1 Spotting Opportunities
1.1 Introduction
Entrepreneurial behaviour is the discovery, creation, development, evaluation and exploitation of opportunities (see box Further Reading [1]). Collectively, the competences of the EntreComp framework are aimed at manifesting entrepreneurial behaviour. This first chapter is about the beginning of the process: spotting opportunities. By an opportunity we mean a business idea that has the potential to add value for customers and for the entrepreneur himself (turnover, profit, satisfaction, well-being). Often exploring and developing the idea for the opportunity is an ongoing process. When you do this, you are already evaluating the opportunity: assessing whether the idea can be attractive, feasible and successful [see: Valuing ideas]. Perhaps the idea as originally conceived is not promising, but if adjusted, it will be. Students may also want to assess whether it is for an opportunity for them personally; spotting an opportunity does not mean you actually want to pursue it. In this chapter the focus is on thinking on generating ideas to create value: Spotting Opportunities.
1.2 Insights
When identifying opportunities, it is important to note that what may be an opportunity for one person, may not be for another. People have different ideas about what constitutes an opportunity. People use different criteria to classify something as an opportunity, and they differ in the degree to which they consider certain criteria to be most important. Examples of those criteria are profitability, feasibility, market potential, risks (and to what extent the risks can be managed), how new the idea is, how unique it is, to what extent it fits in with interests and motivation, to what extent it fits in with one’s capabilities, how ethical the idea is, whether it burdens the environment or benefits it, whether it has positive effects on society, to what extent it solves a problem, and how many people it makes happy [2].
The criteria that a student uses and emphasizes enable him or her to see opportunities, but can also make him or her less aware of other opportunities. For example, if a student is looking for something new or innovative, that student may have little eye for opportunities based on imitation: redoing what already exists (but perhaps in a different place, or somewhat faster, cheaper or better). If a student is looking for something that is easily achievable, opportunities may be overlooked that are more difficult to achieve, etc. Thus, a first thing that students can do is identify the criteria that they emphasize when thinking of opportunities.
Three areas of search
Suppose a student wants to come up with entrepreneurial ideas. Where can those opportunities be found? How can he or she look for opportunities? Basically, there are three directions to look [3]. They depend on where a person focuses his or her attention (see Figure 1.1). All three directions can be used as the first direction. All three directions are usually used: someone uses one direction first, followed by the others.
The criteria that a student uses and emphasizes enable him or her to see opportunities, but can also make him or her less aware of other opportunities. For example, if a student is looking for something new or innovative, that student may have little eye for opportunities based on imitation: redoing what already exists (but perhaps in a different place, or somewhat faster, cheaper or better). If a student is looking for something that is easily achievable, opportunities may be overlooked that are more difficult to achieve, etc. Thus, a first thing that students can do is identify the criteria that they emphasize when thinking of opportunities.
Three areas of search
Suppose a student wants to come up with entrepreneurial ideas. Where can those opportunities be found? How can he or she look for opportunities? Basically, there are three directions to look [3]. They depend on where a person focuses his or her attention (see Figure 1.1). All three directions can be used as the first direction. All three directions are usually used: someone uses one direction first, followed by the others.
Figure 1.1: Three search directions for initial ideas for opportunities
A first direction, depicted in the middle of the figure, is sometimes referred to with the contradictory term 'passive search'. This is about alertness. Alertness is an attitude in which you are receptive to spot opportunities. You are not so much consciously looking, but you are more receptive to and aware of signals that could mean there is an opportunity. This could be anything. Suppose there is something that irritates you. Could it be that if you solve this, this solution will mean an opportunity? Or something makes you afraid, or angry, or happy? Do you find something surprising, or uncomfortable? Do you see signs that something is a big success, for example a long queue of people waiting to buy something or to go somewhere? That might be a sign that there is room in the market for another provider. Or do you see that nobody is interested? Maybe if you did a better job, there would be. If you are seeking passively, it is a good idea to position yourself in such a way that you can easily pick up on any signs that an opportunity has arisen. You can do this by having a diverse network [see: Mobilising resources]. Or by looking at a variety of information, rather than the same social media that everyone else has. Or by taking part in activities that teach you new things. Alertness can be practiced (see exercises below).
In the other two directions, you consciously and actively look for opportunities. A first active search direction is to take a look at yourself. What do you like doing, what can you do well, what are you allowed to do (by yourself and by others), and how can you combine that into an activity that creates value for other people? First of all, it is about what motivates you and gives you energy. What do you like to do? What interests you? What are your ambitions, your aspirations, your dreams? What activates you? What would you like to achieve? What impact do you want to have? What needs do you have? What fascinates you? Secondly, it's about what you're good at. What are your strengths? What knowledge do you have, or could you obtain? What resources do you have? What made you successful in the past? What do you have experience in? It can also be limitations that make you see opportunities. For example, someone who is housebound, takes this as a starting point when looking for opportunities. Thirdly, there are your standards: of yourself and of people who are important to you, such as your family and friends. What do you think, and what do they think is important to do? What things do you, your family or your friends tell you to do, or not to do?
