CHAPTER 5 l THE OPPORTUNITY

CHAPTER
5 The Opportunity
What is Ethics
LE AR NI NG OUTCOMES
By the end of this chapter, you should be able to:

1. Define opportunity;

2. Describe the relationship between creativity and opportunity;

3. Explain the source of opportunity;

4. Identify the opportunity recognition; and

5. Understand opportunity analysis plan.

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INTRODUCTION
Most entrepreneurial firms are started in one of two ways. Some entrepreneurs decide to
start a firm, search for and recognise an opportunity then start a business.While on the
other hand, other entrepreneurs recognise a problem or an opportunity gap and create a
business to fill it.

In this chapter, we’ll understand how an entrepreneur creates an opportunity, shapes it

as well as recognises the opportunity in order to succeed in the venture.

Visit the link below to view a brief introduction about business opportunity and his
company by Frank Vander Slool, CEO of Melaleuca, a fastest growing company in America.

He explain how his company product become popular around the competitive world, his
business opportunity, mission statement of his company and growth of his company.

http://www.youtube.com/watch?v=vu_aLm2-HrY

5.1
6.1 Opportunity

Opportunity is an attractive arena for entrepreneurs action in which the

business enjoys the competitive advantage.

Once entrepreneur’s have taken a company’s internal strengths and weaknesses, they must
turn to the external environment to identify any opportunities and threats that might have
a significant impact on the business.

Window of Opportunity is a metaphor describing the time period in which a firm can
realistically enter a new market. Once the market for a new product is established,
its window of opportunity opens and new entrants flow in.

Opportunities on the other hand are positive external options that a firm can exploit
in order to accomplish its mission, goals and objectives. As we know, the number of
potential opportunities is limitless, so entrepreneurs need to analyse only those factors
that are most significant to the business. The key to any business’s success is to focus
on the most promising opportunities that can fit most closely with the company’s strengths
and core competencies.

When identifying opportunities, an entrepreneur must pay close attention to new potential
markets. There are a few critical questions that need to be identified such as:

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Are competitors overlooking a niche in the market?

Is there a better way to reach customers?

Can we develop new products that offer customers better value?

What opportunities are avaliable in the industry?

Let’s Have A Look At The Following Scenario

Rising fuel prices have created problems for many businesses, but few have felt the
impact as directly as those in the airline industry. Yet rising energy prices have
produced a significant opportunity for Aviation Partners, a small company founded
by a group of retired aeronautic engineers. Noting that birds’ wing turn up at the tips
to provide more loft and less drag (hence requiring birds to use less energy), the founders
of Aviation Partners developed “winglets,” small fins attached to the ends of wings
that extend upward, for use on commercial jets.

Tests indicated that jets using the winglets were far more fuel-efficient than those
without them. In the late 1990s, however, the small company found it difficult to
market the winglets because jet fuel prices were just 50 cents a gallon.

As jet fuel prices climbed significantly over the next several years, Aviation Partners,
now partnering with Boeing Company, found airlines much more interested in their prod-
uct. Although the cost to install the winglets can run as high as $700,000 per plane, the
savings in fuel costs add up to the millions over the life of a jet.

Aviation Partners is capitalising on this opportunity and counts among its customers
virtually every airline in operation today. As Aviation Partners’ experience illustrates,
opportunities arise as a result of factors that are beyond entrepreneurs’ control. As the
proverb says, “Whenever there is a difficulty then there will always be an opportunity”.
Constantly scanning for those opportunities that best match the company’s strengths and
core competencies and then jump on them ahead of competitors is the key to success.

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5.2 Creating Opportunity

Bolton and Thompson (2000) stress the importance of creativity in the process of
invention and innovation. They associate invention closely with creativity but also link
it with entrepreneurship if the invention becomes a commercial opportunity to be
exploited. Creativity is the starting point whether it is associated with invention or
opportunity spotting. This creativity is turned into a practical reality (a product,
for example) through innovation. Entrepreneurship then sets that innovation in the context
of the actual business. These links between creativity, invention and innovation,
opportunity perception and entrepreneurship are represented in Figure 5.1.

Figure 5.1: Creativity, invention, opportunity and entrepreneurship

Another way of looking at the relationship between creativity and entrepreneurship and
its real outcomes is shown in Figure 5.2.

