Unit III Discussion Board

Please make sure that it is your own work and not copy and paste off of someone else work or article. Please read the study guide. Please watch out for spelling and grammar errors. Please use the APA 7th edition.

Book Reference:Neck, H. M., Neck, C. P., & Murray, E. L. (2021). Entrepreneurship: The practice and mindset (2nd ed). SAGE. https://online.vitalsource.com/#/books/9781544354644

COLLAPSE

On page 68 of the eTextbook, alertness is identified as a key characteristic for opportunity recognition. Discuss what you can do to increase your mental alertness to become more sensitive in identifying entrepreneurial opportunities.

BUS 8303, Entrepreneurship and Innovative Business Development 1

Course Learning Outcomes for Unit III

Upon completion of this unit, students should be able to:

2. Analyze the role of an entrepreneurial mindset in opportunity recognition.
2.1 Explain the connection between entrepreneurial mindset and opportunity recognition.
2.2 Discuss the four pathways to opportunity identification.

5. Differentiate innovative business strategies.

5.1 Identify creative techniques for generating innovative business models.
5.2 Interpret innovative techniques related to opportunity recognition.

Course/Unit
Learning Outcomes

Learning Activity

2.1

Unit Lesson

Chapter 3
Article: “Has the Concept of Opportunities Been Fruitful in the Field of

Entrepreneurship?”
Unit III Case Study

2.2, 5.1, 5.2
Unit Lesson
Chapter 3
Unit III Case Study

Required Unit Resources

Chapter 3: Creating and Recognizing New Opportunities

In order to access the following resource, click the link below.

Alvarez, S., & Barney, J. B. (2020). Has the concept of opportunities been fruitful in the field of

entrepreneurship? Academy of Management Perspectives, 34(3), 300–310. https://doi-
org.libraryresources.columbiasouthern.edu/10.5465/amp.2018.0014

Unit Lesson

Opportunity Recognition

All fields of study have unique concepts and terminology. In business courses, you might have learned about
the word opportunities through the creation of a strengths, weaknesses, opportunities, and threats (SWOT)
analysis, which is a tool used to identify internal factors, like strengths and weaknesses, and external ones
like opportunities and threats. In the field of study for entrepreneurship, the word opportunity has a different
meaning. Instead of approaching the word opportunity from the perspective of identifying external facts or
observations about the environment that could be relevant to a company, in entrepreneurship, the word
opportunity refers to the potential for a new idea, product, or process that solves an identified problem.

UNIT III STUDY GUIDE

Opportunity Recognition

https://libraryresources.columbiasouthern.edu/login?url=https://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=145645501&site=ehost-live&scope=site

BUS 8303, Entrepreneurship and Innovative Business Development 2

UNIT x STUDY GUIDE

Title

In the previous unit, the concept of an entrepreneurial mindset was covered, which encompasses the
openness to considering new ideas, the awareness to explore possibilities, and a sense of curiosity in
recognizing that a better solution could be found in addressing specific problems or situations. In this unit, we
move forward in connecting an entrepreneurial mindset to identify an opportunity and solution to a problem—
and then taking the action to move forward in exploring the problem.

Connection Between an Entrepreneurial Mindset and Opportunity Recognition

The image below makes the connection between an entrepreneurial mindset and opportunity recognition or
the ability or capacity to imagine dramatically new ideas and solutions to a problem. Jeffery Timmons, a
groundbreaking researcher on entrepreneurship, defined opportunity within an entrepreneurial context as
including a valuable and identifiable solution to a significant problem with a sizable potential demand base or
market or a definable emotional value connected to the solution and a willingness to move forward in
developing the solution into a business (Timmons, 1994). The opportunity must also align or fit the
entrepreneur’s interests and abilities and fit within the appropriate timing for both the entrepreneur and the
market (Timmons, 1994).

BUS 8303, Entrepreneurship and Innovative Business Development 3

UNIT x STUDY GUIDE
Title

These four conditions are the criteria for opportunity recognition. If any one of these components is missing,
then we would only say that an idea is present, but the opportunity has not been established. The difference
between an entrepreneurial venture and a small business is opportunity. If a small business owner opens a
business based on an already established idea, this would not qualify as an entrepreneurial opportunity. An
entrepreneur is someone who creates something new through the opportunity recognition process that fulfills
these four criteria. This is not to say that a small business owner cannot add an entrepreneurial aspect to an
established business, as pointed out in Unit I in this course.

Opportunity is defined as “generating value through unique, novel, or desirable products, services, and even
processes that have not been previously exploited” (Neck et al., 2021, p. 57). The authors of the eTextbook
note that an entrepreneurial opportunity includes three characteristics: potential economic value, novelty or
newness, and perceived desirability (Neck et al., 2021). The combination of identifying a problem, a solution
to the problem, a willingness to act on researching and developing the solution, and the foresight to recognize
the importance of timing the venture for optimum success along with bringing in the needed resources work
together to present the right conditions that move an idea into an opportunity creation position.

BUS 8303, Entrepreneurship and Innovative Business Development 4

UNIT x STUDY GUIDE
Title

(Adapted from Pistrui et al., 2008)

Conditions for Opportunity

Before we move on, make sure you understand that there are many ideas that people think about, but not all
ideas translate into meeting the conditions that fit as an opportunity. If only one person is interested in your
idea, the idea would not be worth your time and effort to create a business around it. Understanding the
criteria that support the difference between an idea and an opportunity is an important concept for potential
entrepreneurs.

The pet rock created back in the mid-1970s was simply a smooth rock which Gary Dahl, a college student,
marketed as a companion for college students as though the rock was a live pet (Goldman, 2015). The pet
rock provided an emotional solution for college students who missed their friends and family members back
home and presented an emotional connection to other college students through the care of their Pet Rocks as
well as a humorous break in college student’s lives (Goldman, 2015). This example points out how difficult it
is to know if an idea translates into an opportunity. Most experts would have said that no one would be
interested in a pet rock, and yet, for a time, pet rocks were quite popular with product line extensions such as
small designed paper crates like life-size dog kennels to contain the pet rock and a manual on how to care for
it. From today’s perspective, the story of pet rocks sounds odd, yet the creator became a multi-millionaire.
Dahl attributed the popularity of his creation to timing (Goldman, 2015). It worked in a society that was
disillusioned from both the Vietnam War and Watergate with a need for laughter and healing (Goldman,
2015). The pet rock venture was started with minimal investments to test if the idea truly met the conditions
for an opportunity.

BUS 8303, Entrepreneurship and Innovative Business Development 5

UNIT x STUDY GUIDE
Title

Innovation

Just as individuals can identify a problem and translate that problem into an opportunity, organizations can
also encourage their employees to become intrapreneurs and have an entrepreneurial mindset to identify
opportunities based on innovations that align with the organization’s goals. In today’s highly competitive and
dynamic world, change is constant. With change, new problems arise, presenting the potential for new
opportunities to solve these problems. In conjunction with change, the potential for innovation occurs. For
organizations to remain successful, innovation becomes a necessity.

Exactly what is meant by innovation in speaking of an entrepreneurial opportunity? Innovation includes a
product or service that is novel, useful, and valuable (Neck et al., 2021). An entrepreneurial opportunity can
also include improvements to existing products or processes. Even an invention that does not currently have
a market could become an opportunity when the timing is right or with the right position within the market,
possibly creating a previously unknown market such as the one creators of hoverboards and flyboards
accomplished.

Organizations should use incentives to encourage innovation within their organizations as a method to
encourage innovation (Edralin et al., 2019). In earlier material, we noted that 3M incentivizes innovation by
providing resources to support employee intrapreneurial activity (Goetz, 2011). A part of this incentive is
providing time for creativity, an action that you can build into your life. The eTextbook authors provide a
variety of techniques that you can use to generate ideas and even strategies to advance ideas you already
have on your mind. A few other idea generation techniques include brainstorming, storyboarding, and role-
playing. Using these techniques can transform your ideas into potential entrepreneurial opportunities.
Consider setting aside an hour a day to build your skills by practicing these techniques.

