’d)d)d)d)

• Inside-Out Analysis- Assessing the firm’s internal competitive potential

• Resources- Basic inputs that a firm uses to conduct its business

• Tangible resources: visible and easy to measure.• Intangible resources: invisible, difficult to quantify

• Capabilities- Integration of various organizational resources that are deployed

together to the firm’s advantage.• Core Competencies

- Resources and capabilities that provide a firm with a competitive advantage over its rivals.

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Integrating Internal and External Integrating Internal and External Integrating Internal and External Integrating Internal and External AnalysesAnalysesAnalysesAnalyses

• Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis

- A type of assessment that provides a concise overview of a firm ’s strategic situation.

- Helps identify opportunities that match the venture.

• Seeking Competitive Insight- Will the opportunity lead to others in the future?

- Will the opportunity build skills that open the door to new opportunities in the future?

- Will pursuit of the opportunity be likely to lead to competitive response by potential rivals?

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Examples of SWOT FactorsExamples of SWOT FactorsExamples of SWOT FactorsExamples of SWOT Factors3-73-73-73-7

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The Opportunity The Opportunity The Opportunity The Opportunity ““““Sweet SpotSweet SpotSweet SpotSweet Spot””””3-83-83-83-8

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Important Strategic TermsImportant Strategic TermsImportant Strategic TermsImportant Strategic Terms

• Strategy- A plan of action that coordinates the resources and commitments

of an organization to achieve superior performance.• Strategic Decision

- A decision regarding the direction a firm will take in relating to its customers and competitors.

• Sustainable Competitive Advantage- A value-creating industry position that is likely to endure over

time.

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Creating the OpportunityCreating the OpportunityCreating the OpportunityCreating the Opportunity

• The obscure, we see eventually. The completely obvious, it seems, takes longer.

• Edward R Murrow

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Foundation IdeasFoundation IdeasFoundation IdeasFoundation Ideas

• A complete business model will encompass two foundation concepts:

• 1. A concept of how customer value will be created.• A concept of how the new venture will build, for itself, a

structural competitive advantage in providing that value.

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Basic Forces Driving the Business Basic Forces Driving the Business Basic Forces Driving the Business Basic Forces Driving the Business ModelModelModelModel

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Looking at the Business DriversLooking at the Business DriversLooking at the Business DriversLooking at the Business Drivers

• 1. Societal needsSocietal needsSocietal needsSocietal needs: Derive from the values, aspirations, and worries (real or imagined) of the culture in which the new enterprise must dwell.

• Chiefly concerned with those societal needs that can be expressed in the market place.market place.market place.market place.

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Customer ValueCustomer ValueCustomer ValueCustomer Value

• This is the sub set of societal needs that can be recognized in the market place

• Maybe explicit or latent, unrecognized by most entrepreneurs, or unarticulated by the customers

• The value must be The value must be The value must be The value must be ““““realrealrealreal””””• “No enterprise ever rises above the value of the problem it

chooses to solve – Stan Lapidus, entrepreneur

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Insight and TechnologyInsight and TechnologyInsight and TechnologyInsight and Technology

• Special insight into high- quality problems, and the value of their resolution – drivers

• Insight alone is never enough – must build a competitive enterprise by 2 means:

• 1. Combining technology that is well matched to customer value

• 2. Creating an organization to deliver that value and capture enough of it to become self-sustaining

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Technology and InnovationTechnology and InnovationTechnology and InnovationTechnology and Innovation

• Technology can create a powerful lever in building customer value.

• Technology should mesh well with the value sought in the market (not necessarily high tech)not necessarily high tech)not necessarily high tech)not necessarily high tech)

• Technology requires a delivery platformdelivery platformdelivery platformdelivery platform – an organization capable of delivering the product or service, and capturing enough of the value to retain interest of owners, employees, investors

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Entrepreneurial InnovationEntrepreneurial InnovationEntrepreneurial InnovationEntrepreneurial Innovation

• This is the heart of the business model for the new enterprise• Entrepreneurial innovationEntrepreneurial innovationEntrepreneurial innovationEntrepreneurial innovation adds to the technology: processes,

people, skills, and equipment needed to deliver value to the customers, and to capture enough of that value to sustain the firm. (Theory of the firm)

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Distinctive CompetencyDistinctive CompetencyDistinctive CompetencyDistinctive Competency

• The combination of technologytechnologytechnologytechnology and entrepreneurial entrepreneurial entrepreneurial entrepreneurial innovationinnovationinnovationinnovation must be uniqueuniqueuniqueunique to your venture (not available to competitors). It then becomes your

distinctive competencydistinctive competencydistinctive competencydistinctive competency*** Important to distinguish between core competencycore competencycore competencycore competency and distinctive competencydistinctive competencydistinctive competencydistinctive competency (a corecorecorecore competency, however

powerfully established in an enterprise, does not become distinctivedistinctivedistinctivedistinctive, if rivals can easily duplicate it, or buy it in the market place)

Examples of distinctive competency – Infosys, Nordstrom, Southwest Airlines, Dell, Biocon, MindTree, etc.

