Chapter 2 Modified from: Barringer & Ireland (2006) Recognizing Opportunities and Generating Ideas Part II

Personal Characteristics of the Entrepreneur Characteristics that tend to make some people better at recognizing opportunities than others Prior ExperienceSocial Networks Cognitive FactorsCreativity

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

Important Network Characteristics Certain network ties characteristics associated with better outcomes (e.g., more opportunities recognized, better performance, etc.) Certain network ties characteristics associated with better outcomes (e.g., more opportunities recognized, better performance, etc.) Network Size Network Size Network Tie Strength Network Tie Strength Strong Ties Strong Ties Weak Ties Weak Ties

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

In depicting a “network map”, strong ties are indicated by short lines from the focal actor to the connecting strong tie partner. Drawbacks of Strong Ties Provide access to redundant information Provide access to similar or redundant contacts (e.g., no help in expanding an actor’s network) Network Tie Strength: Strong Ties 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

Weak-ties: characterized by infrequent interactions between acquaintances You Benefits of Weak Ties 1.Provide unique perspectives 2.Helpful for identifying opportunities 3.Helps entrepreneurs expand their network In depicting a “network map”, weak ties are indicated by long, dotted, lines from the focal actor to the connecting weak tie. Drawbacks of Weak Ties May be difficult to sort through information Over time tend to become strong ties Sometimes difficult to create relationship with (requires cues of legitimacy) Network Tie Strength: Weak Ties

Creativity Creativity Creativity Creativity is the process of generating a novel AND useful idea. Creativity is the process of generating a novel AND useful idea. Opportunity recognition may be, at least in part, a creative process. Opportunity recognition may be, at least in part, a creative process. Per the text, for an individual, the creative process can be broken down into five stages (next slide) Per the text, for an individual, the creative process can be broken down into five stages (next slide)

Creativity Figure 2.2 Five-Steps to Generating Creative Ideas Variation Evaluation and Selection Retention Evolutionary View of Creativity and Idea Generation 5 6

Brainstorming Brainstorming Focus Groups Focus Groups Surveys Surveys Other Techniques Other Techniques 4 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 Are used for a variety of purposes and can be used to help generate new business ideas Are used for a variety of purposes and 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

Technique 3: Surveys Is a method of gathering information from a sample of individuals Is a method of gathering information from a sample of individuals The sample is a fraction of the population of interest The sample is a fraction of the population of interest This class is a sample of the entire UD student population and even a smaller sample of the entire university-student population within the US This class is a sample of the entire UD student population and even a smaller sample of the entire university-student population within 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 of interest should have the same probability of being selected to participate in the survey Every person in the population of interest should have the same probability of being selected to participate in the survey Using a random sampling procedure allows us to feel more confident in the information we gather from the survey Using a random sampling procedure allows us to feel more confident in the information we gather from the survey 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 out of the hat, that would be a random selection of the UD student population If we put every UD student name in a hat a selected 30 out of the hat, that would be a random selection of the UD student population If we put every university student’ name in the US in a hat and picked 100 out of the hat, that would be a random sample of the US university population If we put every university student’ name in the US in a hat and picked 100 out of the hat, that would be a random sample of the US university population Can also use a random numbers table from MS Excel Can also use a random numbers table from MS Excel Surveys can help to gain information about people’s perceptions, needs, and problems related to potential new product, service, and business ideas Surveys can help to gain information about people’s perceptions, needs, and problems related to potential new product, service, and business ideas

Technique 4: Other Techniques Customer Advisory Boards Customer Advisory Boards 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

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 in Chapter 8 Discussed in more detail in Chapter 8