Opportunity Spotting, problem analysis and innovation

2. Session 12 Opportunity Spotting, problem analysis and innovation

3. Why do organisations leave gaps? Existing businesses are generally working with a secure network; have established customers and suppliers; volume sales (economies of scale). Organisational inertia: there is always a better way of doing things but some organisations get stuck in ways of thinking and doing things; inertia is resistance to change in a changing environment. Complacency – institutionalised thinking (more detail in week 27). Wickham (2006, 429 -451)

4. Why do organisations leave gaps? Dominant logic prevails – they get used to seeing the world in a particular way. They are not hungry enough to see or go for the new opportunities – they are too small to worry about. Technological inertia – to entrenched in where they are now and cannot see the opportunities or need to embrace new ways of working (processes) or technologies. Wickham (2006, 429 -451)

5. Why do organisations leave gaps? Cultural inertia – embraces a how we do things here culture. Need to reflect new approaches and attitudes that don’t allow the company to get stuck in a rut. Government interventions – these might support small firms, helping them to set up and establish themselves. Anti monopoly legislation may also prevent large firms getting too large. Internal politics – too busy in-fighting and missing opportunities. Wickham (2006, 429 -451)

6. Strategic Windows Imagine a brick wall – that reflects the market you wish to enter – the existing suppliers are delivering their products and services in an effective way. The gaps they may leave represent the strategic windows of opportunity open to the entrepreneur. Having seen the opportunity, you must determine the size or scope of opportunity; exploit it and then close the window behind you by creating competitive advantage. Wickham (2006, 429 -451)

7. Six stages Spotting – new product; new service; new means of production; new distribution route; improved service; relationship building - trust can take out cost. Locating – how can the new offer been positional alongside existing products. Measuring – what is the size of the opportunity? Is it worth the effort? You need to understand the market and its dynamics. Wickham (2006, 429 -451)

8. Six stages Spotting – new product; new service; new means of production; new distribution route; improved service; relationship building - trust can take out cost. Locating – how can the new offer been positional alongside existing products. Measuring – what is the size of the opportunity? Is it worth the effort? You need to understand the market and its dynamics. Wickham (2006, 429 -451)

9. Six Stages Opening – gaining commitment. Get peoples’ view of the idea, try it out and see what response you get. Moving through – Start the business. Closing – you need to create competitive advantage Wickham (2006, 429 -451)

10. Problem analysis • Information: • Market Characteristics • Product Characteristics • Buyer Characteristics Synthesis: Refining critical relationships • Analysis: • Understanding critical relationships New Product: • Each stage requires you to make decisions – information, analysis, synthesis. Wickham (2006, 429 -451)

11. Screening and selecting • How large is the opportunity? • How large is the opportunity? • What is the market share likely to be? • What is the gross margin (revenue less costs)? • How long are you likely to be able to exploit the opportunity? • What investment is likely to be needed? • What immediate capital do you need? • What will you need in the long term? • What assumptions are you making? • What resources will you need? Wickham (2006, 429 -451)

12. Screening and Selecting? • What is the likely return? • What profit will you make, over what timescale? • Will that be enough to attract investors? • What are the risks? • What if customers do not find the offer appealing? • What if competitors are more responsive than expected? • How dependent are you on others? • In what circumstances might investors pull out? • What will you do about that? • What will you do if cash flow is more/or less than anticipated? Wickham (2006, 429 -451)

13. Innovation • Comes in many forms, economically its combining resources in a new and original way.Four stages: • Find the gap • Evaluate the opportunity (qualitatively and quantitatively) • Innovate to satisfy the need • Deliver the opportunity Wickham (2006, 429 -451)

14. Types of entrepreneurial innovation High Potential impact in market Low Established New Technology Wickham (2006, 429 -451)

15. Types of innovation Wickham (2006, 429 -451) Incremental – based on existing technology, with minor improvements. New insight innovation – using existing technology in new ways. Specialist innovation – new technology, but with limited ambition, with competition based on appeal to a narrow group. New world innovation – new technology with wide appeal.

16. Innovation breakout Technological knowledge – effective development and production of product or service. Market Knowledge – concern for customers, their needs and knowledge of competition. Competitors’ Knowledge Technological knowledge The Business New Value Market Knowledge Capability Knowledge Capability knowledge – what the venture does and why it does it well. Wickham (2006, 429 -451)

17. Entrepreneurial innovation Wickham (2006, 429 -451) Tends to be driven by strategy, entrepreneurial innovation is said to be driven by vision. It does not complement business performance, but is fundamental to it. Larger corporation tend to compartmentalise innovation, entrepreneurial ventures embrace it in all functions.

18. Read the article “Knowing a winning business idea when you see one” by Chan Kim and Renee Mauborgne, Harvard Business Review, September –October 2000: 129-138.