- Explain how the entrepreneurial mindset relates to opportunity recognition
- Employ strategies for generating new ideas from which opportunities are born
[SLIDE 1]
If you were to ask five different people what the word opportunity means, you would probably get five different answers.
While there are many definitions of opportunity, most share three central characteristics:
- potential economic value
- novelty or newness
- perceived desirability
Using these characteristics, we can understand opportunity as an apparent way of generating value through unique, novel or desirable products, services and even processes that have not previously been exploited.
First, for an opportunity to be viable, it must have the capacity to generate value. Value can take many forms. The most common form of value is economic value: the capacity to generate profit. However, as we have seen in the last lesson, social value and environmental value are also important. An opportunity has social value if it addresses a social need, and environmental value if it protects or preserves the environment.
All forms of value, however, are based on the assumption that there is a market populated with enough people to buy your product or service. This does not mean that a large market is required, and many successful businesses are run on a small scale or cater to limited markets. The key is to provide value for a specific segment such as a geographic area, an age group or a niche.
In addition, the idea must be new, unique or a variation on an existing theme that you are confident people will accept and adopt. The ideas must involve something that people need, desire and find useful or valuable.
Finding these qualities in an idea is the essence of opportunity.
[SLIDE 2]
Not all ideas are created equal. Part of the skill involved in opportunity recognition is the ability to evaluate ideas and identify those with the highest likelihood of success.
One way to do this is to assess whether the idea is an Innovation, Invention, Improvement or Irrelevant.
This can be achieved by rating an idea on two dimensions – the degree of novelty and the value and usefulness of the idea, both of which are rated from high to low.
An innovation is an idea that is novel, useful and valuable. A smartphone is a good example.
Innovations and inventions are often paired together, but the difference in them lies in demand. Inventions score highly on novelty, but if they do not appeal to consumers, they will be rendered useless. Only inventions that succeed in finding a market move to the innovation stage.
For example, in the early 1950s, Better Nesmith Graham, a typist and aspiring artist wondered if there was a way to correct errors while typing. Knowing that artists sometimes paint over their mistakes, she started using water-based paint to correct her mistakes. The idea became popular among the other secretaries in her company and thus, liquid paper was born. When Graham sold the business in 1980, it was worth $47.5 million.
Liquid Paper took off because it was novel and useful, but it only became a high-value innovation when it hit the market. Yet, ideas do not always need to be unique or novel to appeal to customers. There are many ideas that focus on improvement. These are based on existing products. For example, folding sunglasses, reusable sticky notes, and bamboo toothbrushes are not high in novelty, but many people find them useful to a degree.
Finally, irrelevant ideas score low in terms of both novelty and usefulness. There are many examples of beverage companies experimenting with new ideas that have failed to capture the imagination of consumers. Crystal Pepsi was a colorless version of Pepsi that performed poorly. Another example is Maxwell House's coffee in a carton.
[SLIDE 3]
Although a matrix like this one is useful, it is difficult to fully pigeonhole ideas into neat categories in this way. How can we really predict whether an idea is inventive, innovative or irrelevant?
Something we perceive as irrelevant and useless might appeal to someone else. Who would have thought that ugly Christmas sweaters would be in such demand? Or that a fleece blanket with sleeves – the Snuggie – would become a viral sensation and generate over $500,000 in sales?
Take the Pet Rock, for example. Invented in the 1970s, the idea was that people could replace a live animal with a pet rock. Within a year, 1.5 million consumers had bought one, proving that even seemingly improbable ideas can be successful.
Opportunities spring from ideas, but not all ideas are opportunities. While we all have the capability to generate a huge range of ideas, not every one of us knows how to turn an idea into a valuable, revenue-generating opportunity. If we did, everyone would do it!
As the idea classification matrix shows, most opportunities demand a degree of novelty. But, how do we identify the right opportunities? The first step is generating as many ideas as we can, for it is out of thousands of ideas that opportunities are born.
[SLIDE 4]
Here's a quick exercise. Take a minute. Close your eyes, and think of an idea. Ready?
Think hard.
