Employ entrepreneurial discovery strategies to

generate feasible ideas for business ventures/products.

2.01 Part 2

Discuss differences between entrepreneurs and non-

entrepreneurs that can aid entrepreneurs in perceiving

opportunities.

commitment and determination leadership opportunity obsession tolerance of risk, ambiguity and uncertainty creativity, self-reliance and ability to adapt motivation to excel (Timmons 1994) social nature

Being social is important because “Building a company entails hiring, organizing, and inspiring a collection of people who typically need to get start-up funds from others, to buy things from other people, and, ultimately, flourish or fail together as a result of the ability to sell things to yet another group of people.”

Some characteristics commonly associated with

entrepreneurs:

Byers, T., Kist, H. & Sutton, R.I. (1997, October 27). Characteristics of the Entrepreneur: Social Creatures, Not Solo Heroes. Retrieved April 19, 2011, from http://www.skillcast.co.uk/documents/49.html

Life experiences Person’s position in a social network Nature of the search process a person uses Ability to focus on the opportunities Intelligence

Perhaps most importantly, entrepreneurs also tend to be “entrepreneurially alert.” Are you always looking for new opportunities? If so, then you are more apt to see them when they arise.

An entrepreneur also capitalizes on:

Scientific discovery: Occurs when a physical or

technological observation is made Circumstantial discovery: Occurs when an

observation is made based on specific knowledge of time, place, or circumstance

Distinguish between scientific discovery and circumstantial

discovery.

The introduction of a new good or a

new quality of a good The introduction of a new method of

production The opening of a new market The conquest of a new source of supply

of raw materials or components The reorganization of any industry

Areas of Entrepreneurial Discovery 

The introduction of a new

product or an improved product: MP3 player—Most common area of

innovation Note the difference in the new

invention of the MP3 player from improved MP3 player with a screen

 Examples:

Henry Ford’s invention of the assembly line

The introduction of a new method of

production: 

The opening of a new market:

McDonald’s moving into China for the first time Note that in addition to discovering the

new market, this also requires an understanding of culture, laws, local buyer preferences and business practices, and a host of contact, communication, and transportation details referred to as "setting up a distribution channel."

The conquest of a new source of

supply of raw materials or components: Moving a shoe manufacturer from

the U.S. to Mexico to access cheaper labor

Finding a new source of oil previously not discovered

The reorganization of any

industry: Several years ago, the U.S.

government believed that one telephone company, Bell, had formed a monopoly. The company was broken up, making the way for new, smaller telephone companies to form.

Explain techniques that entrepreneurs can use to recognize

opportunities.

Examples:Analogies

Pattern RecognitionExperiments

Simulation of PrototypesReverse Engineering

Comparing an unfamiliar abstract idea with an

already known mental image. It's like painting a picture in the listener's mind. What the utilization of analogies and comparisons does is to change the frame of reference and to force thinking in new and interesting ways. If a person is only thinking of the problem in its own terms, the number of possible solutions is very limited. By making analogies, and forced comparisons, the opportunities for new and creative solutions are multiplied many times over.

Analogies

Hurlbert, W. (2006, March 2). Blog Business World: Analogies: Making the Connection. Retrieved April 12, 2011, from http://blogbusinessworld.blogspot.com/2006/03/analogies-making-connection.html

Many problems can be diagnosed and

remedied in a pattern-recognition mode. Like a doctor looking to diagnose an ailment, look for patterns occurring. For example, if you're always thirsty, you urinate frequently, you're losing weight, and your eyesight is blurry, you have diabetes.

Pattern Recognition

Definition: a 3-dimensional version of your

vision

Prototype

http://www.realclearscience.com/cgi-bin/mt/mt-search.cgi?blog_id=2&tag=Rapid%20prototype&limit=20

It enables you to test and refine the

functionality of your design. Sure, your idea works perfectly in theory. It's

not until you start physically creating it that you'll encounter flaws in your thinking.

That's why another great reason to develop a prototype is to test the functionality of your idea.

You'll never know the design issues and challenges until you begin actually taking your idea from theory to reality.

Prototypes are Helpful to Discovery

Monosoff, T. (2011). Entrepreneur.com. Creating a product prototype. Retrieved April 19, 2011, from http://www.entrepreneur.com/startingabusiness/inventing/inventionscolumnisttamaramonosoff/article80678.html

It makes it possible to test the

performance of various materials. For example, your heart may be set on

using metal—until you test it and realize that, say, plastic performs better at a lower cost for your particular application. The prototype stage will help you determine the best materials.

Prototypes Continued

Monosoff, T. (2011). Entrepreneur.com. Creating a product prototype. Retrieved April 19, 2011, from http://www.entrepreneur.com/startingabusiness/inventing/inventionscolumnisttamaramonosoff/article80678.html

It'll help you describe your product

more effectively with your team, including your attorney, packaging or marketing expert, engineers and potential business partners.

It will encourage others to take you more seriously.

