Unit 2: Developing Successful Business Idea

2.1 Recognizing opportunities and generating ideas

Identifying and recognizing opportunities, finding gaps in the market place,
techniques for generating ideas, encouraging and protecting ideas

2.2 Feasibility Analysis

Product/service feasibility analysis, Industry/Target Market feasibility analysis.
Organizational feasibility analysis, financial feasibility analysis

2.3 Writing a Business Plan

Reasons for writing a business plan, Who reads it? What are they looking for?
Guidelines for writing a business plan, Presenting the business plan to
investors

2.4 Industry and Competitors Analysis

Industry analysis, Studying industry Treads, Competitors analysis

2.5 Developing an Effective Business Model

Business models, Components of an effective Business Model
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 Recognizing Opportunities and
Opportunity
Generating Ideas
It is a favorable set of circumstances that creates a need for a new
product, service, or business.
▪ Opportunities are tough to spot.
▪ There is difference between an opportunity and an idea.
▪ Opportunity gap is a situation that creates unfulfilled needs for a
new product, service or business.

Idea
An idea is a thought, an impression, or a notion. An idea may or
may not meet the criteria of an opportunity.
▪ Many entrepreneurs fail not because the entrepreneurs that
launched them didn't work hard, but rather because there was no
real opportunity to begin with.
 Recognizing Opportunities and
Generating Ideas
Some business firms are externally stimulated and some are
internally stimulated:

▪ Externally stimulated (decide to launch a firm – searches for

opportunity – starts a business)

▪ Internally stimulated (identifies the opportunity – frames the

idea – creates the firm)
Four essential Qualities of Opportunity :

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 Approaches to Identify an Opportunity
1. Observing trends
i. Economic forces
ii. Social forces
iii. Technological advances
iv. Political action and regulatory changes
2. Solving a problem
3. Finding gaps in the marketplace
 Approaches to Identify an Opportunity
1. Observing Trends
i. Economic forces
• State of the economy
• Level of disposable income
• Consumer spending patterns
ii. Social forces
• Demographic changes: retirement of baby boomers
• The increasing diversity of workforce
• Increasing interest in healthy foods and "green" products
• New forms of music and other types of entertainment
• The increasing focus on health care, fitness, and wellness
• Emphasis on alternative forms of energy
• Increased globalization of business
• Increased availability of inexpensive yet relatively powerful
personal computer
 Approaches to Identify an Opportunity

iii. Technological advances

• New technologies
• Emerging technologies
• New uses of old technologies

iv. Political action and regulatory changes

• New changes in political arena
• New laws and regulations
 Approaches to Identify an Opportunity
2. Solving a problem

Second approach to identifying opportunities is to recognize problems

and find ways to solve them.

Can be done by observing the challenges that people encounter in

their daily lives and through more simple means, such as intuition,
serendipity or change.

Advances in technology often result in problems for people who can't

use the technology in the way it is sold to the masses.

Every problem is a brilliantly disguised opportunity. - John Gardner,

founder of Common Cause.
 Approaches to Identify an Opportunity
3. Finding Gaps in the Marketplace

There are many products that consumers need or want that aren't
available in particular location or aren't available at all.

A common way that gaps in the marketplace are recognized is when

people become frustrated because they can't find a product or service
that they need and recognize that other people feel the same way.

A related technique for generating new business ideas is to take an

existing product or service and create a new category by targeting a
completely different target market.
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Personal Characteristics of the Entrepreneur Enabling them
to Recognize Business Opportunities Better
Several characteristics tend to make some people better at
recognizing opportunities than others.

The process of perceiving the possibility of a profitable new business

or a new product or service is called Opportunity Recognition.

Specific characteristics of those who have better opportunity

recognition:

▪ Prior experience
▪ Cognitive factors
▪ Social Networks
▪ Creativity
Personal Characteristics of the Entrepreneur Enabling them
to Recognize Business Opportunities Better
1. Prior Experience:

Prior experience in an industry helps entrepreneurs recognize

opportunities and get the idea for their new businesses.

An individual may spot a market niche that is underserved. It is also

possible that while working in a particular area, an individual builds a
network of social contacts in that industry that may provide insights
that lead to opportunities.

Once an entrepreneur starts a firm, new venture opportunities

become apparent. This is called the corridor principle, which states
that once an entrepreneur starts a firm, he or she begins a journey
down a path where “corridors” leading to new venture opportunities
become apparent.
Personal Characteristics of the Entrepreneur Enabling them
to Recognize Business Opportunities Better
2. Cognitive factors
Opportunity recognition may be an innate skill or a cognitive process.
It is also believed that entrepreneurs have a “sixth sense” that allows
them to see opportunities that others don't. This is called
entrepreneurial alertness. It is an ability to notice things without
engaging in deliberate search.
Alertness is largely a learned skill, and people who have more
knowledge of an area tend to be more alert to opportunities in that
area than others. E.g., a computer engineer would be more alert to
needs and opportunities within the computer industry than a lawyer
would be.
However for entrepreneurs, alertness goes beyond noticing things
and involves a more purposeful effort.
Personal Characteristics of the Entrepreneur Enabling them
to Recognize Business Opportunities Better
3. Social Networks
The extent and depth of an individual’s social network affects
opportunity recognition. People who build a substantial network of
social and professional contacts will be exposed to more
opportunities and ideas than people with meager networks.

Those who identified their business ideas on their own are solo
entrepreneurs.

Those who identified their ideas through social contacts are network
entrepreneurs.