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Figure 5.2: Relationship between creativity, invention, opportunity and entrepreneurship

• Only in quadrant A, there is a winning combination of creativity and entrepreneurship.

All other quadrants fail to achieve their full potential.
• In quadrant B there is a firm struggling with too many wasted ideas. It lacks an
entrepreneurial orientation with both the ability to see the commercial application of
the idea and to exploit it.
• In quadrant C the firm lacks creativity but can at least copy and perhaps can improve
upon the creativity of other firms if they have a commercial application.
• Firms in quadrant D, lack both creativity and entrepreneurship and more certainly
cannot grow.

5.3 Sources of Opportunity

Peter Drucker (1985) believes innovation can be practised systematically through creative
analysis of change in the environment and the opportunities this generates. It is not the
result of coincidence. According to him, entrepreneurship is a discipline and it can be
learned. Furthermore, entrepreneurs can practise innovation systematically by searching
for change, as change provides the opportunity for innovation and it is the entrepreneur
who creatively evaluates the potential for an economic or social return.

Drucker further stressed that, ‘Innovation is the specific tool of entrepreneurs, the
means by which they exploit change as an opportunity for a different business or a
different service. It is capable of being presented as a discipline, capable of being
learned and capable of being practised. Entrepreneurs need to search purposefully for
the sources of innovation, the changes and their symptoms that indicate opportunities
for successful innovation. They also need to know and to apply the principles of
successful innovation’.

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He lists seven sources of opportunity for firms in search of creative innovation.

Four can be found within the firm itself or from the industry of which it is a part.
They include the following sources of opportunities as shown in Figure 5.3.

The unexpected - be it the unexpected success or failure or the unexpected event.

Nobody can predict the future but an ability to react quickly to changes is a real
commercial advantage, particularly in a rapidly changing environment. Information
and knowledge are invaluable.

The incongruity - between what actually happens and what was supposed to happen.
Plans go wrong and unexpected outcomes produce opportunities for firms that are
able to spot them.

The inadequancy in underlying processes - that are taken for granted but can
be improved or changed. This is essentially improving process engineering–
especially important if the product or service is competing primarily on price
and therefore needs to minimise its costs.

The changes in industry or market structure - that take everyone by surprise.

Again, unexpected change, perhaps arising from technology, legislation or
other outside events creates an opportunity, first-mover advantage–making the
most of the advantage before others do so–is usually worth striving for.

Figure 5.3: The four sources of opportunities for creative innovation

These changes produce sources of opportunity that need to be dissected and the underlying
causes of change understood. The causes give clues about how innovation can be used to
increase value to the customer and economic return. The other three factors as shown in
Figure 5.4 come from the outside world as mentioned below.

Demographic changes
Population changes caused by changes in birth rates, wars, medical improvements
etc.

Changes in perception
This can be brought about by the ups-and-downs of the economy, culture, fash-
ion etc. In-depth interviews of focus groups can often give an insight into these
changes

Demographic changes

Both scientific and non-scientific.

Figure 5.4: The other three sources of opportunity for creative innovation

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Drucker lists these seven factors in what he sees as the increasing order of difficulty,
uncertainty and unreliability, which means that he believes that new knowledge including
scientific knowledge, is in fact the most difficult, least reliable and least predictable
source of innovation.

He argues that innovations arising from the systematic analysis of routine and
unglamorous, unexpected successes or failures are far more likely to yield commercial
innovations. They have the shortest lead times between start and yielding measurable
results and carry fairly low risk and uncertainty.

One technique for getting to the root cause of these ‘unexpected events’, ‘incongruities’
or ‘inadequacies’ is the ‘Why? Why?’ Exercise. This is used to explore options related
to the event.Figure 5.5 shows a ‘Why? Why?’ Diagram exploring the reason for a fall in
sales. From it wecan see that there are several possible reasons. The root cause will
lie at the end of the ‘why?’ trail. Figure 5.5 addresses a problem, but opportunities
also spring from other sources.

Figure 5.5: Why? Why? diagram

Bolton and Thompson suggest that three basic approaches to innovation are practised, and
none of which are mutually exclusive:
1. Have a problem and seek a solution
They cite as an example Edwin Land’s invention of the Polaroid camera because his
young daughter could not understand why she had to wait to have pictures of herself
printed.

