1. (Opportunity Recognition)
ENTR 452
(Opportunity Recognition)

2. THE PROCESS OF “CREATIVE DESTRUCTION”
Schumpeter (1934) described the role of the entrepreneur as a radical market innovator who brings about creative destruction through innovation.
He argued that industries within societies are replaced by other industries over time. The process of replacement of one industry (destruction) by another more modern industry (creation) is creative destruction. (e.g., typewriters/computers, horse & buggy/cars)
Creative destruction is taking place constantly and moves society forward – entrepreneurship moves society.

3. ODDS OF SUCCESS
1 in 1000 chance of becoming a millionaire from starting a business (some studies show 1 in 200 chance)
3 in 10,000 high school basketball players will make the NBA or WNBA (odds far worse for all high school kids)
1 in 176 million chance of winning Mega Millions
1 in 1.1 million chance of getting struck by lightning
1 in 250,000 chance of getting struck by lightning in Montana

4. FINDING/DEVELOPING AN OPPORTUNITY IS CRITICAL
Think about unmet market needs.
Think about what you are passionate about.
Be unique!
Can you establish sustainable competitive advantage.

5. UNIQUE BUSINESSES http://most-expensive.com/bed

6. OPPORTUNITY RECOGNITION DEFINITION
Perceiving a possibility for new profit potential through (a) the founding and formation of a new venture or (b) the significant improvement of an existing venture.
(Christensen, Madsen, & Peterson, 1989)

7. OPPORTUNITY FACTORS Opportunities emerge when there are changes in:
Technology
Consumer Economics
Social Values
Political Action and Regulatory Standards
Demographics
Natural Disasters
Resource Discoveries

8. WINDOW OF OPPORTUNITY (TIMMONS)
Time (years)
Market Size 5 10 20
$100M
$250M
$500M
$1 billion
Window of
Opportunity
Market

9. OPPORTUNITY AS MARKET DISEQUILIBRIA (KIRZNER)
Quantity
Price S D Q1 Qe Q2 Pe P1

10. THE OPPORTUNITY RECOGNITION PROCESS (LONG & McMULLAN, 1984)
Cultural
Forces
Social
Economic
Job
Personality
Factors
i) uncontrolled factors
Initial
Vision
the ‘aha’
experience
Strategic Idea Elaboration
Elaborated
The Decision
to Proceed:
Prestructuring
the Venture
B. Identifying the
Field of
Opportunity
C. Elaborating the
D. The Decision
to Proceed
Venture
Alertness
Cultivation
Study of
Venture Subjects
Selection
Moonlight
Venturing
Entrepreneurial
Lifestyle
ii) controlled factors

11. OPPORTUNITY RECOGNITION SEQUENCES (BHAVE, 1994)
Decision to
Start
Opportunities
Recognized
Opportunity
Chosen
Need
Fulfilled
Business Opportunity
A. Externally Stimulated Opportunity Recognition
B. Internally Stimulated Opportunity Recognition
Commitment to Physical
Creation
Business Concept
Identified
Refinement
Filtration
Meta Opportunity
Stage

12. NEW VENTURE IDEAS VS. ENTREPRENEURIAL OPS.
Ideas do not equate to opportunities
Other factors must exist
Controlled and uncontrolled factors
(Long & McMullan, 1984)
An entrepreneur’s personal characteristics and
environment will influence the opportunity
recognition process.

13. MY MODEL OF THE BASIC OPPTY REC. PROCESS
*** Business Idea ***
Entrepreneur
- Background
- Experience
- Education
Environment
- Industry
- Economic Conditions
- Social Context
- Regulatory Issues
Entrepreneurial
Opportunity
Possible
Firm
Founding

14. MEAN NUMBERS OF IDEAS AND OPPORTUNITIES
ITEM
MEAN
Ideas last month
2.4
Ideas last year
6.6
Opportunities last month
1.2
Opportunities last year
3.3

15. IDEA SOURCES SOURCE % OF RESPONDENTS Prior Experience 73.0%
Business Associates
32.8%
Saw a Similar Business
25.8%
Friends or Relatives
19.1%
Hobby/Personal Interest
17.2%
Market Research
11.3%
It Just Came to Mind
10.9%
Magazine/Newspaper
2.3%
Radio/Television
0.4%
Other
4.7%

16. OPPTY RECOGNITION ACTIVITIES
ACTIVITY
% OF RESPONDENTS
Sought out information/feedback from business associates
52.0%
Contacted potential customers/clients
50.0%
Discussed idea with friends/family members
46.5%
Gathered information on competitors
33.6%
None, just knew idea was an opportunity
33.2%
Prepared financial statements
25.0%
Other
3.5%

17. TIME LAPSE BETWEEN IDEA AND OPPORTUNITY
TIME LAPSE BETWEEN IDEA AND OPPORTUNITY
TIME
% OF ENTREPRENEURS
None
13.7%
Hours
2.3%
Days
14.5%
Weeks
22.7%
Months
35.9%
Years
10.9%

18. TIME LAPSE BETWEEN OPPORTUNITY AND FOUNDING
% OF ENTREPRENEURS
Hours
1.6%
Days
11.3%
Weeks
26.2%
Months
50.8%
Years
10.2%

19. MODIFICATION TO IDEA BEFORE BECOMING OPPTY
CHANGE
PERCENTAGE OF ENTREPRENEURS
No Change
19.1%
Slight Change
42.6%
Moderate Change
28.5%
Major Change
9.0%
Complete Change
0.8%

20. OPPTY RECOGNITION THROUGH SOCIAL NETWORKS
Social networks are the most important resource of the firm
- they provide access to information and resources
Social networks subsume both individual and environmental factors
- the people one associates with tell us about the individual
Support for the “Strength of Weak Ties” (Granovetter, 1973)
- People you do not know well are more important to
entrepreneurs than people you know well.
An associated concept is the importance of Structural Holes
(Burt, 1992) – if your immediate contacts do not know each other
there are “holes” in the network. This is advantageous (see example).

21. STRUCTURAL HOLES EXAMPLE
Three holes (look at immediate contacts)
No holes (not as beneficial
to the entrepreneur)