When thinking of opportunities, you try to combine the above into an idea. It's essential to translate what you're good at and enjoy doing into something that brings value to someone else. For example, playing video games is not an opportunity in itself. But on YouTube, you will see many people who exploit playing games as an opportunity by doing something that others find valuable, such as discussing games, demonstrating games or commenting on actual games played by others. The great advantage of using yourself as a starting point when looking for opportunities is that when you come up with ideas, these ideas often fit in well with your interests, abilities and living conditions. In alert search (passive search), you may come up with many more ideas, but they are not necessarily ideas that have a good fit.
The third search direction is to consciously and actively look for information about markets and market developments. This almost always has to do with changes. These may be local changes (for example, a new neighbourhood has been built where there is not yet a hairdresser). They can also be broader changes, for example the availability of new knowledge, technological developments, changes in the population structure, changes in consumer tastes and behaviour, changes in the state of the economy, changes in the environment, changes in government regulations, and so on. By studying these developments and trends carefully, you can deduce what opportunities will arise. For example, it is well known that the population is ageing. If there are more elderly people, this has consequences for all markets, for example food, housing, leisure, care. With this search direction it is important to have a vision on where developments will lead [see: Vision].
The three search directions usually follow each other. For example, you see an opportunity by being alert, then you investigate whether the opportunity suits you, and then you look to see if there is a market for it. Or you've thought about yourself and about what you could do, after which you become alert to everything that could help you do this, and you finally investigate what the market looks like for this idea.
Discovery versus creation
Finally, there is a distinction between seeing the entire opportunity immediately before you, or a first glimpse of it. The entrepreneurship literature makes a difference between the discovery and creation of opportunities [4]. In the case of discovery, the opportunities were already there and you just had to discover them. For example: you discover that a website in the United States sells something so cheaply that you could sell it here for a profit, even after deducting transport and import costs. In creation, the initial idea is only a first step towards the final idea. There is no single insight, but rather progressive insight. With a creation idea the final result depends very much on you as an entrepreneur. You develop a creative idea by learning as much and as fast as possible [see Valuing Ideas and Learning through experience].
In the other two directions, you consciously and actively look for opportunities. A first active search direction is to take a look at yourself. What do you like doing, what can you do well, what are you allowed to do (by yourself and by others), and how can you combine that into an activity that creates value for other people? First of all, it is about what motivates you and gives you energy. What do you like to do? What interests you? What are your ambitions, your aspirations, your dreams? What activates you? What would you like to achieve? What impact do you want to have? What needs do you have? What fascinates you? Secondly, it's about what you're good at. What are your strengths? What knowledge do you have, or could you obtain? What resources do you have? What made you successful in the past? What do you have experience in? It can also be limitations that make you see opportunities. For example, someone who is housebound, takes this as a starting point when looking for opportunities. Thirdly, there are your standards: of yourself and of people who are important to you, such as your family and friends. What do you think, and what do they think is important to do? What things do you, your family or your friends tell you to do, or not to do?
When thinking of opportunities, you try to combine the above into an idea. It's essential to translate what you're good at and enjoy doing into something that brings value to someone else. For example, playing video games is not an opportunity in itself. But on YouTube, you will see many people who exploit playing games as an opportunity by doing something that others find valuable, such as discussing games, demonstrating games or commenting on actual games played by others. The great advantage of using yourself as a starting point when looking for opportunities is that when you come up with ideas, these ideas often fit in well with your interests, abilities and living conditions. In alert search (passive search), you may come up with many more ideas, but they are not necessarily ideas that have a good fit.
The third search direction is to consciously and actively look for information about markets and market developments. This almost always has to do with changes. These may be local changes (for example, a new neighbourhood has been built where there is not yet a hairdresser). They can also be broader changes, for example the availability of new knowledge, technological developments, changes in the population structure, changes in consumer tastes and behaviour, changes in the state of the economy, changes in the environment, changes in government regulations, and so on. By studying these developments and trends carefully, you can deduce what opportunities will arise. For example, it is well known that the population is ageing. If there are more elderly people, this has consequences for all markets, for example food, housing, leisure, care. With this search direction it is important to have a vision on where developments will lead [see: Vision].
The three search directions usually follow each other. For example, you see an opportunity by being alert, then you investigate whether the opportunity suits you, and then you look to see if there is a market for it. Or you've thought about yourself and about what you could do, after which you become alert to everything that could help you do this, and you finally investigate what the market looks like for this idea.
