Super-project.eu Lecture 5 Business Ideas Super-project.eu Lecture 5

Contents Idea 1 Opportunity 2 Entrepreneurial process 3

Aim for the session By the end of the session, you will: Understand the difference between idea and opportunity. Know the sources of opportunities. Be able to describe the entrepreneurial process.

Do you know the company Rovio? Finnish company founded in 2003

“Overnight” success came after 6 years and 51 unsuccessful games “Overnight” success came after 6 years and 51 unsuccessful games. In 2009 they were close to bankruptcy.

Idea Not every idea is a good business opportunity. The idea is just a beginning. In order to have a great idea, you need to have many ideas. We all have ideas :-) and sometimes even business ideas. Founders often fall in love with their ideas. But idea raises many questions and you need to search for answers.

Innovation Innovation is a process of new idea creation or adoption and a subsequent effort to develop it into a new product, service, process or business model with an expected added value for a potential user. What innovations do you know? What is the link between innovation and entrepreneurship?

Entrepreneurial Alertness Is a propensity to notice and be sensitive to information about objects, incidents, and patterns of behaviour in the environment, with a special sensitivity to maker and user problems, unmet needs and interests, and novel combinations (Ray, Cardozo, 1996). Exercise: Ask students to write as many ideas for new business as possible in 3 minutes. Than ask on the numbers of ideas. ”Who has more than 10 ideas? More than 5?” Use this to illustrate that we are different in the number of business opportunities we see.

Brainstorming Listen to ideas of others Defer judgement - don’t criticize Encourage wild ideas Build on ideas of others Go for quantity Brainstorming is one example of ideation method. We will explore other methods in the seminar. Ask students what is their experience with brainstorming.

Business Opportunity Business opportunity is a possibility to satisfy market need trough a new combination of resources that will offer added value (Kirzner, 1973). It can be a situation in which new goods, services, raw materials and organizing methods can be introduced and sold at greater price than their cost of production (Shane, Venkataraman, 2000).

Business Opportunity Characteristics In order to evaluate idea as a business opportunity, it needs to have 3 central characteristic: Economic value - potential to generate profit. Newness – something that did not exist previously or wasn’t available on the market. Perceived desirability of the new product or service in society. (Baron, 2014)

Types of Opportunities Unfulfilled market needs – value sought Unused or inefficiently used resources - value creation capability Combination of the two

Sources of Opportunities Information asymmetries Mistakes of other market participants Exogenous shocks Technological changes Political and regulative changes Shifts in societal demographics Supply side changes New products, services, raw materials, production and organizing methods Demand side changes New geographical markets Changes in customer behavior through shifts in perception, culture, preferences Adopted from Frank & Mitterer (2010)

What is not an Opportunity Timing Too late – market is saturated Too early – people are not ready or the technology is not available Hobby- projects - the market is not big enough to create sustainable business Too late – starting another Facebook or Google – Best to provide an example from your own country. Too early – starting Amazon in 1980 when internet access was not widespread.

Entrepreneurial Process changing demographics, emergence of new market segments, process needs, new technologies, regulatory or social change 1. Identify an opportunity 2. Develop the concept 6. Harvest the venture 3. Determine the required resources 4. Acquire the resources 5. Implement and manage new products, new services, new sales channels, ... unique selling point? skilled employees, management expertise, marketing, sales, technical expertise, money, production facilities, licences debt, equity, outsourcing, leasing, contract labour, joint ventures, barter, gifts, supplier financing Give students a perspective, that idea is just a beginning. Discuss the replicability of the process with students. implementation of concept, monitoring performance, growth management, expansion, goals achievement family succession, selling the venture, go public vs. bankruptcy Adapted from Morris, Kuratko & Schindehutte, 2001

Questions that will help you develop your idea into opportunity What products and/or services will be offered? To whom will the products and/or services be offered and what specific needs of these customers will be satisfied? What is unique and will constitute and added value for the customer when compared with what the competition offers? How the products and/or services will be delivered to the market – the concept of production and logistics, sales and marketing, partnerships? Who are your customers? What their needs do you satisfy? What is your current domestic and international competition and what is your advantage (unique selling point) against them? This illustrates the variety of topics related to a new idea. This can be used as a home assignment in relation to their own idea.

Questions that will help you develop your idea into opportunity How big is the market? How will the market develop in the future? What is the current trend? How will you make money in this business? Are sales revenues and profits high enough? How will your customers get to know you? What marketing strategies will you use? Who are your key suppliers and how do you ensure cooperation with them? Who are the members of your team and what are their strengths? What are the major risks and how will you fight them? How do you plan to sustain your competitive advantage for the future?

Summary Not every idea we have is a great business opportunity. Try to have many ideas before you settle on one for your business. Describe the problem or pain your product is addressing. Idea is just a beginning, business opportunities are complex.

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