Introduction

Andrew Erkin, founder of d1g1t, gave a presentation about his experience in

entrepreneurship and opportunity recognition. The company, founded in 2013, is both a tech and
accounting service firm. The firm was recognized for taking the forefront in financial forecasting
amidst the uncertainty brought about by the 2020 pandemic. Erkin is a repeat entrepreneur;
having started several business ventures in the same industry. In this essay, Andrew Erkin’s
process of opportunity recognition are analyzed and related to theories discussed in select pre-
provided seminal articles. His personal experience as an entrepreneur is examined to extract a
token form of what an entrepreneur is and how recognize opportunity.

Discussion

Andrew Erkin ostensibly leans towards cognition-based theories in opportunity

recognition. He specifically mentions Robert Baron and shares his process of actively looking for
“gaps” in industries, determines value in said gaps, finds “scalable solution”, and then later
exploits these gaps when he recognizes opportunity in them. He asserts that his prior experience
in business ventures, prior knowledge in web design and the tech industry, and extensive social
network are instrumental in finding and later developing opportunity. Erkin is also sensitive to
the changing landscape of the finance industry brought about by technological innovations, and
is one of the very first to recognize the opportunity in these changes and actively pursue them.
These factors are emblematic of Baron’s (2006a) cognition-based theory of pattern recognition.

Figure 1: Baron’s conceptual model of pattern recognition.

Moreover, Eerkin admits that his years as a new entrepreneur—filled with untempered
enthusiasm—reached a critical threshold that obstructed objective judgment of the value and
viability of an opportunity. This reflects Baron and Hensly’s (2006b) emphasis on experiential
knowledge and his conclusion that new entrepreneur tend to “love their own ideas too much” to
let go or objectively evaluate them. Erkin says that his experience with past ventures and failure
prompted him to “step back” and reassess the situation with a much clearer eye and a more
educated mind. Baron’s assertion that pattern recognition can be honed through education,
training, and experience is supported by Erkin’s anecdotes.

Further, it can be observed that Erkin and his experience with d1g1t share the same
elements with Corbett’s (2005) proposals. Erkin talks of lessons he picked up during the process
of running a business (e.g. pricing, human resource, etc.) which supports Corbetts argument that
information and learning is acquired continuously at different intervals in the venture. This is
reiterated by Baron’s conclusions that differences in information (assymetrical knowledge) and
innate individual traits (e.g. creativity and intelligence) affect opportunity recognition. Overall,
the theories mentioned support the hypothesis that cognition-related factors significantly impacts
opportunity recognition and best explains why the founder of d1g1t recognizes opportunity
where others do not.

Although Erkin actively searches for opportunity through pattern recognition, his initial
experience in entrepreneurship was not born out of active or even passive searching.
Nevertheless, it did require a measure of entrepreneurial alertness. His first business venture,
Entropic, is an exceptional example of a spontaneous recognition of opportunity. Dew (2014)
defines spontaneous recognition as a direct amalgamation of prior knowledge of domain (Erkin’s
knowledge in graphic design) and a contingent factor (payment from the DJ roommate).1

Figure 2: Dew’s diagram depicting serendipitous recognition.

Later on, Erkin mentions that he was left with a “feeling” of discovery after a break prior
to the founding of d1g1t. Abstract notions such as gut-feelings and “eureka-moments” are
common themes in serendipitous recognition. However, Dew’s (2014) definition of serendipitous

1
Erkin mentions he was surprised to be paid for doing what he loves therefore it is safe to assume he was not
passively searching for an opportunity in that domain at that time.
recovery is less about instinct and more about the element of contingency introduced to active
search and prior knowledge. This definition falls in line with Erkin’s personal and environmental
circumstances at that time. He had prior knowledge of the industry and was also actively
searching for opportunity. The contingency factor may have come from the infectious energy of
the startups he hang out with or in the form of Xero, whose business practices, values, and
principles inspired Erkin as they were not all that dissimilar from his own.

The partnership between Xero and d1g1t may have been serendipitous, but its success is
accurately explained by the cognition-based theory of Ward (2003). Erkin mentioned the way
real-estate markets rejected d1g1t’s services and only years later on caught up to cloud.
According to Ward (2003), a balance between creativity and cognitive processing should be
established to form a more constrained venture that would be relatable to others instead of being
too alien. One of these constrained cognitive processes is analogous processing. This explains
how and why d1g1t and Xero’s partnership formed and why it is a success. Xero’s objectives of
digitizing finances and accounting appealed to Erkin who shared the same ideas and values. The
partnership dealt positive effects on funding and stored knowledge while effectively minimizing
risk. Furthermore, Xero was already making a name for itself at that time and the idea of a cloud
as platform for finance services was already familiar to the masses. Communicating d1g1t’s
ideas to markets through analogous association with Xero helped familiarize people with less
than full understanding of the opportunity.