Creativity

Everyone has the capacity for creativity, even if you have heard someone tell you that you are not creative.
Creativity is about how we apply our unique perspectives to situations. Your creativity skills are present in a
vast variety of activities. Challenge yourself to notice when you are being creative. For example, even the
route you drive to your job can display creativity as you select specific routes that focus on the quickest route,
or maybe you select a route that provides for a relaxing drive, or a scenic drive, or a stop for your favorite
coffee. Creativity is not necessarily defined as producing a well-received piece of imaginative art; creativity is
also present in solving our everyday problems. Mind maps are a popular method for applying creativity in
generating ideas. The mind map below is an example of exploring ideas as a process for building creativity.
This same tool also works well in discovering more about a specific problem as you consider possible
solutions. You can use this tool in creatively analyzing a problem that you are facing. You can include
pictures, spelling words backward, or adding emotions into a mind map.

Example of a mind map for creativity
(Dizain777, n.d.)

BUS 8303, Entrepreneurship and Innovative Business Development 6

UNIT x STUDY GUIDE
Title

Interactive Activity

In order to check your understanding of
concepts from this unit, complete the Unit III
Knowledge Check activity.

Unit III Knowledge Check

PDF version of the Unit III Knowledge Check

Note: Be sure to maximize your internet
browser so that you can view each individual
lesson on a full screen, ensuring that all content
is made visible.

Remember, this is a nongraded activity.

Conclusion

There are a wide range of entrepreneurial opportunities for you to uncover from small improvements such as
improved packing designs to products that appeal to emotional needs to much larger and more complicated
products. There are also many tools you can use to develop your creative thinking skills. The entrepreneurial
mindset positions you to continuously consider ideas for improvements to existing products by identifying a
problem that needs a solution. As ideas occur to you, write these ideas down. Then, analyze the idea to
determine if the idea translates into the definition of an entrepreneurial opportunity. Make a conscious effort to
practice using the information in this unit.

References

Dizain777. (n.d.). Hand drawn creativity mind map, business concept (ID 204476714) [Image]. Dreamstime.

https://www.dreamstime.com/hand-drawn-creativity-mind-map-business-concept-blackboard-
image204476714

https://online.columbiasouthern.edu/bbcswebdav/xid-136932284_1

https://online.columbiasouthern.edu/bbcswebdav/xid-138335260_1

https://online.columbiasouthern.edu/bbcswebdav/xid-136932284_1

BUS 8303, Entrepreneurship and Innovative Business Development 7

UNIT x STUDY GUIDE
Title

Edralin, D. M., Tibon, M. V. P., Poblador, P. E. T., & Yu, J. W. (2019). Creativity, innovation, and
sustainability: Insights of Entrepinays in the handicrafts industry.
http://web.a.ebscohost.com.libraryresources.columbiasouthern.edu/ehost/pdfviewer/pdfviewer?vid=8
&sid=ab1854dd-c3ad-4d79-bf87-fd22c0b5841c%40sessionmgr4007

Goetz, K. (2011, February 1). How 3M gave everyone days off and created an innovation dynamo. Fast

Company. https://www.fastcompany.com/1663137/how-3m-gave-everyone-days-off-and-created-an-
innovation-dynamo

Goldman, D. (2015, April 1). Pet rock founder Gary Dahl dead at 78. CNN Money.

https://money.cnn.com/2015/04/01/news/pet-rock-founder-gary-dahl-dead/index.html

Neck, H. M., Neck, C. P., & Murray, E. L. (2021). Entrepreneurship: The practice and mindset. SAGE.

Pistrui, D., Blessing, J., Mekemson, K. (2008). Building an entrepreneurial engineering ecosystem for future

generations: The Kern Entrepreneurship Education Network [Graphic]. American Society of
Engineering Educators.
https://www.researchgate.net/publication/237784695_Building_an_Entrepreneurial_Engineering_Eco
system_for_Future_Generations_The_Kern_Entrepreneurship_Education_Network

Timmons, J. A. (1994). New venture creation (4th ed.). Irwin.

Learning Activities (Nongraded)

Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit
them. If you have questions, contact your instructor for further guidance and information.

In order to access the following resource, click the link below.

Utilize the following Chapter 3 Flashcards to review terminology from the eTextbook.

https://edge.sagepub.com/neckentrepreneurship2e/student-resources/chapter-3/flashcards

CREATING AND RECOGNIZING NEW OPPORTUNITIES

©iStockphoto.com/phototechno

“Entrepreneurs see trends where others just see data; they connect dots when others just see dots. This ability to consistently recognize and seize opportunity does not develop overnight. It takes deliberate practice.”

—Dan Cohen, entrepreneur and educator

CHAPTER OUTLINE

.1
The Entrepreneurial Mindset and Opportunity Recognition

·
3.2
Opportunities Start With Thousands of Ideas

·
3.3
Four Pathways to Opportunity Identification

·
3.

Alertness, Prior Knowledge, and Pattern Recognition

·
3.

From Idea Generation to Opportunity Recognition

Learning Objectives

· 3.1 Explain how the entrepreneurial mindset relates to opportunity recognition.

· 3.2 Employ strategies for generating new ideas from which opportunities are born.

· 3.3 Apply the four pathways to opportunity identification.

· 3.4 Demonstrate how entrepreneurs find opportunities using alertness, prior knowledge, and pattern recognition.

· 3.5 Connect idea generation to opportunity recognition.

THE ENTREPRENEURIAL MINDSET AND OPPORTUNITY RECOGNITION

>> LO 3.1 Explain how the entrepreneurial mindset relates to opportunity recognition.

Chapter 2

, we explored the concept of mindset and its importance to identifying opportunities. Applying what we have learned about mindset, it is evident that an entrepreneurial mindset positions you to identify opportunities and to take action. Entrepreneurship is all about openness to new ideas, new opportunities, and new ways of acting on them. Indeed, this is demonstrated time and again by countless entrepreneurs’ stories, regardless of the diversity of their industries, whether for-profit or nonprofit, whether a startup or within an existing corporation. All the entrepreneurs featured throughout this text, including Juan Giraldo, founder of Waku; Saurabh Gupta, founder of Gyan-I; and Maliha Khalid, founder of Doctory, have found ways to identify new opportunities that address unmet needs in the marketplace. Let’s take a closer look at what opportunity really means.

What Is an Opportunity?

There are many definitions of opportunity, but most include references to three central characteristics: potential economic value, novelty or newness, and perceived desirability.

We define

opportunity

as a way of generating value through unique, novel, or desirable products, services, and even processes that have not been previously exploited in a particular context. Jazmine Valencia is a good example of an entrepreneur who found an opportunity to provide personalized services for musicians. For an opportunity to be viable, the idea must have the capacity to generate value.

Opportunity: a way of generating profit through unique, novel, or desirable products or services that have not been previously exploited.

Master the content at

edge.sagepub.com/neckentrepreneurship2e

Value can take many forms. The most common form of value is economic value: the capacity to generate profit. Two other forms of value—social value and environmental value—are less understood but equally important. An opportunity has social value if it helps to address a social need or creates social good. Environmental value exists if the opportunity protects or preserves the environment. We address this further in

Chapter 1

on social entrepreneurship. Startup Bios Urn, headquartered in Spain, created a biodegradable urn in which to grow trees from human ashes, to address the environmental problems of a growing population (many people don’t have the land to bury their loved ones) and the polluting effects of traditional burials.