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Basic Forces Driving the Business Basic Forces Driving the Business Basic Forces Driving the Business Basic Forces Driving the Business ModelModelModelModel

• Success of the new venture becomes self-reinforcing: the better the firm becomes, the better it can become.

• All elements of the business model must work towards this end.• Selective neglect of one element of the business model, even

while achieving excellence in others, seems to be a recipe for eventual disaster.

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The Living Business ModelThe Living Business ModelThe Living Business ModelThe Living Business Model

• Most entrepreneurs do not begin with an entire business model, with complete understanding, mature plans, and ready-to-implement steps.

• Reality compels evolutionevolutionevolutionevolution• Shape Shape Shape Shape and refinerefinerefinerefine your business model as insightinsightinsightinsight grows and

experienceexperienceexperienceexperience accumulates.

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Business Model: The Ice HarvestersBusiness Model: The Ice HarvestersBusiness Model: The Ice HarvestersBusiness Model: The Ice Harvesters

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Business Model: The Ice Business Model: The Ice Business Model: The Ice Business Model: The Ice ManufacturersManufacturersManufacturersManufacturers

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The Dynamics of Market ChangeThe Dynamics of Market ChangeThe Dynamics of Market ChangeThe Dynamics of Market Change

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Creative ideasCreative ideasCreative ideasCreative ideas

• Developing New Business IdeasDeveloping New Business IdeasDeveloping New Business IdeasDeveloping New Business Ideas reports that for every 100 ideas presented to investors in the form of a business plan or proposal of some kind, a maximum of 3% will ever get funded.

• In addition, over 30% of new businesses which do see the light of day fail within three years.

• In light of these figures, you must avoid the temptation of rushing into action with the first apparently feasible business idea which you create without fully challenging it

Bragg 2004

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Creativity , flair and initiativeCreativity , flair and initiativeCreativity , flair and initiativeCreativity , flair and initiative

• These are the qualities that underpin enterprise, whether enterprise manifests itself as entrepreneurship and the development of new businesses, or intrapreneurship - enterprise and positive change within established organisations.

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Creativity and economic growthCreativity and economic growthCreativity and economic growthCreativity and economic growth

• Today, creativity forms the core activity of a growing section of the global economies — the so-called “creative industries" — capitalistically generating (generally non-tangible) wealth through the creation and exploitation of intellectual property or through the provision of creative services.

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An enterprising manager An enterprising manager An enterprising manager An enterprising manager

• You must have the creative talent to identify new product opportunities. The same talent is required of company employees, who as intrapreneurs, are on the look-out for product innovation and process improvement

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Managerial practice and creativityManagerial practice and creativityManagerial practice and creativityManagerial practice and creativity

• Challenge – matching people with right assignments• Freedom – give people autonomy• Resources – allot these carefully• Work-group features – diversity • Supervisory encouragement – foster and support

creative efforts• Organisational support – leadership, systems,

procedures How to kill creativity by T Amabile in HenryHow to kill creativity by T Amabile in HenryHow to kill creativity by T Amabile in HenryHow to kill creativity by T Amabile in Henry(2001)(2001)(2001)(2001)

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Innovation and CreativityInnovation and CreativityInnovation and CreativityInnovation and Creativity

• Innovation is often used to refer to the entire process by which an organization generates creative new ideas and converts them into novel, useful and viable commercial products, services, and business practices,

• Creativity is reserved to apply specifically to the generation of novel ideas by individuals, as a necessary step within the innovation process.

• For example, Amabile et al (1996). suggest that while innovation "begins with creative ideas,"

• ". . . creativity by individuals and teams is a starting point for innovation; the first is a necessary but not sufficient condition for the second".

