Diane M. Sullivan (2010) Some sections Modified from Barringer & Ireland’s (2008) Chapter 2 Recognizing Opportunities and Generating Ideas Day #2

Personal Characteristics of the Entrepreneur Characteristics that tend to make some people better at recognizing opportunities and successfully developing and running firms than others Prior Experience Social Networks Cognitive Factors

Prior Industry Experience Prior Industry Experience Prior Industry Experience Prior industry experience helps entrepreneurs recognize opportunities because Prior industry experience helps entrepreneurs recognize opportunities because An individual may spot a market niche that is underserved An individual may spot a market niche that is underserved Can build a network of social contacts who provide insights that lead to new opportunities Can build a network of social contacts who provide insights that lead to new opportunities Technical term: The Corridor Principle Technical term: The Corridor Principle

Cognitive Factors Opportunity recognition may be an innate skill or cognitive process Opportunity recognition may be an innate skill or cognitive process Entrepreneurs may have a “sixth sense” so they see opportunities that others miss Entrepreneurs may have a “sixth sense” so they see opportunities that others miss This “sixth sense” is called entrepreneurial alertness This “sixth sense” is called entrepreneurial alertness The ability to notice things without engaging in deliberate search The ability to notice things without engaging in deliberate search

Social Networks Characteristics of one’s social network affects opportunity recognition and venture development Characteristics of one’s social network affects opportunity recognition and venture development You Network Tie Refers to any relationship you have with another person The people represented in a network are generally called “actors” When mapping the network of one individual, that person is called the “focal actor” A graphical representation of a network of relationships is called a network map. People indicated as dots/circles Relationships indicated as lines

Important Network Characteristics Certain network tie characteristics linked to better outcomes (e.g., opportunities recognized, firm performance, power, etc.) Certain network tie characteristics linked to better outcomes (e.g., opportunities recognized, firm performance, power, etc.) Network Size Network Size Network Tie Strength Network Tie Strength Strong Ties Strong Ties Weak Ties Weak Ties Bridging Ties Bridging Ties

Network Size You Large Network characterized by many tiesSmall network characterized by few ties Benefits of Larger Networks 1.Very helpful in earlier stages of venture development 2.More opportunities identified 3.Better firm performance 4.Faster IPO 5.Network growth Benefits of Smaller Networks 1.Helpful in later stages of venture development i.Provides a more parsimonious group of “helpers” later on

Network Tie Strength: Strong Ties Strong Ties are determined as such by three characteristics of these relationships: 1. Long duration of relationship 2. Closeness of relationship (close/very close) 3. Frequency of contact (frequently interact) In depicting a “network map”, strong ties are indicated by short solid lines from the focal actor to the connecting strong tie. Drawbacks of Strong Ties 1. Provide access to redundant information 2. Provide access to similar or redundant contacts (e.g., no help in expanding an actor’s network) Strong-ties: characterized by frequent interactions between coworkers, friends, and spouses Benefits of Strong Ties 1.Generally trustworthy 2.Provides depth of information 3.Usually helpful in early-stage funding You Mom Dad Spouse Best Friend

Network Tie Strength: Weak Ties Weak-ties: characterized by infrequent interactions between acquaintances You Weak Ties are determined as such by three characteristics of these relationships: 1. Short duration of relationship 2. Closeness of relationship (not close) 3. Frequency of contact (infrequently interact) In depicting weak ties on a “network map”, weak ties are indicated by long dotted lines from the focal actor to the connecting weak tie. Benefits of Weak Ties 1. Provide unique perspectives 2. Helpful for identifying opportunities 3. Helps entrepreneurs expand their network Drawbacks of Weak Ties 1.Difficult to sort through information 2.Over time tend to become strong ties 3.Sometimes difficult to create exchange relationship with (requires legitimacy)

Bridging Ties Bridging ties describe the situation where an actor is tied to another actor within the network who has no other links with that network. Benefits of Bridging Ties 1.Actors holding bridging positions are more likely to receive novel information vs. the rest of the network 2.Bridging actors more likely to receive new information earlier than others in the network 3.This leads to more power and control benefits for the actors holding the bridge position (e.g., the brokering position) Drawbacks of Bridging Ties 1.If you do not hold the bridging position, you may be in a weak position You Broker between 3 network groups Group 1 Group 3 Group 2

Other Important Entrepreneurial Network Issues to Consider Understanding your network can help to know where network “gaps” need to be filled To evaluate your entrepreneurial network: List names of your contacts that can help with business-related issues a) a) Count the number of contacts within your business network = network size Next to their name, list the business functions they can help with a) a) Examine the business functions listed and determine if any are missing Next to the business function(s), list each contact’s relationship to you (e.g., friend, family, acquaintance) a) a) Count the number of friends and family = strong ties b) b) Count the number of acquaintances = weak ties i. i. With which business functions do your strong ties help? ii. ii. With which business functions do weak ties help?