All forms of value, however, are predicated on the assumption that there is a market populated with enough people to buy your product or service. This does not mean that a large market is required; there are countless examples of successful businesses that run on a small scale, catering to a market that is limited in one way or another. The key is to scale the business and its costs to the size of the market—to balance supply with demand. Here again, the entrepreneurial mindset is what enables us to envision how a new product or service can generate value for a niche, an age group or interest segment, a geographic area, or a larger population.

Entrepreneurship in ActionJazmine Valencia, JV Agency

Jazmine Valencia, founder, JV Agency

Photo courtesy of Jazmine Valencia

Jazmine Valencia operates at the heart of one of the most disrupted and fastest-changing industries of the past decade. She has been on the cutting edge of the music industry since the beginning of her career. In 2012, she started from the bottom at the Island Def Jam Music Group label as an intern, working her way to director of digital marketing. During her

years at Island Def Jam, she witnessed the dawn of social media as an effective marketing tool before it was consolidated into the handful of platforms we have today, such as Facebook, YouTube, and Instagram. Jazmine saw the changes and she saw the possibilities. “In the beginning people didn’t yet know exactly what social media could do for music marketing as it had yet to establish itself as a mainstream medium and it was not clear if major players would, but I wanted to be ready.”

In 2014, Island Def Jam Music Group split into multiple labels and Jazmine’s entire client list was shaken up. As Jazmine said, “It was like going through a divorce and we were all confused kids.” Although her job was secure, her day-to-day had changed drastically, and many of the artists she had spent years building relationships with were no longer hers. But Jazmine had skills that the artists needed, especially in this time of uncertainty. What those artists needed was help with marketing in this new world of music distribution. As a result, she left Island Def Jam in 2015 and started consulting with her clients who had been displaced in the split. She soon realized she was offering a little too much help for free. It was time, she thought, to “jump head first into starting my own music marketing agency.”

It was an organic transition from Def Jam to her own business because it was easy to sell herself based on what she had already accomplished. There was no question of what she was capable of doing for musicians, and this made it easy to attract clients she had previously worked with as well as new ones. “It didn’t seem like a risk to me; it felt easy and it happened by accident. I said to myself, ‘Let me just go with this and see where it gets me.’”

Today, JV Agency is a marketing company handling campaigns for all levels of musicians from all genres. Jazmine leads and advises some of music’s biggest artists, from indie rock band The Killers to Canadian singer-songwriter Shawn Mendes. She helps grow careers for some of the most talented musicians today using an artist-focused marketing approach to growth. This means she handles their digital marketing, social media, brand strategy, international distribution, and many other aspects of an artist’s business. She credits her success in the industry to her creativity, confidence, and ability to thrive under pressure, all things she honed early on while at Island Def Jam. One thing Jazmine wishes everyone would do is replace the word “failure” with “lesson” because she feels that failure has such negative connotations. “I wish we could use a positive word for failure so people would be less afraid of making mistakes and more capable of learning lessons from their experiences.” Jazmine knows that without failure and the associated learning, it’s hard to see new opportunities. “Sometimes you have to learn lessons and pay the price in the short term and to realize that setbacks can be opportunities in disguise.”

Critical Thinking Questions

1. Why did Jazmine start her own business?

2. Why does she recommend doing what you are passionate about?

3. What is Jazmine’s perspective on failure? •

Source: Jazmine Valencia (interview with author, January 15, 201

)

In addition, a new idea that constitutes an opportunity, whether it is a product, service, or technology, must be new or unique or at least a variation on an existing theme that you are confident people will accept and adopt. The idea must involve something that people need, desire, and find useful or valuable. Or there must be a significant problem to solve. Finding solutions to problems and meeting customer needs are the essence of opportunity recognition.

Innovation, Invention, Improvement, or Irrelevant?

Of course, all ideas are not created equal and not all ideas are venture opportunities. Part of recognizing an opportunity is the ability to evaluate ideas and identify those with the highest likelihood of success. One framework for doing this is to rate an idea on four different dimensions: The idea may be an innovation, an invention, an improvement, or irrelevant. Of these, innovations and inventions are high in novelty, while improvements and irrelevant ideas are low in novelty (see

Figure 3.1

A successful idea scores highly as an innovation if the product or service is novel, useful, and valuable. Today’s smartphone, and the basic cellular phone of the 19

0s, are both good examples of a product that meets all the requirements of a successful innovation.

Innovations and inventions are often paired together, but the difference between them lies in demand. Inventions, by definition, score highly for novelty, but if an invention does not reach the market or appeal to consumers, then it will be rendered useless. Inventions that succeed in finding a market move to the innovation stage.

Description

Figure 3.1 Idea Classification Matrix

Source: Neck, H. M. (20

). Idea generation. In B. Bygrave & A. Zacharakis (Eds.), Portable MBA in entrepreneurship (pp. 27–52). Hoboken, NJ: John Wiley & Sons.

As an example of an invention that developed into an innovation, consider the story of Dr. Spencer Silver, the inventor of

Post-it® notes

.3 More than 35 years ago, Silver was a scientist working for 3M. His task was to devise a new adhesive, something stronger and tougher that had never been seen before. During his experiments, he discovered an adhesive that was none of those things—although it did stick to surfaces, it didn’t bond tightly to them. For years, Silver tried to persuade his colleagues that he had found something meaningful—the only problem was that he had no idea what the adhesive could be used for. Art Fry, another 3M scientist, had a problem of his own. Every time he tried to bookmark particular pages of the hymn book for choir practice with pieces of paper, they would fall out. Fry remembered Silver’s discovery and they ended up working together to develop what we now know as the Post-it® note.

Post-it® notes

Shutterstock Royalty-free stock photo ID: 64719535

The Post-it® note took off because it was novel, useful, and practical—but it became an innovation of high value only when it hit the market. Yet ideas do not always need to be unique or novel to appeal to customers. There are many ideas that focus on improvement of existing products. Take folding sunglasses, serrated ice cream scoops, or liquid paper, for instance. Each product has been revisited and improved on. The products may not be high in novelty, but there is still a strong market for these products, as many people will find them useful to a degree.

Finally, there are ideas that fall into the irrelevant category, scoring low on both novelty and usefulness. The food and beverage industry, in particular, has experimented with some changes over the years that have failed to meet consumer expectations. Pepsi introduced a morning pick-me-up drink called Pepsi A.M., beverage giant Coors started selling mountain spring water, and soup company Campbell’s combined soup and a sandwich into one frozen microwaveable meal—all of these are arguably examples of irrelevant ideas.4

However, it is difficult to fully pigeonhole ideas into neat categories. How can we really predict whether an idea is inventive, innovative, or irrelevant? Something we perceive as irrelevant and useless might appeal to someone else. For example, who would have thought fidget spinners would have been in such high demand? Or that Mood Rings would turn into such a trendy fashion item?5 Or that the Slinky would make more than $3 billion?6

Even the most apparently bizarre inventions can find a home. Take Billy Bob Teeth, invented in the 1990s. Fake rotting teeth might seem absolutely ludicrous to some, but more than 20 million units have been sold, generating more than $50 million in profit.7

Fidget Spinners.

©iStockphoto.com/filadendron

Opportunities spring from ideas, but not all ideas are opportunities. Although we all have the capability to generate a huge range of ideas, not everyone knows how to turn an idea into a valuable, revenue-generating opportunity. Making an idea a reality is a process that requires time, resources, commitment, and a great deal of work, which can seem a little daunting to many of us. But if it were easy, wouldn’t everyone do it?

As the idea classification matrix illustrates, most opportunities in entrepreneurship demand high value and some degree of novelty. But how do we identify the right opportunities? The first step in the opportunity identification process is generating as many ideas as we can, for it is out of thousands of ideas that opportunities are born.

