1. Recognizing Opportunities and Generating Ideas
Day #2
Diane M. Sullivan (2007)
Sections Modified from Barringer & Ireland’s (2006) Chapter 2

2. Personal Characteristics of the Entrepreneur
Characteristics that tend to make some people better at recognizing opportunities than others
Prior Experience
Social Networks
Cognitive Factors
Creativity

3. Prior Industry Experience
Prior industry experience helps entrepreneurs recognize opportunities because
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
Technical term: The Corridor Principle

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

5. Social Networks
Characteristics of one’s social network affects opportunity recognition and venture development
A graphical representation of a network of relationships is called a network map.
People indicated as dots/circles
Relationships indicated as lines
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”

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

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

8. Network Tie Strength: Strong Ties
Strong-ties: characterized by frequent interactions between coworkers, friends, and spouses
Benefits of Strong Ties
Generally trustworthy
Provides depth of information
Usually helpful in early-stage funding
You
Mom
Dad
Spouse
Best Friend
Strong Ties are determined as such by three characteristics of these relationships:
Long duration of relationship
Closeness of relationship (close/very close)
Frequency of contact (frequently interact)
In depicting a “network map”, strong ties are indicated by solid lines from the focal actor to the connecting strong tie.
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)

9. Network Tie Strength: Weak Ties
Weak-ties: characterized by infrequent interactions between acquaintances
You
Benefits of Weak Ties
Provide unique perspectives
Helpful for identifying opportunities
Helps entrepreneurs expand their network
Weak Ties are determined as such by three characteristics of these relationships:
Short duration of relationship
Closeness of relationship (not close)
Frequency of contact (infrequently interact)
In depicting a “network map”, weak ties are indicated by, 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 exchange relationship with (requires cues of legitimacy)

10. Benefits of Bridging Ties Drawbacks of Bridging Ties
You
Broker between 3 network groups
Group 1
Group 3
Group 2
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
Actors holding bridging positions are more likely to receive novel information vs. the rest of the network
Bridging actors more likely to receive new information earlier than others in the network
This leads to more power and control benefits for the actors holding the bridge position (e.g., the brokering position)
Drawbacks of Bridging Ties
If you do not hold the bridging position, you may be in a weak position

11. Other Important Entrepreneurial Network Issues to Consider
Understanding your network can help to know where network contact “gaps” need to be filled
Understanding others’ networks can help to know where they can add value and where they need value added
Note: Understanding your partner’s networks can also help you understand what they value (e.g., what your value proposition must/must not do for them)
The types of networks that are beneficial to entrepreneurs vary during different phases of venture development
For example, early-stage entrepreneurs seem to benefit from large, diverse networks. Later-stage entrepreneurs seem to benefit from more parsimoniously diverse networks.

12. Creativity Creativity
Creativity is the process of generating a novel AND useful idea.
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)

13. Creativity 1 2 3 4
Variation
Evaluation and Selection
Retention
Evolutionary View of the Process of Creative Idea Generation 5 6
Figure 2.2
Five-Steps to Generating Creative Ideas

14. Creative Process and Entrepreneurial Opportunity Construction
More
Extent of
Venture
Organization
Less V S R V S R
Entrepreneur(s) Market/Industry
Idea Generation Idea Exploration Idea Exploitation

15. 5 Other Techniques For Generating Ideas
Brainstorming
Focus Groups
Surveys
Customer Advisory Boards
Day-in-the-Life Research

16. Technique 1: Brainstorming
Used to generate a large number of ideas/solutions quickly
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
Rules for a brainstorming session:
No criticism
Promotes people offering more ideas than they otherwise might
Freewheeling is encouraged
The session should move quickly
Leap-frogging is encouraged

17. Technique 2: Focus Group
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
Groups led by a trained moderator who tries to gain insight into why people feel they way they do about the issue
* Note that focus groups are also useful for developing and/or modifying/researching business offerings once they are identified.

18. Technique 3: Surveys
Is a method of gathering information from a sample of individuals
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
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
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
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
Surveys can help to gain information about people’s perceptions, needs, and problems related to potential new product, service, and business ideas
More on this later in the semester

19. Techniques 4 and 5: CABs and Day-in-the –Life Research
Customer Advisory Boards
Regular meetings of a sample of a company’s customers to discuss needs, wants, and problems
Day-In-The-Life Research
The employees of a company spend a day with a customer
A type of anthropological research
Can watch customers using the firm’s offerings
Have to be careful of the “Hawthorne Effect”
The employee can actually practice using the firm’s offerings as a customer would

20. Initial Steps for Protecting Ideas
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
Step 2
Secure the idea (e.g., password protect, put in safe, etc.)
Step 3
Avoid inadvertent or voluntary disclosures
Doing so could forfeit the right to claim exclusive rights to it
Other, more formal, steps
Copyright, Trademarks, Patents, etc.
Discussed in more detail in Chapter 8