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Strategies for creativity Strategies for creativity Strategies for creativity Strategies for creativity enhancementenhancementenhancementenhancement

• Introduce procedures for encouraging generation of new ideas e.g. brainstorming

• Train people in the skills required for successful creative performance

• Select to recruit creative individuals and allocation positions accordingly

• Change structure, climate and culture to facilitate creativity

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Creative industries in the UKCreative industries in the UKCreative industries in the UKCreative industries in the UK

• The creative industries are those industries that are based on individual creativity, skill and talent. They are also those that have the potential to create wealth and jobs through developing intellectual property.

www.culture.gov.uk/what_we_do/Creative_industries/(5.10.06)

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UK Creative IndustriesUK Creative IndustriesUK Creative IndustriesUK Creative Industries

PublishingPublishingPublishingPublishing

Television and radioTelevision and radioTelevision and radioTelevision and radio

Performing artsPerforming artsPerforming artsPerforming arts

MusicMusicMusicMusicInteractive leisure Interactive leisure Interactive leisure Interactive leisure softwaresoftwaresoftwaresoftware

Film and videoFilm and videoFilm and videoFilm and video

Designer fashionDesigner fashionDesigner fashionDesigner fashion

Software and Software and Software and Software and computer servicescomputer servicescomputer servicescomputer services

DesignDesignDesignDesign

ArchitectureArchitectureArchitectureArchitecture

AdvertisingAdvertisingAdvertisingAdvertising

Arts and antiquesArts and antiquesArts and antiquesArts and antiques

CraftsCraftsCraftsCrafts

ProductionProductionProductionProduction

Arts and craftsArts and craftsArts and craftsArts and crafts

ServicesServicesServicesServices

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Development of idea into businessDevelopment of idea into businessDevelopment of idea into businessDevelopment of idea into business

• Important to come up with a process to develop ideas into business project

- The four steps in the idea development process (Bragg and Bragg 2005)

• This calls for whole brain thinking• Benefits of developing new business idea model

- 3% maximum proposals ever get funding- Low survival rates of registered new businesses (Small

Businesses Services, January 2004)

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Whole brain thinkingWhole brain thinkingWhole brain thinkingWhole brain thinking

• Identify your own preferred thinking styleIdentify your own preferred thinking styleIdentify your own preferred thinking styleIdentify your own preferred thinking style: Fill out at the questionnaire at page 44 of Developing New Business Ideas.

• SSSStrengthen your non-preferred thinking styletrengthen your non-preferred thinking styletrengthen your non-preferred thinking styletrengthen your non-preferred thinking style: For techniques on improving your ability to switch between left-brain and right-brain thinking, and to deliberately stretch your non-preferred thinking side, see page 46 of Developing New Business Ideas.

• MMMMaking the most of divergent and convergent thinking aking the most of divergent and convergent thinking aking the most of divergent and convergent thinking aking the most of divergent and convergent thinking phasesphasesphasesphases: Follow the ground-rules for managing each of the different phases listed at page 49 of Developing New Business Ideas

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Diagrammatic representation of the Diagrammatic representation of the Diagrammatic representation of the Diagrammatic representation of the Brain Brain Brain Brain

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The right The right The right The right –––– left brain left brain left brain left brain characteristics characteristics characteristics characteristics

• Left-brain thinking is often Left-brain thinking is often Left-brain thinking is often Left-brain thinking is often characterised by:characterised by:characterised by:characterised by:

• logic• analysis• mathematics• sequential• verbal• rational• goal-oriented• organised

• Right brain thinking is Right brain thinking is Right brain thinking is Right brain thinking is often characterised by: often characterised by: often characterised by: often characterised by:

• spontaneity• emotion• non-verbal• musical• dreaming• imaginative• images • sensory

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Creativity at every step of the Creativity at every step of the Creativity at every step of the Creativity at every step of the processprocessprocessprocess

• Do not front-load creativity- that is assuming that a superficial attractive business idea will be

developed into a profitable business• Intuition and logics are equal partners

- Have a part to play at every step of the idea development process

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Traditional view of creativityTraditional view of creativityTraditional view of creativityTraditional view of creativity

• Held that only right-brained thinkers could be creative• Those not blessed with the artistic temperament were deemed to

be logical• But creativity is wider than just the right-brain thinking.• Everyone can be creative by combining intuition (divergent or

right-brain thinking) and logic (convergent or left-thinking)

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Does education systems kill Does education systems kill Does education systems kill Does education systems kill creativity?creativity?creativity?creativity?

• Trained to think convergently, to find the right answer.• To acquire knowledge one step after the other• This demands the left-brain skills• The skills of imagination and intuition risk being lost from

early age