OPPORTUNITIES START WITH THOUSANDS OF IDEAS

>> LO 3.2 Employ strategies for generating new ideas from which opportunities are born.

The way to get good ideas is to get lots of ideas and throw the bad ones away. Different strategies can be employed and not all will work for you.

—Linus Pauling, Nobel Laureate in Chemistry

The first step in creating and identifying opportunities is idea generation; the more ideas we generate, the greater the likelihood we will find a strong opportunity. At this stage, it’s important to embrace the openness of an entrepreneurial mindset to consider ideas that might seem impractical, obvious, wild, or even silly. On the surface, you never know what may turn out to be a good or bad idea.

The Myth of the Isolated Inventor

Here’s a quick exercise: Take a minute, close your eyes, and think of an idea for a new business. Ready? Think hard. How many ideas did you come up with? If you have come up with very few or no ideas at all, you are in good company. Ideas don’t just spring fully formed into our minds, although the myth of the isolated inventor, working tirelessly from his or her workshop or laboratory, may lead us to think so.

In fact, as recent literature shows, history’s greatest inventions occurred very differently from what we may have been taught. For instance, most of us learned in history class that Eli Whitney invented the cotton gin in 1793—except he didn’t, really. In fact, he simply improved existing cotton gins by using coarse wire teeth instead of rollers. In other words, he took an existing product and enhanced it to make it more useful. The cotton gin was actually a result of the work of a group of different people who made improvements over a number of years, which finally resulted in a popular marketable innovation.8

Similarly, Thomas Edison did not invent the lightbulb—in fact, electric lighting and lightbulbs existed before he came along. Edison’s discovery was a filament made of a certain species of bamboo that had a higher resistance to electricity than other filaments. Again, he took an existing product and made it more useful and valuable. Edison’s biggest contribution to the lightbulb was making it more marketable.9

Many of the best-known inventions exist because of both a substantial number of people working on them simultaneously and improvements made by groups over the years or even centuries. Many sewage treatment plants and irrigation systems today use a rotating corkscrew type of pump known as Archimedes’ screw, which dates back to the 3rd century BC. Although its invention is attributed to the Greek scientist Archimedes, chances are he did not devise it on his own—and even if he did, it has been modified and adapted in a multitude of ways around the world. Other inventions with long and varied histories include concrete (developed by the Romans around 300 BC); optical lenses (another ancient Roman discovery, made practical in 13th-century Europe); gunpowder (invented in the 9th century in China); and vaccination (first developed in the 1700s but not widely implemented until more than a century later). As history shows, there is very little reason to credit just one person for the creation of a novel product or service.10

Regardless of who is responsible for inventions and innovations, we can safely say that each of those successful products or services began with an idea. Opportunities emerge from thousands of ideas, but how can we learn to generate thousands of ideas? Let’s take a look at some strategies we can use for idea generation. Keep in mind, however, that all ideas are equal! Later in the chapter, and certainly later in the text, we’ll talk more about assessing whether good ideas are entrepreneurial opportunities.

Entrepreneurship Meets EthicsThe Ethics of Taking Someone’s Idea

Consider this scenario: You’re on a public Internet forum or social networking site and someone has posted an idea for a really innovative new product. Despite the enthusiastic responses, the person tells the forum that he wants to work on the idea as a hobby rather than turn it into a business. You are one of those people who sees huge potential in the idea, but what do you do next? If you take the idea and run with it, would you consider this ethical?

The answer to this really depends on your own personal code of ethics, which varies from one person to another. In general, your personal code of ethics are the principles used to guide your decision making and identify what is right or wrong. One person’s code could justify that if something is posted on a public forum, then the poster does not mind other people knowing about the idea and therefore the opportunity is there for the taking. Another person’s code could be exactly the opposite. Still another person’s code could be somewhere in the middle.

But what would happen if the message was posted on a private forum set up specifically for entrepreneurs to swap ideas in a secure environment based on trust? What do you do then? Using someone else’s idea in this scenario may not be illegal, but exploiting an idea from one of those members could be considered a breach of trust and therefore unethical.

The online world is ripe with ethical quandaries. One way to make the right decision is to examine your own ethical standards and ask, If the situation were reversed, what would you think? Sometimes looking at your dilemma from the other person’s point of view creates greater clarity in terms of right and wrong. Seeking advice from mentors you trust and respect are ways to test the efficacy of your actions. One rule of thumb to help you handle online ethical dilemmas is this: Ask yourself if your behavior was to be published on the front page of the Wall Street Journal, would you be ok with this?

Critical Thinking Questions

1. Put yourself in the shoes of the poster on the private forum. When they post, is there a risk of the idea being taken by others?

2. Sharing ideas with others is part of the Entrepreneurship Method in this book. Is it possible to share new ideas and protect them at the same time?

3. What other rules of thumb (besides the Wall Street Journal front page test) could be used to help you navigate ethical situations? •

Seven Strategies for Idea Generation

There are countless different ways to generate ideas—from the informal (but not very effective) type illustrated above, such as “close your eyes and think of an idea!” to more structured idea generation techniques, which we describe below.

Researchers have defined many formal methods for idea generation. Out of these, we have chosen seven main strategies that we believe are effective in the generation of entrepreneurial ideas:

· analytical strategies

· search strategies

· imagination-based strategies

· habit-breaking strategies

· relationship-seeking strategies

· development strategies

· interpersonal strategies

Although not all of the strategies may suit everyone, each can help us forge new connections, think differently, and consider new perspectives in different ways. Let’s take a closer look at each.

Analytical strategies

involve taking time to think carefully about a problem by breaking it up into parts, or looking at it in a more general way, to generate ideas about how certain products or services can be improved or made more innovative. In some cases, you may see very little correlation between problems until you think about them analytically. For example, in one study, a group was asked to think about different ways of stacking certain items. The ideas they came up with were then considered as ways to park cars. In another study, researchers found that artists who carried out critical analysis before they started their work, as well as during the task, were more successful than those who did not use the same analysis.

Analytical strategies: actions that involve taking time to think carefully about a problem by breaking it up into parts, or looking at it in a more general way, to generate ideas about how certain products or services can be improved or made more innovative.

Designing a door hinge may require use of search strategies as a stimulus.

Credit: ©iStockphoto.com/Gizmo

Search strategies

involve using a stimulus to retrieve memories in order to make links or connections based on personal experience that are relevant to the current problem. For example, say you were asked to design a door hinge. Here, the door hinge is a stimulus—a starting point for searching for solutions to the problem. Although you may not have any prior experience of designing door hinges, you could search your memory to see if you can think of anything that you can associate with a door hinge to support the design process. For example, the search process may stimulate your memory of the opening and closing of a clam shell. By drawing on this memory, you could use your knowledge of the clam shell and apply it to the hinge design. This strategy illustrates our ability to be resourceful in generating associations between objects that at first appear to have no apparent relationship with each other.

Search strategies: actions that involve using a stimulus to retrieve memories in order to make links or connections based on personal experience that are relevant to the current problem.

Imagination-based strategies

involve suspending disbelief and dropping constraints in order to create unrealistic states or fantasies. For example, the Gillette team used imagination to come up with a new shampoo by imagining themselves as human hairs. Though playful and even absurd, such freeing behavior allows our minds to think in ways we never thought possible.

Imagination-based strategies: actions that involve suspending disbelief and dropping constraints in order to create unrealistic states or fantasies.

One of the remarkable things about generating ideas, especially ideas that come from imagination-based strategies, is that one idea can lead to another, yielding a pipeline of great ideas that may impact the world. For example, scientists at NASA have needed to use a great deal of imagination to come up with tools, protective clothing, personal care items, foodstuffs, and other inventions that can be used in outer space. Along the way, these ideas led to other inventions that have changed many people’s lives here on Earth; some of them are shown in
Figure 3.2
.