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b. Have a solution and seek a problem

They cite 3M’s Post-it notes as an example of a product with loosely sticking qualities
that was applied to the need to mark pages in a manuscript.

c. Identify a need and develop a solution

The example they cite is James Dyson’s dual cyclone cleaner that he developed because
of hisfrustration with the inadequate suction provided by his existing vacuum cleaner
when he was converting an old property.

WEBSITE

http://www.youngentrepreneurs.net.au/how-to-source-new-opportunities-
for-your-business.html

5.4 Opportunity Recognition

Some entrepreneurs have the ability to recognise a business opportunity that is funda-
mental to the entrepreneurial process as well as a growing business. A business
opportunity represents a possibility for the entrepreneur to successfully fill a large
enough unsatisfied need so that enough sales and profits result. There has been signifi-
cant research done on the opportunity recognition process and several models developed.
One model that clearly identifies the aspects of this opportunity recognition process is
indicated in Figure 5.6.

Figure 5.6: A model of the opportunity recognition process

As indicated, recognising an opportunity often results from the knowledge and experience
of the individual entrepreneur and where appropriate the entrepreneurial business.

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This prior knowledge is a result of a combination of education and experience and the
relevant experience could be work-related or could result from a variety of personal
experiences or events. The entrepreneur needs to be aware of this knowledge and experience
and have the desire to understand and make use of it.

The other important factors in this process are entrepreneurial alertness and entrepreneurial
networks. There is an interaction between entrepreneurial alertness and entrepreneur’s prior
knowledge of markets and customer problems. Those entrepreneurs who have the ability to
recognise meaningful business opportunities are in a good position to successfully
complete the product planning and development process and successfully launch new venture.

5.5 Opportunity Analysis Plan

Each and every innovative idea and opportunity should be carefully assessed by the
global entrepreneur. One good way to do this is to develop an opportunity analysis plan.

An opportunity analysis plan is not a business plan, as it focuses on idea and the
market (the opportunity) not on the venture. It is also shorter than a business plan
and does not contain any formal financial statements of the business venture.
The opportunity analysis plan is developed to serve as the basis for either acting
on the opportunity or waiting until another (hopefully better) opportunity comes along.

A typical opportunity analysis plan has four sections as shown in Figure 5.7.

1 A description of the idea and its competition.

2 An assessment of the domestic and international market for the idea.

3 An assessment of the entrepreneur and the team.

A discussion of the steps needed to make the idea the basis for a viable
4 business venture.

Figure 5.7: Four sections of opportunity analysis plan

5.5.1 The Idea and its Competition

One of the major sections of the opportunity analysis plan is that this section focuses
on the idea itself and the competition. The product or service needs to be described in
as much detail as possible. A prototype or schematic of the product is helpful in fully
understanding all its aspects and features. On the other hand all competitive products

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and competitive companies in the product (service) market space need to be identified
and listed.

The new product/service idea should be compared with at least three competitive
products/services that are most similar in filling the identified market need. This
analysis will result in a description of how the product/service is different or may
be unique as compared to its competitors. If the idea does not have at least 3-5 unique
selling propositions versus competitive products/services on the market, the entrepreneur
needs to carefully examine whether or not the idea is really unique enough to compete and
be successful in the market.

5.5.2 The Market and the Opportunity

The second section of the opportunity analysis plan addresses the size and the characteri-
stics of the market. For this purpose, market data should be collected for at least three
years so that a trend is apparent for the overall industry, the overall market, the market
segment, and the target market.

This can be done through gathering as much secondary (published) data as possible. For
instance, if you had an idea for a motorised wheelchair for small children that was shaped
like a car, you would get market statistics on overall industry, wheelchairs (overall
market), motorised wheelchairs (market segment), and children needing wheelchairs (target
market). This focus approach indicates the overall, industry market size as the size of the
specific target market.

The size of these markets and also each of their characteristics has to be determined.
Figure 5.8 lists the questions that determines the characteristics of the market.

Is the market made up of a few large companies or many small ones?

Does the market respond quickly or slowly to any new entrants?

How many (if any) new products are introduced each year in the market?

How geographically dispersed is the market?

What social conditions underlie this market?

What other products might the company also introduce into this market?

What is the nature and size of the international market?

Figure 5.8: The questions to determine the characteristics of the market

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Therefore, on the basis of this section with regards to the opportunity analysis plan,
the entrepreneur should be able to determine both the size and the characteristics of
the market and whether it is large enough and suitable enough to assure the time and
effort required to further develop a business plan and actually enter the market.