Other Important Entrepreneurial Network Issues to Consider The types of networks that are beneficial to entrepreneurs vary during different phases of venture development The types of networks that are beneficial to entrepreneurs vary during different phases of venture development Early-stages benefit from large, diverse networks Early-stages benefit from large, diverse networks Later-stages benefit from more parsimoniously diverse networks Later-stages benefit from more parsimoniously diverse networks Managing your network over time can impact venture performance Managing your network over time can impact venture performance Understanding others’ networks can help to know where they can add value and where they need value added Understanding others’ networks can help to know where they can add value and where they need value added Evaluate your contacts’ networks to find gaps, areas from which you can benefit, and areas where you can help Evaluate your contacts’ networks to find gaps, areas from which you can benefit, and areas where you can help Creating win-win situations between network partners  higher venture performance Creating win-win situations between network partners  higher venture performance

Emerging Issues with Business Networks Online Networking focused on professional networking combines business and social networking increasingly being used as a marketing tool Cautions and Recommendations: Employers increasingly using online social networking websites to screen candidates Facebook.com Myspace.com Twitter.com Online networking is only useful to the extent that focal actors effectively manage and utilize their network

1. Brainstorming 2. Focus Groups 3. Surveys 4. Customer Advisory Boards 5. Day-in-the-Life Research 6. IDEO Method Cards 6 Other Techniques For Generating Ideas

Technique 1: Brainstorming Used to generate a large number of ideas/solutions quickly Used to generate a large number of ideas/solutions quickly Typically involves a group of people and is targeted to a specific topic Typically involves a group of people and is targeted to a specific topic Can generate more ideas than traditional meetings because usually when an idea is suggested, the group immediately starts to evaluating it Can generate more ideas than traditional meetings because usually when an idea is suggested, the group immediately starts to evaluating it Rules for a brainstorming session: Rules for a brainstorming session: No criticism No criticism Promotes people offering more ideas than they otherwise might Promotes people offering more ideas than they otherwise might Freewheeling is encouraged Freewheeling is encouraged The session should move quickly The session should move quickly Leap-frogging is encouraged Leap-frogging is encouraged

Technique 2: Focus Group Used for a variety of purposes—can be used to help generate new business ideas Used for a variety of purposes—can be used to help generate new business ideas Gathering of 5-10 people, selected based on common characteristics relative to the issues being discussed Gathering of 5-10 people, selected based on common characteristics relative to the issues being discussed Groups led by a trained moderator who tries to gain insight into why people feel they way they do about the issue Groups led by a trained moderator who tries to gain insight into why people feel they way they do about the issue * Focus groups are also useful for developing and/or modifying/ researching business offerings once they are identified. * Focus groups are also useful for developing and/or modifying/ researching business offerings once they are identified.

Technique 3: Surveys Method of gathering information from a sample of individuals Method of gathering information from a sample of individuals Sample = a fraction of the population of interest Sample = a fraction of the population of interest This class is a sample of the entire UD student population and This class is a sample of the entire UD student population and An even a smaller sample of the entire university-student population in the US An even a smaller sample of the entire university-student population in the US The most effective surveys select a “random” portion of the population The most effective surveys select a “random” portion of the population Every person in the population has the same probability of being selected to participate in the survey Every person in the population has the same probability of being selected to participate in the survey Random sampling allows us to feel more confident in the information we gather Random sampling allows us to feel more confident in the information we gather This class is not a random sample of the UD student population This class is not a random sample of the UD student population If we put every UD student name in a hat a selected 30, that would be a random selection of the UD student population If we put every UD student name in a hat a selected 30, that would be a random selection of the UD student population If we put every university student’s name in the US in a hat and picked 100, that would be a random sample of the US university population If we put every university student’s name in the US in a hat and picked 100, that would be a random sample of the US university population Surveys can help to gain information about people’s perceptions, needs, and problems related to new product, service, and business ideas Surveys can help to gain information about people’s perceptions, needs, and problems related to new product, service, and business ideas More on this later in the semester More on this later in the semester

Techniques 4, 5, and 6: CABs; Day-in-the–Life; and IDEO Method Cards Customer Advisory Boards (CABs) Customer Advisory Boards (CABs) Regular meetings of a sample of a company’s customers to discuss needs, wants, and problems Regular meetings of a sample of a company’s customers to discuss needs, wants, and problems Day-In-The-Life Research Day-In-The-Life Research The employees of a company spend a day with a customer The employees of a company spend a day with a customer A type of anthropological research A type of anthropological research Can watch customers using the firm’s offerings Can watch customers using the firm’s offerings Have to be careful of the “Hawthorne Effect” Have to be careful of the “Hawthorne Effect” The employee can actually practice using the firm’s offerings as a customer would The employee can actually practice using the firm’s offerings as a customer would IDEO Method Cards IDEO Method Cards Each card has a picture and corresponding method for coming up with a new idea on the back Each card has a picture and corresponding method for coming up with a new idea on the back 4 categories: learn, look, ask, and try 4 categories: learn, look, ask, and try

Initial Steps for Protecting Ideas Step 1 Step 1 Put idea in a tangible form (e.g., enter into a physical idea logbook or computer disk) Put idea in a tangible form (e.g., enter into a physical idea logbook or computer disk) Include the date when the idea was first conceived Include the date when the idea was first conceived Step 2 Step 2 Secure the idea (e.g., password protect, put in safe, etc.) Secure the idea (e.g., password protect, put in safe, etc.) Step 3 Step 3 Avoid inadvertent or voluntary disclosures Avoid inadvertent or voluntary disclosures Doing so could forfeit the right to claim exclusive rights to it Doing so could forfeit the right to claim exclusive rights to it Other, more formal, steps Other, more formal, steps Copyright, Trademarks, Patents, etc. Copyright, Trademarks, Patents, etc. Discussed in more detail later in semester Discussed in more detail later in semester