To think creatively, our mind needs to break out of its usual response patterns.

Habit-breaking strategies

are techniques that help to break our minds out of mental fixedness in order to bring about creative insights. One strategy is to think about the opposite of something you believe, in order to explore a new perspective. Another method focuses on taking the viewpoint of someone who may or may not be involved in the situation. A popular habit-breaking strategy is to take the role of a famous or admired individual and think about how he or she would perceive the situation. This is sometimes called the Napoleon technique, as in “What would Napoleon do?”

Habit-breaking strategies: actions that involve techniques that help to break our minds out of mental fixedness in order to bring about creative insights.

Relationship-seeking strategies

involve consciously making links between concepts or ideas that are not normally associated with each other. For example, you could make a list of words that are completely unrelated to the problem you are trying to solve, then list the characteristics of each item on the list. Next, apply those characteristics to the problem in order to come up with ideas to solve the problem. The purpose of this exercise is to stimulate the mind into making connections that would otherwise have gone unnoticed.

Relationship-seeking strategies: plans of action that involve consciously making links between concepts or ideas that are not normally associated with each other.

Description

Figure 3.2 Everyday Spinoffs From NASA

Source: Chino, M. (2014). You won’t believe how many world-changing inventions came from NASA. Inhabitat. Retrieved from

INFOGRAPHIC: You Won’t Believe How Many World-Changing Inventions Came From NASA

; National Aeronautics and Space Administration. (2016). Spinoff. Retrieved from

https://spinoff.nasa.gov/Spinoff2016/pdf/2016_Brochure_web

Development strategies

are employed to enhance and modify existing ideas in order to create better alternatives and new possibilities. A common exercise in idea enhancement is to gather a group of four to six people together. Each person writes down three ideas, which are then passed around the group. Then every member spends 5 minutes suggesting improvements to the ideas to make them more feasible and effective. Group brainstorming is a good example of a development strategy.

Development strategies: actions that involve enhancing and modifying existing ideas in order to create better alternatives and new possibilities.

Interpersonal strategies

require group interaction; ideas are generated as a group and the group builds on each other’s ideas. Brainstorming is a very common interpersonal tool for generating ideas that emphasize the creativity of the group over the individual.

Interpersonal strategies: actions that involve group members generating ideas and building on each other’s ideas.

The point of these seven strategies is to focus on generating enough ideas to eventually create pathways to new opportunities. Not all approaches will work for every person. Try a few and see what happens. As you try, you are training your brain to think more creatively!

FOUR PATHWAYS TO OPPORTUNITY IDENTIFICATION

>> LO 3.3 Apply the four pathways to opportunity identification.

When the famous explorer George Leigh Mallory was asked why he climbed Mount Everest, he answered, “Because it’s there.”

This indicates that Mallory took the opportunity to climb Everest simply because it was there for the taking. But how do entrepreneurs know when “the mountain” is there and when or if they should start to climb? In the case of Mallory, the idea was climbing Mount Everest, but it really wasn’t an opportunity until he convinced himself that (1) the mountain was climbable and (2) he could do it. In previous sections we’ve talked about where ideas come from. Now it’s time to shift our MindshiftIn Love With Your Idea?

Find some classmates and practice this quick brainstorming exercise. It’s best to have a group of five or more. The more people you have, the more powerful the exercise will be. You’ll need a few materials before you begin:

1. A sheet of paper for every group member

2. A pen or pencil for every group member

3. A paper clip that will not be used—or a picture of a paper clip, if you are working with a large group

4. A timer

Here are your instructions. They are quite simple: You have 5 minutes to brainstorm as many uses as you can for a paper clip. Yes, a paper clip!

Go for quantity, do not judge your ideas, and keep in mind that wild ideas are just as acceptable as are mundane ideas. Start the timer and go.

After 5 minutes have passed, stop brainstorming uses for a paper clip and count how many ideas each person has generated.

Identify

the person with the most ideas—the winner!

Ask the winner to identify his or her first and second idea. Then ask the other group members to raise their hands if their list included at least one of these two ideas. Usually most of the group will raise their hands.

The point of the exercise is you shouldn’t fall in love with the first ideas that pop into your mind because most people will come up with those same ideas.

Now ask the winner to share an idea from the very bottom of his or her list. Typically, you will find that not many people in the room have that idea on their lists. The thoughts we generate when we keep “digging,” prodding ourselves to think of more and more ideas, are the ones that tend to be the most original and novel.

Paper clips

Credit: ©iStockphoto.com/Photoevent

Brainstorming takes practice and it also takes energy, as it requires pushing beyond the easiest, most obvious ideas. Don’t fall in love with the ideas at the top of your list. They won’t be novel. Instead, keep going to get the most innovative ideas.

Critical Thinking Questions

1. Reflect on your own idea generation methods. Do you tend to fall in love with your early ideas? Why or why not?

2. Which of the seven idea generation strategies was applied in this Mindshift?

3. In what ways did the exercise challenge your previous assumptions and beliefs? Did you learn anything that surprised you? •

An opportunity can be a new product or service, new markets, new channels of distribution, new means of production or supply, or new ways of organizing.

Favorable opportunities are those that are valuable, rare, costly to imitate, and fit the capabilities of the entrepreneur.

Valuable means there is a market of customers; rare means they offer some novelty that doesn’t currently exist for customers; costly to imitate creates barriers to entry to other entrepreneurs; and fit aligns with the skills and knowledge of the entrepreneur or founding team. In this section, we focus on different pathways that entrepreneurs use to identify opportunities. Think of these pathways as steps, and as you travel the steps, reflect on how the opportunity identified is a bit more complicated and the environment in which it’s identified is a bit more uncertain. The increase in complexity and uncertainty may yield more valuable opportunities (see
Figure 3.3
).

Description

Figure 3.3 Increasing Complexity and Unknowingness in Opportunity Creation

Source: Neck, H. (2019). Beyond the entrepreneurial mindset. Keynote presentation for the Kern Entrepreneurial Engineering Network Annual Conference, January 5, 2019, Dallas, TX.

Finding opportunities is the least complicated and perhaps most common way to identify new opportunities. The

find pathway

assumes that opportunities exist independent of entrepreneurs and are waiting to be found. Generally, an opportunity is found when the entrepreneur sees a clear problem and develops a solution. The problem is known to most, but the entrepreneur is the one who acts on the potential solution. Jason Craparo saw a clear problem. Paper business cards are passé. Most people forget to carry them or lose the ones they are given by others. However, connecting to new people at events in order to follow up with them later is essential to business and networking. He founded Contap, an online platform that enables users to connect and share information. Users can connect with one another by tapping the Contap logo on their phones when they meet. They can instantly share numbers, email addresses, websites, and any other connected social media accounts. Jason found a solution to the business card problem.

Find pathway: a pathway that assumes that opportunities exist independent of entrepreneurs and are waiting to be found.

The

search pathway

is used when entrepreneurs are not quite sure what type of venture they want to start, so they engage in an active search to discover new opportunities.

We all possess certain information sets or knowledge bases.

By actively searching these sets, we can access a wealth of information and uncover new opportunities. Typically, entrepreneurs find an area that they are interested in and then start searching for business opportunities. For example, Jen Gutman and Liz King met in the International Culinary Center pastry program. During their program, they would travel around Chinatown and other areas of New York City, tasting everything. They knew they wanted to start a pastry business together but were not sure what they wanted to do. They knew New York City didn’t need another bon bon, but they wanted to turn the beloved Snickers bar into candy that capitalized on the artisanal food trend. Their idea? Recreate and make better Snickers and similar candy using high-quality, local, and organic ingredients.

They each had independent jobs until Liz discovered the Brooklyn Flea, a flea market for new food products. They began selling at the Brooklyn Flea in 2009 on weekends.