In cognition theories, social capital is not equally as central as the entrepreneur’s

cognitive setting. In conjunction, social networks are only mentioned tangentially during the
presentation. However, Ramos-Rodriguez (2010) claimed that social capital is just as essential in
opportunity recognition. This is because access to new knowledge and external information via
social networks is more important than what is already in storage of domain knowledge. Erkin’s
search relies on alertness and spotting gaps in various industries. Spotting these gaps probably
involves gaining information via social networks, but this he did not explicitly mention in the
“identifying opportunities” section of the presentation and is only implied when he mentions the
usefulness of social networks in “trying new ideas”. This suggests that social capital is useful for
Erkin in the evaluation and other stages in opportunity recognition that follows the search.

At the end of the presentation, the Corridor Principle was mentioned in tangent
(Ronstadt, 1988). The principle provides a general blueprint of Erkin’s entrepreneurial
experience. According to this principle starting a business venture inadvertently leads to other
ventures. Erkin demonstrated this when he talks about starting Entropic, creating a related
secondary venture called Web in the Box, gearing Entropic towards business customization
systems, and then later founding d1g1t.

Overall, it is apparent that Erkin’s opportunity recognition discipline align with

cognition-based theories, especially that of pattern recognition. However, the formation of d1g1t
also shares some elements that are in line with serendipitous themes. He also emphasizes the
importance of social networks and experimentation 2 in the opportunity development process. His
perseverance in the industry despite numerous setbacks, and the branching to other ventures
reflect the Corridor Principle in action. Meanwhile, the analogous processes that occurred
between Xero and Erkin’s own ideas exemplify the fluid nature of opportunity and the many
forms through which they manifest.

Conclusion

Deriving from Andrew Erkin’s experience, an entrepreneur is someone who is able to

recognize opportunity as a result of entrepreneurial alertness, sensitivity to the shifting
environmental landscape, creativity, prior domain knowledge, extensive social network, and
flexibility. Experience hones their ability to effectively search and recognize opportunity.
Whether or not they are searching for them, an entrepreneur is always alert and on the look-out
for ventures. They can detect opportunity in a crisis as d1g1t has during the pandemic. They fail
from time to time, yet consider failure a source of knowledge and a competitive edge in
opportunity recognition. A “growth mindset” is vital in maintaining the same drive in searching
for opportunity and recognizing them.

2
Erkin discloses him and his team experiments with ideas and regularly convene to share notes. This could fall
under behavior-based theory of causation and effectuation. However, only the experimentation domain under
effectuation is mentioned and there is not enough data from the presentation to further elucidate the theoretical
implications of this behavior.
 References

Baron, Robert A. 2006. “Opportunity Recognition as Pattern Recognition: How Entrepreneurs “Connect
the Dots” to Identify New Business Opportunities.” Academy of Management Perspectives 20
(1): 104-119. DOI: 10.5465/AMP.2006.19873412

Baron, Robert A., and Michael D. Ensley. 2006. “Opportunity Recognition as the Detection of Meaningful
Patterns: Evidence from Comparisons of Novice and Experienced Entrepreneurs.” Management
Science 52 (9): 1331-1344. https://doi.org/10.1287/mnsc.1060.0538

Corbett, Andrew C. 2007. “Learning Asymmetries and the Discovery of Entrepreneurial Opportunities.”
Journal of Business Venturing 22 (1): 97-118. DOI:10.1016/j.jbusvent.2005.10.001

Dew, Nicholas. 2009. “Serendipity in Entrepreneurship.” Organization Studies 30 (7): 735-753. DOI:
10.1177/0170840609104815

Erkin, Andrew. 2021. “Entrepreneurship and Enterprises: Showcasing innovative and inspirational
success.” Online Presentation form Curtin University.

Ramos-Rodriguez Antonio-Rafael, José-Aurelio Medina-Garrido, José-Daniel Lorenzo-Gómez, and José

RuizNavarro. 2010. “What You Know or Who You Know? The Role of Intellectual and Social
Capital in Opportunity Recognition.” International Small Business Journal 28 (6): 566-582. DOI:
10.1177/0266242610369753

Ronstadt, Robert. 1989. “The Corridor Principle.” Journal of Business Venturing 3 (1): 31-40. DOI:
10.1016/0883-9026(88)90028-6

Ward, Thomas B. 2004. “Cognition, Creativity and Entrepreneurship.” Journal of Business Venturing 19
(2): 173-188. https://doi.org/10.1016/S0883-9026(03)00005-3