5.5.3 Entrepreneur and Team Assessment

Next, both the entrepreneur and the entrepreneurial team need to be assessed. At least
one person from the team needs to have experience in the particular industry. This is
one characteristic that correlates to the probability of success of the venture.

As such, several questions need to be answered to assess the entrepreneur and his team
as shown in Figure 5.9.

Will this idea and

Why does this idea and opportunity sustain you once
opportunity excite you? the initial excitement
has worn off?

How does the idea and

How does it fit your opportunity fit your
entrepreneurial team? personal background
and experience?

Figure 5.9: The questions for entrepreneurial team assessment

This section of the opportunity analysis plan is usually smaller than the previous two
sections and allows the entrepreneur to determine if indeed he is really suited to
successfully move his idea into the market.

5.5.4 The Next Steps

The final section of the opportunity analysis plan delineates the critical steps that
need to be taken to make the idea a reality in the marketplace. The steps need to be
identified and put in sequential order, and the time and the money needed for each
step needs to be determined. If the idea cannot be self-financed, then sources of capital
need to be identified. The entrepreneur should always keep in mind that most entre-
preneurs tend to underestimate both the costs and the time it will take by about 30
percent.

ACTIVITY
Think of a new business venture and identify what are the opportunities
waiting the business. Analyse the opportunity and how it is relevant.

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SUMMARY
1. Opportunity is limitless, therefore entrepreneurs need to analyse only all
relevant factors that are most significant that can give impact to the business.

2. The key to any business’s success is to focus on the most promising opportunities
that can fit most closely with the company’s strengths and core competencies.

3. A business opportunity represents a possibility for the entrepreneur to successfully

fill a large enough unsatisfied need so that enough sales and profits result.

4. When identifying opportunities, an entrepreneur must pay close attention to new

potential markets.

5. The creativity is turned into a practical reality (a product, for example) through
innovation. Entrepreneurship then sets that innovation in the context of the
actual business.

6. Each and every innovative idea and opportunity should be carefully assessed
by the global entrepreneur. One good way to do this is to develop an opportunity
analysis plan.

7. The second section of the opportunity analysis plan addresses the size and the
characteristics of the market.

8. Both the entrepreneur and the entrepreneurial team need to be assessed.

9. The final section of the opportunity analysis plan delineates the critical steps
that need to be taken to make the idea a reality in the marketplace.

glossary

Demographic changes - Changes taking place in the age and the size of the
population.

Entrepreneurial - Entrepreneurial alertness is the ability that some

alertness people have to recognise competitive imperfections
in markets.

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Frustration - Frustration is a normal and valid emotional response

to many of the difficulties of being a caregiver.

Inadequacy - The quality or condition of being inadequate.

Incongruity - Not in keeping with what is correct or proper, or

logical.

Market niche - Small segment of a market that is particularly suitable

for target audience for a specific product.

Market segment - A market segment is a group of people or organisa-

tions sharing one or more characteristics that cause
them to have similar product and/or service needs.

Market structure - The different characteristics of a market, such as the

number and relative strength of buyers and sellers and
degree of collusion among them, level and forms of
competition, extent of product differentiation and
ease of entry into and exit from the market are inter-
connected together is known as market structure.

Metaphor - A comparison between two unlike things that

continues throughout a series of sentences in a
paragraph or lines. Example a poem.

Opportunity analysis - A plan which guides step-by-step through the

plan complicated process of determining the feasibility
of marketing a new product or service.

Potential market - Collective of all individuals, firms and organisation

in a particular market who have some level of interest
in a particular product.

Target market - The market that a business person is trying to reach

are people with common characteristics that set them
apart as a group.

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reference

Books

Donald, F., Kuratko, & Richard, M., Hodgetts. (2004). Entrepreneurship: Theory,
Process & Practice. Thomson South-Western.

Donald, F., Kuratko, & Jeffrey, S., Hornsby. (2009). New Venture Management:
The Entrepreneur’s Roadmap. New Jersey: Pearson Prentice Hall.

Peter, F., Drucker. (1999). Innovation and Entrepreneurship: Practice and Principles.
Butterworth Heinemann.

Philip, A., Wickham. (2001). Strategic Entrepreneurship: A Decision-Making

Approach to New Venture Creation and Management ( 2nd ed.). Pearson Prentice Hall.

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