Discovery versus creation
Finally, there is a distinction between seeing the entire opportunity immediately before you, or a first glimpse of it. The entrepreneurship literature makes a difference between the discovery and creation of opportunities [4]. In the case of discovery, the opportunities were already there and you just had to discover them. For example: you discover that a website in the United States sells something so cheaply that you could sell it here for a profit, even after deducting transport and import costs. In creation, the initial idea is only a first step towards the final idea. There is no single insight, but rather progressive insight. With a creation idea the final result depends very much on you as an entrepreneur. You develop a creative idea by learning as much and as fast as possible [see Valuing Ideas and Learning through experience].
1.3 Further reading
[1] In this authoritative and by now classic article, entrepreneurship is no longer defined as having or starting a business, but the concept of opportunity is central. Shane, S., & Venkataraman, S. (2000). The promise of entrepreneurship as a field of research. Academy of Management Review, 25(1), 217-226.
[2] A classic article showing that people use different criteria when defining opportunities, and that experienced entrepreneurs use different criteria than inexperienced entrepreneurs. Baron, R.A., & Ensley, M.D. (2006). Opportunity recognition as the detection of meaningful patterns: Evidence from the comparison of novice and experienced entrepreneurs. Management Science, 52(9), 1331-1344.
[3] Article providing an overview of theory and research on conceiving ideas for opportunities. Van Gelderen, M.W. (2017). Generating initial ideas for opportunities. www.enterprisingcompetencies.com/generating-ideas.html.
[4] In this article the authors discuss the differences between opportunities that are 'recognized' or 'discovered' (discovery), and those that are 'created' (creation). Alvarez, S.A., & Barney, J.B. (2007). Discovery and creation: Alternative theories of entrepreneurial action. Strategic Entrepreneurship Journal, 1(1-2), 11-26.
[2] A classic article showing that people use different criteria when defining opportunities, and that experienced entrepreneurs use different criteria than inexperienced entrepreneurs. Baron, R.A., & Ensley, M.D. (2006). Opportunity recognition as the detection of meaningful patterns: Evidence from the comparison of novice and experienced entrepreneurs. Management Science, 52(9), 1331-1344.
[3] Article providing an overview of theory and research on conceiving ideas for opportunities. Van Gelderen, M.W. (2017). Generating initial ideas for opportunities. www.enterprisingcompetencies.com/generating-ideas.html.
[4] In this article the authors discuss the differences between opportunities that are 'recognized' or 'discovered' (discovery), and those that are 'created' (creation). Alvarez, S.A., & Barney, J.B. (2007). Discovery and creation: Alternative theories of entrepreneurial action. Strategic Entrepreneurship Journal, 1(1-2), 11-26.
1.4 Exercises for students
It is possible to practice the three search directions. Give students the following assignment:
Use a few hours to explore active search directions (looking at yourself and looking at information about markets and developments). Alertness can be trained throughout the day.
1) Passive search / alertness
In daily life, be alert to experiencing surprises, irritations, problems, successes, etc., and consider what opportunities for enterprise these offer. Write down every idea that comes to you. For each idea you very briefly state a business model: how will the idea provide value to others, what is the target group, and how will the target group pay for your product or service?
1) Active search / looking inside
In this exercise, analyse what you really want to do (your passions, dreams, ambitions, what fascinates you) and what you are good at (your experiences, knowledge, skills, successes). Also analyse what the people you listen to (your family, your friends) think is right and important (and what they think is wrong), and assess your own circumstances. Then try to think of ideas that combine all this and create value for others. For each idea, you very briefly outline a business model: how will the idea provide value to others, what is the target audience, and how will the target audience pay for your product or service?
1) Active search / outward look
Select a particular industry or market, and a change or trend in that industry or market. Then search for information about this change. Try to predict how the change will affect consumers and producers. From this analysis, you will derive ideas for opportunities. For each idea you briefly outline a business model: how will the idea provide value to others, what is the target group, and how will the target group pay for your product or service?
Use a few hours to explore active search directions (looking at yourself and looking at information about markets and developments). Alertness can be trained throughout the day.
1) Passive search / alertness
In daily life, be alert to experiencing surprises, irritations, problems, successes, etc., and consider what opportunities for enterprise these offer. Write down every idea that comes to you. For each idea you very briefly state a business model: how will the idea provide value to others, what is the target group, and how will the target group pay for your product or service?
1) Active search / looking inside
In this exercise, analyse what you really want to do (your passions, dreams, ambitions, what fascinates you) and what you are good at (your experiences, knowledge, skills, successes). Also analyse what the people you listen to (your family, your friends) think is right and important (and what they think is wrong), and assess your own circumstances. Then try to think of ideas that combine all this and create value for others. For each idea, you very briefly outline a business model: how will the idea provide value to others, what is the target audience, and how will the target audience pay for your product or service?
1) Active search / outward look
Select a particular industry or market, and a change or trend in that industry or market. Then search for information about this change. Try to predict how the change will affect consumers and producers. From this analysis, you will derive ideas for opportunities. For each idea you briefly outline a business model: how will the idea provide value to others, what is the target group, and how will the target group pay for your product or service?