How many ideas did you come up with? If you came up with very few or no ideas at all, you are in good company. Ideas don't just spring fully formed into our minds, although the myth of the isolated inventor, working tirelessly from his or her workshop or laboratory may lead us to think so.
In fact, history's greatest inventions occurred very differently from what we may have been taught. For instance, many of us learned in history class that Eli Whitney invented the cotton gin in 1793 – except he didn't really. In fact, he improved existing cotton gins by using coarse wire teeth instead of rollers. Similarly Thomas Edison did not invent the lightbulb – it already existed! Edison's discovery was a filament made of a certain species of bamboo that had a higher resistance to electricity than other filaments. Again, he took an existing product and made it more useful and valuable.
Many of the most well-known inventions have evolved because of a substantial number of people working on them simultaneously, and improvements made by groups over the years or even the centuries. History shows us that there is usually little reason to credit just one person for the creation of a novel product or service.
What we can safely say, however, is that successful products and services all begin with an idea. Opportunities emerge from thousands of ideas, but how can we learn to generate the best ideas? Lets take a look at some of the strategies we can use for idea generation. In total, we can observe seven major strategies.
[SLIDE 5]
Analytical strategies involve taking time to think carefully about a problem by breaking it up into parts, or looking at it in a more general way in order to generate ideas about how certain products or service can be improved or made more innovative.
In some cases, you may see very little correlation between problems until you start to think about them analytically. For example, in one study, a group was asked to think about different ways of stacking certain items. The ideas they came up with were then considered as ways to park cars.
In another study, researcher found that artists who carried out critical analysis before they started their work, as well as through the duration of the task, were more successful than those who did not use the same analysis.
[SLIDE 6]
Search strategies involve using memory to retrieve information to make links or connections based on past experience that are relevant to the current problem using stimuli.
For example, lets say you were asked to design a door hinge. In this example the door hinge is a stimulus – a starting point for searching solutions to the problem.
Even if you do not have any previous experience of designing door hinges, you could search your memory to see if you can think of anything that you can associated with a door hinge to support the design process. For example, you might think of the opening and closing of a clam shall, and apply this to the hinge design.
This strategy illustrates our ability to be resourceful in generating associations between objects that at first appear to have no relationship with each other.
[SLIDE 7]
Imagination also plays an important part in idea generation. Imagination-based strategies involve suspending disbelief and dropping constraints in order to create unrealistic states or fantasies.
Using this approach, one idea can lead to another, yielding a pipeline of great ideas that may impact the world. For example, scientists at the National Aeronautics and Space Administration (NASA) have needed to use a great deal of imagination to come up with tools, protective clothing, personal care items, foodstuffs and other inventions that can be used in outer space. Along the way, these ideas have led to other innovations that have changed people's lives here on Earth.
[SLIDE 8]
In order to think creatively, our mind needs to break out of its usual response patterns. Habit-breaking strategies are techniques that help to break our minds out of mental fixedness in order to bring about creative insights.
One strategy is to think about the opposite of something you believe in order to explore a new perspective. Another method focuses on taking the viewpoint of someone who may or may not be involved in the situation.
This is sometimes called the Napoleon technique, as in "What would Napoleon do?" referring to the skills of the famous military and political leader.
[SLIDE 9]
Relationship-seeking strategies involve consciously making links between concepts or ideas that are not normally associated with each other.
For example, you could make a list of words that are completely unrelated to the problem that you are trying to solve, then list the characteristics of each item on the list. Next, apply those characteristics to the problem with a view toward coming up with ideas to solve the problem.
The purpose of this exercise is to stimulate the mind into making connections that would otherwise have gone unnoticed.
[SLIDE 10]
Development strategies are employed to enhance and modify existing ideas in order to create better alternatives and new possibilities. A common exercise in idea enhancement is to gather a group of four to six people together. Each person writes down three ideas, which are then passed around the group. Then, every member spends five minutes suggesting improvements on the ideas to make them more feasible and effective.
[SLIDE 11]
The most dominant of the strategies within group scenarios are interpersonal strategies, in which group members collaborate to come up with new or improved ideas.
Group brainstorming is a good example of an interpersonal strategy where members exchange thoughts and build on ideas.