Prototypes Continued

Monosoff, T. (2011). Entrepreneur.com. Creating a product prototype. Retrieved April 19, 2011, from http://www.entrepreneur.com/startingabusiness/inventing/inventionscolumnisttamaramonosoff/article80678.html

Definition: examining a completed product with the intent of understanding the technology and process used in its design, manufacture, or operation

Reverse Engineering

Online Ethics Center. (2006, February 16). Benchmarking and reverse engineering. Retrieved April 19, 2011, from http://www.onlineethics.org/CMS/workplace/workcases/ti-ethics/benchmarking.aspx#revers

Determine your product/ideas major

selling advantage: What will make a customer buy you

and not a competitor? What makes your product different

from the competition? This may be a product feature, type

of service provided, etc.

Discuss ways that entrepreneurs try to

distinguish themselves from their competitors.

Discuss stages of entrepreneurial

processes.

The term ‘discovery’ has the connotation of

literally removing the cover from something that already exists. I do not intend that meaning here. Here, discovery is synonymous with ‘invention’, but I don’t use that term because it is too much associated with technological invention, while I want to denote the emergence of new technology, organization and knowledge generally. – Bart Nooteboom, Tilburg University

Discovery

Nooteboom, B. (2005, April 25). Entrepreneurial roles along a cycle of discovery [CentER Discussion Paper No. 2005-43]. April 11, 2011, from http://ssrn.com/abstract=706902

Entrepreneurial discovery is the

oil that enables the market mechanism to operate and adapt so smoothly.

Entrepreneurial discovery occurs when a market participant notices what others have overlooked.

Discovery Continued

Leithner, C. (2004, December 15). Entrepreneurship and intelligent investing. Retrieved April 11, 2011, from http://www.quebecoislibre.org/04/041215-5.htm

Warren Buffett discovered a lucrative opportunity (one of the first of many in his long and successful career) when he worked at Graham-Newman Corp. Mr. Buffett recalls that “Rockwood & Co., a Brooklyn based chocolate products company of limited profitability, had adopted [Last In First Out] inventory valuation in 1941 when cocoa was selling for $0.50 per pound. In 1954, a temporary shortage of cocoa caused the price to soar to over $0.60. Consequently Rockwood wished to unload its valuable inventory quickly. But if the cocoa had simply been sold off, the company would have owed close to a 50% tax on the proceeds. The 1954 Tax Code came to the rescue. It contained an arcane provision that eliminated the tax otherwise due on LIFO profits if inventory was distributed to shareholders as part of a plan reducing the scope of a corporation’s business. Rockwood decided to terminate one of its businesses, the sale of cocoa butter, and said 13 million pounds of its cocoa bean inventory was attributable to that activity. Accordingly, the company offered to repurchase its stock in exchange for the cocoa beans it no longer needed, paying 80 pounds of beans for each share. “For several weeks I busily bought shares, sold beans, and made periodic stops at Schroeder Trust to exchange stock certificates for warehouse receipts. The profits were good and my only expense was subway tokens.”

Example

Leithner, C. (2004, December 15). Entrepreneurship and intelligent investing. Retrieved April 11, 2011, from http://www.quebecoislibre.org/04/041215-5.htm

“This evaluation of the opportunity is perhaps the most critical element of the entrepreneurial process, as it allows the entrepreneur to assess whether the specific product or service has the returns needed compared to the resources required. This evaluation process involves looking at the length of the opportunity, its real and perceived value, its risks and returns, its fit with the personal skills and goals of the entrepreneur, and its uniqueness or differential advantage in its competitive environment.”

Evaluation

Hisrich, R. D., Peters, M. P., & Shepherd, P. D. (n.d.). http://www.sbaer.uca.edu/publications/entrepreneurship/pdf/01.pdf. Retrieved June 11, 2012, from Small Business Advancement National Center: http://sbaer.uca.edu/

The use or utilization, especially for profit

The exploitation of newly discovered oil fields. Selfish utilization

He got ahead through the exploitation of his friends.

The combined, often varied, use of public-relations and advertising techniques to promote a person, movie, product, etc.

An entrepreneur will identify market opportunities and use innovative approaches to exploit them.

Exploitation

www.dictionary.com

Entrepreneurs are opportunity-driven. Opportunity

comes from changes in the environment, and one central characteristic of entrepreneurs is that they excel at seeing patterns of change.

Entrepreneurs are not resource-driven; while the manager asks, "Given the resources under my control, what can I achieve?" the entrepreneur asks "Given what I want to achieve, what resources do I need to acquire?"

It is the entrepreneur's drive to acquire resources in order to exploit opportunities that creates the high correlation between entrepreneurship and economic growth.

Exploitation Continued

http://en.wikibooks.org/wiki/Getting_Started_as_an_Entrepreneur/Opportunity/Entrepreneurship_Is

Work in a group with two or three classmates to conduct research to identify five entrepreneurial discoveries and the areas of entrepreneurial discovery for each. Develop a profile of each entrepreneur, and compare their characteristics to determine their shared or similar traits that probably aided them in making the entrepreneurial discovery. Determine the techniques that the entrepreneurs used to recognize the opportunities. Record your findings, and as a group, present them to the class for discussion.

Activity