Network entrepreneurs identified significantly more opportunities

than solo entrepreneurs but were less likely to describe themselves
as being particularly alert or creative.
Personal Characteristics of the Entrepreneur Enabling them
to Recognize Business Opportunities Better
4. Creativity
Creativity is the process of generating a novel or useful idea.
Opportunity recognition is also hence in part a creative process. On
an anecdotal basis, it is easy to see the creativity involved in forming
many products, services, and businesses.
For an individual, the creative process can be broken into five stages.
 Personal Characteristics of the Entrepreneur Enabling them
to Recognize Business Opportunities Better
Stages of Creative Process
i. Preparation: Preparation is the background, experience, and
knowledge that an entrepreneur brings to the opportunity
recognition process.
ii. Incubation: Incubation is the stage during which a person
considers an idea or thinks about a problem; it is the “mulling
things over” phase. Sometimes incubation is a conscious
activity, and sometimes it is unconscious and occurs while a
person is engaged in another activity.
iii. Insight: Insight is the flash of recognition—when the solution to
a problem is seen or an idea is born. It is sometimes called the
“eureka” experience. In a business context, this is the
moment an entrepreneur recognizes an opportunity.
 Personal Characteristics of the Entrepreneur Enabling them
to Recognize Business Opportunities Better
Stages of Creative Process
iv. Evaluation: Evaluation is the stage of the creative process during
which an idea is subjected to scrutiny and analyzed for its
viability. Many entrepreneurs mistakenly skip this step and try to
implement an idea before they’ve made sure it is viable.
Evaluation is a particularly challenging stage of the creative
process because it requires an entrepreneur to take a sincere
look at the viability of an idea.
v. Elaboration: Elaboration is the stage during which the creative
idea is put into a final form. The details are worked out and the
idea is transformed into something of value, such as a new
product, service, or business concept. In the case of a new
business, this is the point at which a business plan is written.
***
 Techniques for Generating Ideas
Entrepreneurs identify more ideas than opportunities because many
ideas are typically generated to find the best way to capitalize on an
opportunity. Several techniques can be used to stimulate and facilitate
the generation of new ideas for products, services, and businesses.

They are : 1. Brainstorming; 2. Focus Groups; 3. Library and Internet

Research

1. Brainstorming:
A common way to generate new business ideas is through
brainstorming. In general, brainstorming is simply the process of
generating several ideas about a specific topic. The approaches range
from a person sitting down with a yellow legal pad and jotting down
interesting business ideas to formal “brainstorming sessions” led by
moderators that involve a group of people.
 Techniques for Generating Ideas
2. Focus Groups
It is a gathering of 5 to 10 people who are selected because of
their relationship to the issue being discussed. Although focus groups are
used for a variety of purposes, they can be used to help generate new
business ideas. Focus groups typically involve a group of people who are
familiar with a topic, are brought together to respond to questions, and
shed light on an issue through the give-and-take nature of a group
discussion.
3. Library and Internet Research
A third approach to generate new business ideas is to conduct library and
Internet research. Library can provide related and useful inputs from
industry-specific magazines, trade journals, and industry reports that can
spark new ideas.
Internet research is rather easier method to spot new ideas. Simply typing
“new business ideas” into search engines will produce links to newspaper
and magazine articles about the “hottest” and “latest” new business ideas
and much more.
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 Encouraging and Protecting Ideas
Idea generation can be a haphazard process and hence need to be
managed. Entrepreneurial ventures can take certain concrete steps to
build an organization that encourages and protects new ideas. They
are:
– Establishing a Focal Point for Ideas
– Encouraging Creativity at the Firm Level
– Protecting Ideas from Being Lost or Stolen

1. Establishing a Focal Point for Ideas

Firms can designate a specific person to screen and keep track of
collection and evaluation of ideas. Identifying a specific person is
important because "everybody’s job is nobody's" responsibility.
Another approach is to establish an idea bank (or vault), which is a
physical storage of ideas. It can also be digital repository of ideas, a
password-protected location on a firm’s intranet.
Other firms can encourage employees to keep journals of their ideas.
Story of Responsibility
 Encouraging and Protecting Ideas
2. Encouraging Creativity at the Firm Level

Although creativity is typically thought of as an individual attribute, it

can be encouraged or discouraged at the firm level. The extent to
which an organization encourages and rewards creativity affects the
creative output of its employees.

Innovation refers to the successful introduction of new

outcomes by a firm. Creativity is the process of generating a novel or
useful idea but does not require implementation. In other words,
creativity is the raw material that goes into innovation.

Employees may come up with a hundred creative ideas for a new

product or service, but only one may ideally satisfy an
opportunity before it gets implemented.
Encouraging and Protecting Ideas
 Encouraging and Protecting Ideas
3. Protecting Ideas from Being Lost or Stolen
Intellectual property is any product of human intellect that is
intangible but has value in the marketplace. It can be protected
through tools such as patents, trademarks, copyrights, and trade
secrets.
There are three steps that should be taken when a potentially valuable
idea is generated to qualify for intellectual property protection.
Step 1: The idea should be put into a tangible form, either entered
into a physical idea logbook or saved on a computer disk and dated.
All the entries should be in ink and should be witnessed.
If the idea is original and useful, and is kept secret or is disclosed only
in a situation where compensation for its use is contemplated, the
idea may qualify as a “property right” or “trade secret” and be legally
protected under a variety of statutes.
 Encouraging and Protecting Ideas
3. Protecting Ideas from Being Lost or Stolen

Step 2: The idea, whether it is recorded in a physical idea logbook or

saved in a computer file, should be secured. On the one hand, a firm
wants new ideas to be discussed, so a certain
amount of openness in the early stages of refining a business idea
may be appropriate. On the other hand, if an idea has considerable
potential and may be eligible for patent protection, access to the idea
should be restricted.

Step 3: Avoid making a voluntary disclosure of an idea in a

way that forfeits your claim to its exclusive rights. In general, the
intellectual property laws seek to protect and reward the originators
of ideas as long as they are prudent and try to protect the ideas.
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