Opportunity Recognition Ing. Matthijs H.M. Hammer M.Sc. Senior lecturer Innovative Entrepreneurship Academy for Business Creation (SB&RM) Research center for Innovative Entrepreneurship

Menu What about opportunities? Models and methods Philosophy of Entrepreneurship

Activity IDIVIDUAL ASSIGNMENT DO NOT COOPERATE Take a blank sheet of paper. Take a pencil. Draw an entrepreneur. (NL: teken een ondernemer)

results >99% human being Where from: >80% Man Where from: >80% Suite Where from: >80% Tie Where from: >80% Smiling / success

Examples

Who or what is an entrepreneur? What are the essential skills? How do they work? Can anyone be one? Can entrepreneurial behaviour be learned? What do you think? What do entrepreneurs do?

So what? There are many myths about ‘entrepreneurs’ They are not ‘born that way’ Everyone can work in enterprising ways, if... – We want to – Are encouraged to by those around us – in an enterprise culture! – Are able to learn the skills and adopt the behaviours

Enterprise What is enterprise? Applying creativity by: – Recognising a problem or a need as an opportunity – Finding or creating a solution – Acting to make it happen This may be through a business venture or in another way - e.g. a project or a social enterprise

Entrepreneurs and entrepreneurship Entrepreneurs identify, create and act on opportunities, e.g. by starting business ventures Entrepreneurship is the practical and academic subject: the knowledge, skills and techniques used by entrepreneurs

Entrepreneurial working: creating new value Entrepreneurship is identifying or creating market opportunities By bringing together resources in a venture and acting to exploit opportunities Resulting in the creation of new value: Financial - as well as Social Creative Technological Environmental

Entrepreneurship as unlocking value ‘entrepreneurs make creative connections between needs/opportunities and capabilities/resources’

Entrepreneurial process VALUE CREATION Opportunity recognition Opportunity preparation Opportunity exploitation Value creation process (Shane & Venkataraman, 2000)

How does an opportunity look like? Several approaches: Look and find! Cognitive psychological prototype Models to turn ideas into opportunities

Idea or opportunity? The DIFA model An opportunity has: Demand: actual or potential customer need, ability to pay - viability Innovation: a product, service or technology can be provided Feasibility: technology and resources exist and can be sourced Attraction: benefits and interest for you, customers, investors Is yours an idea or an opportunity?

Using the ‘idea space’ to connect ideas for innovation

Idea space example: bouncy mobile phone

A similar approach to Tony Buzan’s ‘Mindmapping’: Drawing a problem/opportunity map

What do you see?

Prototyping ++

Dimensions of a business opportunity prototype factors describing the business idea 1.Solves customer problems 2.Positive net cash flow 3.Manageable risk 4.Superior product 5.Change industry factors referring to the feasibility of business development 1.Overall financial model 2.Advice from experts 3.Unique product 4.Big potential market 5.Intuition Source: Baron and Ensley, 2006

Example See possibilitiesTackle opportunities Know where to find it. Successful application

But remember ….. Vision without Action without Vision Daydream Nightmare

Principles of effectuations decision making heuristics learned by expert entrepreneurs in uncertain, disruptive situations. (Sarasvathy, 2001)

Means. The basis for decisions and new opportunities: –Who I am –What I know –Whom I know Goals vs means Goals. Given (based on predictions)

Entrepreneurial dynamics

Affordable Loss. Calculate downside potential and risk no more than you can afford to lose. Risk, Return and Resources Expected Return. Calculate upside Potential and pursue the (risk adjusted) best opportunity.

Risk, Return and Resources AlternativeOwn capitalLoan bankinvestmentExpected return Example Alternative 2 Alternative 1

Partnership. Build your “future” together with customers, suppliers and even prospective competitors. Attitude toward others Competition. Set up transactional relationships with customers and suppliers.

30 Surprise Avoid Surprises. Leverage Surprises. Surprises can present new opportunities.

Underlying logic & what to do To the extent we can predict the future, we can control it.  PLAN To the extent we can control the future, we don’t need to predict it.  CO-CREATE More information:

Business model canvas (Osterwalder, 2004)