Then they set up a pop-up store for a month, and soon their business, Liddabit Sweets, was growing! They developed an online store and even built a storefront in Brooklyn. Passion led their search, and their search led them to start Liddabit Sweets.

Search pathway: a pathway used when entrepreneurs are not quite sure what type of venture they want to start, so they engage in an active search to discover new opportunities.

Contap founder Jason Craparo found a solution to paper business cards with his online platform that allows people to share their information virtually.

Courtesy of Jason Craparo, Contap.

Effectuating opportunities involves using what you have (skills, knowledge, abilities) to uncover an opportunity that uniquely fits you. The opportunity builds on your experience, abilities, networks, and your confidence to act under conditions of uncertainty. Unlike finding and searching, the

effectuate pathway

is more about creating opportunities rather than simply uncovering them. To identify opportunities, this approach advocates using what you know, whom you know, and who you are. Your role as an entrepreneur is to take action and see how the market responds, recognize patterns, and learn from iteration to define the opportunity as it evolves. FlowDog, a canine aquatic and physical therapy facility for dogs, is a clear example of effectuation. Chris Cranston had deep knowledge of physical therapy, given her 13 years of practicing as a sports medicine physical-therapist. She also had a deep love for animals. Tired of dealing with the human side of medicine, she enrolled in a canine physical therapy course at the University of Tennessee. Armed with her extensive knowledge in sports medicine and her newfound knowledge in canine physical therapy, she began testing the market in the Boston area. She started a mobile practice to treat dogs in their homes, then she started a physical therapy clinic for an animal hospital outside of Boston, and she eventually bought a dog swimming facility and converted it to a therapeutic and physical therapy clinic for dogs. Each iteration of her business helped her create more experience, build deeper networks, and take confident action. In 2017, after 10 years of operating the clinic, she sold it to a large animal hospital in New England.

Design pathway: a pathway that can uncover high-value opportunities because the entrepreneur is focusing on unmet needs of customers, specifically latent needs.

The final pathway, the

design pathway

, is one of the most complex, yet it can be the most value-creating approach. It can uncover high-value opportunities because the entrepreneur is focusing on unmet needs of customers—specifically, latent needs (needs we have but don’t know we have). Design is at the top of the staircase in

Figure 3.3

and is considered the most complicated pathway because of the practice and imagination it takes to uncover true unmet needs. As a matter of fact, we devote an entire chapter (

Chapter 4

) to this pathway! Design is another way to create opportunities because by identifying unmet needs, the entrepreneur is creating a new market. The most iconic example of using the design pathway to create a new market is the iPhone. The introduction of the iPhone (even though the BlackBerry existed) created a new global market of communication and connection. When we look back we can ask ourselves, did we need an iPhone? If the answer is “Well, I can’t imagine living without one today,” then you now understand what a latent need is!

Effectuate pathway: a pathway that involves using what you have (skills, knowledge, abilities) to uncover an opportunity that uniquely fits you.

The four pathways can be classified as either a discovery approach or a creation approach (see
Table 3.1
).

The discovery approach assumes that opportunities exist and we rely on entrepreneurs to discover them. Creating, on the other hand, assumes that the entrepreneur creates the opportunity rather than simply uncovering it.

Table 3.1

Discover

ing or Creating Opportunities

	Discovery	Creation
Opportunity pathways	Find and Search	Effectuate and Design
Assumptions	The opportunity exists and is waiting to be identified	The entrepreneur creates the opportunity
Role of the entrepreneur	Be alert to and scan the environment	Take action, build, iterate
Level of experience and prior knowledge needed to identify	Low	High
Potential value of opportunity	Lower	Higher
Action orientation	Risky	Uncertain

Source: Alvarez, S. A., & Barney, J. B. 2007. Discovery and creation: Alternative theories of entrepreneurial actions. Strategic Entrepreneurship Journal, 1(1–2): 11–26.

attention to turning ideas into marketable and valuable opportunities.

ALERTNESS, PRIOR KNOWLEDGE, AND PATTERN RECOGNITION

>> LO 3.4 Demonstrate how entrepreneurs find opportunities using alertness, prior knowledge, and pattern recognition.

As we have discussed, access to the right information is one of the key influences of opportunity identification. However, access to information is not enough—it is how this information is used that makes the real impact.

Alertness

To address the question of why some people spot opportunities and some don’t, researchers have suggested that opportunities are everywhere waiting to be discovered, but discovery is made only by those entrepreneurs who have

alertness

, which is the ability to identify opportunities in their environment.

This means that entrepreneurs do not necessarily rationally and systematically search their environment or their particular information sets for opportunities. Rather, they become alert to existing opportunities through their daily activities—in some instances, they are even taken by surprise by what they observe.

Alertness: the ability some people have to identify opportunities.

Think back to Dr. Spencer Silver, the inventor of Post-its®, mentioned earlier in this chapter. Silver was not actively searching for an opportunity to invent a specific adhesive to create sticky notes, but he became alert to the idea through his scientific experiments. He then collaborated with a colleague to create a product that would prove to be a huge market success. Silver’s experience adheres to this concept of alertness that suggests that we are capable of recognizing opportunities even when we are not looking for them.

Richard Lindon with enhanced rugby balls

Credit: Wikimedia Commons/Public Domain

The origin of the rugby football is another interesting example of alertness.

Until 1860, footballs were made of animal bladders, which were blown up into a plum or pear shape, then tied and sealed. Because the bladders were constantly exploding, shoemakers were often called upon to encase the bladders in leather to protect them from bursting so easily. A young shoemaker in the town of Rugby, England, named Richard Lindon was employed in this trade, and he enlisted the help of his wife to inflate the bladders by blowing air into them. However, after his wife died from an illness attributed to contact with infected pigs’ bladders, Lindon started to look for a safer option. He found a way to replace the bladders with inflated rubber tubes and used a pump to inflate the footballs without any contact with the mouth. He is credited with inventing the oval rugby football we know today, as well as the hand air pump. The point is that although Lindon had not started out looking to revolutionize the football, he was able to recognize an opportunity when it appeared.

Some researchers believe that entrepreneurs may be more adept at spotting opportunities than non-entrepreneurs for several reasons:

· They have access to more information.

· They may be more prone to pursuing risks than avoiding them.

· They may possess different cognitive styles from those of non-entrepreneurs.

These reasons can be attributed to an entrepreneur’s level of alertness as well as their persistence and optimism. Persistence helps entrepreneurs power through obstacles and optimism helps drive persistence.

The combination of persistence and optimism encourages a state of alertness and readiness to identify and act on new opportunities that others may miss or just don’t see.

Building Opportunities: Prior Knowledge and Pattern Recognition

There has been a great deal of research on measuring how entrepreneurs recognize opportunities. We have explored the importance of actively searching for opportunities, alertness to recognizing opportunities when they arise, and the importance of taking action to support the formation of opportunities. But once entrepreneurs have identified opportunities, how do they go about building on them?

Allen Lim was able to use his prior knowledge to build his company, Skratch Labs.

Courtesy of SkratchLabs

Researchers have identified two major factors in the building of opportunities: prior knowledge and pattern recognition.

As described in our earlier discussion of the finding approach,

prior knowledge

is information gained from a combination of life and work experience. Many studies indicate that entrepreneurs with knowledge of an industry or market, together with a broad network, are more likely to recognize opportunities than those who have less experience or fewer contacts.

Successful entrepreneurs often have prior knowledge with respect to a market, industry, or customers, which they can then apply to their own ventures.

Prior knowledge: the information gained from a combination of life and work experience.

Allen Lim, founder of Skratch Labs, a company that provides tasty, natural hydrated food and drinks to athletes, was able to apply the knowledge he gained while working as a sports scientist and coach for professional cycling teams.

