COEUR - BCM Business Creativity Module Opportunity Recognition and the Screening Process Carolyn McNicholas Aberdeen Business School, RGU

Today’s Objectives Understand where business ideas come from Understand how to perform an initial high level screening / evaluation of business opportunities Understand the influence of the external environment Take away action – screening checklist

Business Creation & Start-up Process Adapted from Deakins (2006) Idea formulation Opportunity Recognition Pre-start Planning and Preparation Entry and Launch Post-entry Development

where can you find BIG IDEAs ?

Sources of Ideas Every day problems / needs / complaints –E.g. Sports Division / Cisco / Netflix Personal experience –Work, home, education, skills and talents Hobbies and interests –Lifestyle entrepreneurs Newspapers, magazines, media Other countries Deliberate Search –Business Opportunity Profiles –On-line databases –Patents and licensing Factors of Change

Pizza Express Case Study Founded Peter Boizot – 1965 Influenced by Italian and German experiences - pizzaiolos Formed an exclusive alliance with London’s only mozzarella maker By 2003 over 300 outlets in UK, Ireland, Spain and France

Drucker’s 7 Sources of Innovative Opportunities Organisational / Sectoral The unexpected (event or success or failure) The incongruity – between what actually happens and plan The inadequacy in underlying processes The changes in industry or market structure External Demographic changes Changes in perception, mood and meaning New knowledge (both scientific and non scientific) Last is most difficult, least reliable and least predictable

Opportunity Recognition Converting an idea into a business opportunity is the key element of the process of business creation Entrepreneurs are attuned to opportunity Opportunity must take priority over innovation Opportunities are generated by change

Opportunity has Four Essential Qualities - Barringer and Ireland, 2006 Attractive Durable Timely Anchored in product/service which adds value to buyer/end user “I never perfected an invention that I did not think about in terms of the service it might give others... I find out what the world needs, then I proceed to invent” Thomas Edison Wow products /services such as the Dyson vacuum cleaner and the bar and massage service in Virgin Upper Class, Amazon

One Product is Not Enough! Dyson vacuum cleaner took 5 years and 5,127 prototypes First product, G-Force, sold for $2000 each in Japan Vacuums, washing machines, Airblade hand dryer (sales $6 billion worldwide), Air Multiplier

Window of Opportunity Varies Internet Search Engines 1995 – Yahoo Quickly followed by Lycos, Excite, AltaVista, etc 1998 – Google (advanced technology)

Ideas not Innovative Opportunities Sinclair C5 E-stamps and Stamps.com Tartan tanks

Evaluating Idea / Opportunity Must be a clearly defined market need –Customer analysis, segments, motivations, unmet needs, gaps in market Idea needs to be economically viable –Market attractiveness e.g. size? growth? trends? entry barriers? –Profit potential? –Resources needed / available? Technical feasibility Competitive advantage / USP –Competitor analysis Fit with your personal / company objectives / experiences / core competencies Timing must be right – window of opportunity Risks / threats – Environmental analysis

What to look for Limitations of what’s currently available Trends and changes (beware fads) Something new and different Unfilled niche Technological advances Speed to market

Conclusions Generating ideas and new products is easy - but you need customers and markets The real challenge is converting ideas into a business opportunity The better you understand your consumer the better your chances of winning in the market place Evaluation and assessment of markets is key to developing business ideas and new products and services

References Trott, P 2008 Innovation management and New Product Development 4th ed. Harlow:Prentice Hall Deakins, D and Freel, M Entrepreneurship and Small Firms. 5th Edition, McGraw Hill. Drucker, Peter F. Innovative and Entrepreneurship, Practice and Principles. Harper & Row, Publishers, Inc Burns, P 2007 Entrepreneurship and Small Business 2 nd ed. Palgrave Barringer, B & Ireland, D 2006 Entrepreneurship: Successfully Launching New Ventures 2nd ed. Prentice Hall Kotter, J.P 1997 The New Rules. Simon & Schuster. Franke, N, von Hippel, E & Schreier, M 2006 Finding commercially attractive user innovations: A test of lead user theory. Journal of Product Innovation Management. V.23 pp Venkataraman, S., and Shane, S., (2000) The Promise of Entrepreneurship as A Field of Research, Academy of Management Review, V. 25 (1) pp Cooper, R (1985) Selecting Winning new product projects; using the NewProd system. Journal of Product Innovation Managment v

COEUR - BCM Business Creativity Module Screening Checklist Carolyn McNicholas Aberdeen Business School, RGU

Screening Check List – Market Factors Is the market large? YesNo Is the market highly competitive? (Direct/indirect) Is this an emerging / growth market? Is there any pending legislation which might impact market demand? Are there any obvious barriers to entry? Are there reachable / receptive customers close by? (Think about distribution channels, etc)

Screening Check List – Competitive Advantage? Is there a well identified market need for the product/service? YesNo Can we establish a USP for our product / service? – Price? Quality? Speed of response? Unique features? Is our product / service a significant improvement on our competitors? Can we protect our product? Can we establish first mover advantage?

Screening Check List – Management Capability Do we have personal knowledge / experience / the right skills / experience? Yes No Do we have an interest in the service? Do we know other people who have the rights skills / experience? Have we the right contacts and networks? Is there specific training we can receive to improve our chances of success?

Screening Check List – Resources / Economics Is this a low cost start up business model? YesNo Do we have access to the money necessary to start this business? Is this a sizeable / scaleable business opportunity? Is it worth doing?

Screening Check List – Other YesNo European dimension? Personal / corporate values? e.g. Environmental considerations Cultural barriers and attitudes?

Summary Need to tailor checklist to individual idea Seeking –Large and growing market –Reachable customers –An innovative product which adds value –Right window of opportunity Assess whether to abandon, reform or enhance the idea