Similarly, Sara Blakely, founder of Spanx, spent weeks researching the shapewear industry before using the knowledge she gained to create her seamless pantyhose product. Steve Sullivan, founder of functional and fashionable outdoor clothing company Stio, spent a number of years working in outdoor retailing before launching his venture.

These are just a few examples of how prior knowledge can be crucial in an entrepreneur’s ability to build on an opportunity.

Another key factor in building and recognizing opportunities is

pattern recognition

: the process of identifying links or connections between apparently unrelated things or events. Pattern recognition takes place when people “connect the dots” in order to identify and then build on opportunities.

The “nine-dot exercise” (
Figure 3.4
) illustrates the limitations of our thinking. The challenge is to connect nine dots by drawing four straight lines without lifting your pen from the paper and without backtracking. If you have difficulty completing the task, your mind may be blocked by the imaginary “box” created by the dots. Try to look beyond that imaginary constraint.

Description

Figure 3.4 Nine-Dot Exercise

Source: Raudsepp, E., & Hough, G. (1977). Creative growth games. New York, NY: Jove. The nine-dot exercise is referred to as “Breaking Out” and is found on page 29. The solution is on page 113.

Pattern recognition: the process of identifying links or connections between apparently unrelated things or events.

In a recent study, highly experienced entrepreneurs were asked to describe the process they used to identify opportunities.

Each entrepreneur reported using prior knowledge to make connections between seemingly unrelated events and trends. In cognitive science, pattern recognition is thought to be one of the ways in which we attempt to understand the world around us.

Some of the simplest ideas are born from making links from one event to the other. For example, keen travelers Selin Sonmez and Niko Georgantas were fed up with hauling their baggage around with them while waiting to check in to their accommodation. Sonmez said, “Niko and I always ended up schlepping our luggage around on the first and last days of our Airbnb stays. Similarly, we oftentimes wished to go to an event or go shopping but decided against it to because carrying bags around is a hassle. We hoped someone would find a solution to rid us of the burden. For months we wished. In the beginning of 2017, we decided to CREATE the solution.”

To solve this problem, Sonmez and Georgantas cofounded luggage storage company Knock Knock City, which partners with different shops to allow people to drop off their luggage for $2 an hour. Not only do travelers have the opportunity to explore new cities baggage-free, but the shops get to earn revenue by renting out unused space.

Moving from the idea to identifying an opportunity may seem like a daunting prospect, but we can all train ourselves to get better at recognizing opportunities. We do so by identifying changes in technology, markets, and demographics; engaging in active searches; and keeping our mind open to recognizing trends and patterns. And always look beyond the imaginary box!

FROM IDEA GENERATION TO OPPORTUNITY RECOGNITION

>> LO 3.5 Connect idea generation to opportunity recognition.

As we have explored, for an opportunity to be viable, the idea must be new or unique or at least a variation on an existing theme that you are confident people will accept and adopt. It must involve something that people need, desire, find useful, or find valuable, and it must have the capacity to generate profit. We cannot credit divine intervention as the source of new ideas, nor is every idea an opportunity. The best ideas are based on knowledge and the ability to transform the idea into a viable opportunity.

Let’s take a look at the process that connects idea generation to opportunity recognition (see
Figure 3.5
). Typically, entrepreneurs go through three processes before they are able to identify an opportunity for a new business venture: idea generation, creativity, and opportunity recognition.

Description

Figure 3.5 Idea Generation, Creativity, and Opportunity Recognition

Source: Baron, R. A., & Shane, S. A. (2008). Entrepreneurship: A process perspective (p. 69). Mason, OH: Thomson/South-Western Educational, a part of Cengage Learning, Inc. Reproduced by permission.

www.cengage.com/permissions

The journey from idea to opportunity is important to recognize because the difference between someone who comes up with an idea and an entrepreneur is that the entrepreneur turns this idea into an actionable opportunity that has the potential to become a viable business and generate profit.

Figure 3.5

illustrates the journey from idea to opportunity. Though the goal is recognizing a value opportunity, the journey starts with lots of ideas—let’s say 100 ideas. These ideas can be generated in many ways, potentially through the strategies we discussed earlier in the chapter. Of those 100 ideas, you need to determine which ones are the most useful for potential customers. Let’s say, then, that the original 100 are narrowed to 25. Of the remaining 25 ideas, you then need to determine which ones can generate economic value, which is profit. Finally, the entrepreneur is the one who acts on the opportunity.

Along this continuum of idea generation to creativity to opportunity recognition depicted in
Figure 3.5
, educators and entrepreneurs Dan Cohen and Greg Pool have developed an empirically proven method for identifying and selecting high-potential ideas that can be converted to new opportunities. Their approach is called IDEATE: Identify, Discover,

Enhance

Anticipate

Target

, and

Evaluate

(see
Table 3.2
).

Let’s apply the IDEATE method to the evolution of the modern-day gourmet food truck.

The mobile food business is not a new concept, but traditionally street food has been associated with fast food such as burgers, hot dogs, and ice cream; these are the menu items often sold from food trucks, kiosks, and food carts. Yet in the past decade, the nature of the mobile food business has changed as the street food industry has become increasingly upscale and popular with “foodies.” Using the Identify stage, we could observe that food trucks are popular but customers really want more healthy options. A possible concept could be a food truck that serves fresh seasonal salads and healthy grain bowls, with a menu that changes with the seasons.

Building on this food truck concept in the Discover stage, the opportunity could morph into an entirely different concept that takes into consideration social, demographic, political, or other environmental changes. For example, given that waste management is a significant issue in the world, and islands of plastic are forming in our oceans, the salad food truck mentioned above could promote itself not only as healthy for people but also healthy for the planet.

All plates, cups, and utensils would be compostable—even the straws! (see

https://www.ecoproducts.com/compostable_straws.html

). Note how the idea of the food truck has become a bit more innovative and meets the needs of customers, too.

Table 3.2 The IDEATE Model for Opportunity Recognition

Identify	Identifying problems that customers are currently trying to solve, are spending money to solve, but are still not solved to the customers’ satisfaction. Also identifying the underlying causes of the problem.
Discover	Actively searching for ideas in problem-rich environments where there is social and demographic change, technological change, political and regulatory change, and/or change in industry structure.
Enhance	Taking the ideas and expanding to new applications or adding innovative twists. Or simply enhancing existing ideas.
Anticipate	Studying change and analyzing future scenarios as they relate to social, technological, and other global changes and trends.
Target	Defining and understanding a particular target market, validating new ideas with early adopters.
Evaluate	Evaluating whether the solution solves a problem, size of target market, degree of personal interest by the entrepreneur, and skills and abilities of the entrepreneur.

Source: Adapted from Cohen, D. Hsu, D. & Shinnar, R. (2018) Enhancing Opportunity Identification Skills In Entrepreneurship Education: A New Approach and Empirical Test (forthcoming); and Ideate: An empirically proven method for identifying and selecting high potential entrepreneurial ideas. Workbook.

MindshiftPracticing “Identify” in the IDEATE Model

Important to the IDEATE methodology is the ability to identify “headache problems.” They are called headache problems because when one has a headache one usually buys aspirin. Consumers don’t buy products or services; they buy solutions. In the case of a headache, the solution is an aspirin, so they buy aspirin. But other solutions could exist as well. What’s important is your ability to identify headache problems before thinking about solutions. In this Mindshift, you are to identify five headache problems and then create five solutions per problem. We give you an example to help you get started:

Example headache problem: It’s not easy to quickly exchange contact information and younger people don’t carry business cards.

Possible solutions:

1. Contap (discussed in this chapter)

2. Phone bump attachment so when you bump phones the information is transferred automatically

3. QR code that can quickly be scanned

4. I look at my friend’s phone and it recognizes me using iris recognition technology

5. Something connected to LinkedIn that recognizes all the people in your immediate vicinity and will send them requests to connect

At this point, we are not evaluating the ideas above. We are just helping you practice finding headache problems.

Critical Thinking Questions

1. How difficult was it to identify headache problems?

1. How will you analyze whether some of your solutions have customers who a re willing to buy?

2. Do a quick Google search for your solutions. How many already exist? What does that tell you? •

As you enter the Enhance stage, you could morph the food truck opportunity again. Enhancing the idea requires you to expand concepts to new applications or add innovative twists. Maybe the food truck turns into “fresh food” vending machines that are in strategic urban locations and the machines are restocked daily. Or maybe they could be placed in airports, where more and more people want access to healthy food to bring on their flights. Notice now that with the twists, our market just got bigger! We gain more customers by solving more headaches.

Food truck

PriceM/Shutterstock

Applying the original food truck concept to the Anticipate stage could result in an entirely new concept. Here we are forced to think about future scenarios. Food deserts are becoming a serious problem. A food desert is an area that lacks access to affordable healthy food such as fruit, vegetables, grain, and other nonprocessed food. Most of these food deserts are in rural, minority, and low-income neighborhoods with very little access to supermarkets and fresh produce—places where there are more convenience stores than grocery stores.

Ultimately the health of these populations is at risk. How can we morph the food truck concept and anticipate the future? Now we can perhaps think about creating a fleet of food trucks that act as “mini” produce markets. These trucks travel through low-income areas selling healthy food at reasonable prices while also educating the public on how to eat healthy on tight budgets.

In the Target stage, you could take the food-truck-in-food-deserts concept and choose a low-income urban area in which to test the idea before investing in trucks. Or you could take the original food truck concept of seasonal salads and test it in downtown Denver, Colorado—one of the healthiest cities in the United States. The idea here is to find that niche market of early adopters who will help validate your idea.

Research at WorkTesting IDEATE in the Entrepreneurial Classroom

Researchers Cohen, Shinnar, and Hsu (2019) set out to study the impact of the IDEATE method (discussed in Section 3.5 above) versus more traditional methods of opportunity identification. To compare the quality of ideas generated by each method, they took a group of U.S. undergraduate students enrolled in six sections of an Introduction to Entrepreneurship course. Out of the six sections of the course, three sections were taught the IDEATE method while the other three sections (the control group) learned a more traditional opportunity recognition method. Using the IDEATE method, the students were required to generate 100 high-quality ideas, or 25 ideas per IDEATE stage (see Mindshift: Practicing “Identify” in the IDEATE Model).

Because the IDEATE method is rooted in deliberate practice, the researchers hypothesized that this approach was more likely to sharpen students’ skills in opportunity identification. When the experiment was complete, the researchers found “a significant correlation between the IDEATE teaching method and the innovativeness of the opportunities students identified”; they also discovered that “the students taught in sections using the IDEATE approach identified opportunities that were more innovative than the opportunities identified by students in the control sections.” Overall, the researchers concluded that the IDEATE approach proved to be more effective in opportunity identification than any other of the methods tested.

Critical Thinking Questions

1. What are the benefits of the IDEATE method versus the traditional methods of opportunity identification?

2. Which method would you choose to generate your ideas, and why?

3. What would you do with your ideas after you generated them? •

Source: Cohen, D., Shinnar, R. S., & Hsu, D. K. (2019). Enhancing opportunity recognition skills in entrepreneurship education: A new approach and empirical test. 2019 Babson College Entrepreneurship Research Conference, Babson Park, MA.

Finally, the Evaluate stage encourages you to take all of the ideas and begin to “size” the problem:

1. food truck with salads and bowls

2. food truck (same as #1) that only uses compostable packaging and utensils

3. fresh food vending machine

4. fleet of trucks that offer “mini” produce markets in food deserts

For each concept, what is the size of the market? Is the customer reachable? Do I have the ability to reach the customer? Do I even want to work on any of these opportunities? Do I have the skills and ability to execute them? Do I know people who can help me? These are all questions we will be answering throughout this text. •

Get the tools you need to sharpen your study skills. SAGE edge offers a robust online environment featuring an impressive array of free tools and resources.

· Access practice quizzes, eFlashcards, video, and multimedia at
edge.sagepub.com/neckentrepreneurship2e

SUMMARY

3.1 Explain how the entrepreneurial mindset relates to opportunity recognition.

Having the right entrepreneurial mindset is essential to identifying opportunities and taking action to start new ventures. It gives entrepreneurs the confidence to network and find unmet needs in the marketplace and the ability to persist with ideas and build on opportunities.

3.2 Employ strategies for generating new ideas from which opportunities are born.

Of the nearly countless ways of generating ideas, seven strategies have been outlined by researchers: analytical strategies, search strategies, imagination-based strategies, habit-breaking strategies, relationship-seeking strategies, development strategies, and interpersonal strategies.

3.3 Apply the four pathways to opportunity identification.

The four pathways (design, effectuate, search, and find) are useful for explaining how entrepreneurs identify and exploit opportunities.

3.4 Demonstrate how entrepreneurs find opportunities using alertness, prior knowledge, and pattern recognition.

To find opportunities, entrepreneurs need to be alert to random opportunities when they arise, possess knowledge based on past experience, and identify connections between seemingly unrelated things or events through pattern recognition.

3.5 Connect idea generation to opportunity recognition.

IDEATE (identify, discover, enhance, anticipate, target, and evaluate) is an empirically proven method for identifying and selecting high-potential ideas that can be converted to new opportunities.

Key Terms

Alertness

·
Analytical strategies
63

Design pathway

·
Development strategies
64

Effectuate pathway

Find pathway

·
Habit-breaking strategies
63

·
Imagination-based strategies
63

·
Interpersonal strategies
64

Opportunity

Pattern recognition

Prior knowledge

·
Relationship-seeking strategies
63

Search pathway

·
Search strategies
63

Alertness

alertness

, which is the ability to identify opportunities in their environment.

Alertness: the ability some people have to identify opportunities.

Richard Lindon with enhanced rugby balls

Credit: Wikimedia Commons/Public Domain

The origin of the rugby football is another interesting example of alertness.

Some researchers believe that entrepreneurs may be more adept at spotting opportunities than non-entrepreneurs for several reasons:

· They have access to more information.

· They may be more prone to pursuing risks than avoiding them.

· They may possess different cognitive styles from those of non-entrepreneurs.

The combination of persistence and optimism encourages a state of alertness and readiness to identify and act on new opportunities that others may miss or just don’t see.

Building Opportunities: Prior Knowledge and Pattern Recognition

Allen Lim was able to use his prior knowledge to build his company, Skratch Labs.

Courtesy of SkratchLabs

Researchers have identified two major factors in the building of opportunities: prior knowledge and pattern recognition.

As described in our earlier discussion of the finding approach,

prior knowledge

Successful entrepreneurs often have prior knowledge with respect to a market, industry, or customers, which they can then apply to their own ventures.

Prior knowledge: the information gained from a combination of life and work experience.

These are just a few examples of how prior knowledge can be crucial in an entrepreneur’s ability to build on an opportunity.

Another key factor in building and recognizing opportunities is

pattern recognition

The “nine-dot exercise” (

Figure 3.4

) illustrates the limitations of our thinking. The challenge is to connect nine dots by drawing four straight lines without lifting your pen from the paper and without backtracking. If you have difficulty completing the task, your mind may be blocked by the imaginary “box” created by the dots. Try to look beyond that imaginary constraint.

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Unit III Discussion Board

Innovation, Invention, Improvement, or Irrelevant?

OPPORTUNITIES START WITH THOUSANDS OF IDEAS

The Myth of the Isolated Inventor

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