OPPORTUNITY RECOGNITION: THE STARTING POINT FOR NEW VENTURES

1. OPPORTUNITY RECOGNITION:THE STARTING POINT FOR NEW VENTURES

2. What is an opportunity? • How are they discovered or created? • Why do some people but not others discover or create them?

3. Key Question: Why do some people but not others recognize/discover opportunities? • Luck? They are in the right place at the right time or know the right people? • They are unusually talented or creative? • They go around searching for opportunities? • The cognitive perspective can offer valuable answers • They are able to “connect the dots” because of knowledge and experience they have and others do not?

4. If this is true, then where do opportunities exist? • “Out there” in the real world—as a result of changes in technology, markets, demographics, government policy? • “In here”—in the minds of specific persons • Answer: BOTH! • Opportunities exist “out there” as a potential • But do not really exist until they are recognized by specific persons—in the minds of specific entrepreneurs

5. One view: • It is really a “connect the dots” phenomenon? • Some people recognize opportunities because their prior experience and the knowledge structures (base) they have allow them to see connections others do not see • Question: is there always a “short window” for an opportunity?

6. No! Evidence for this view: • Some entrepreneurs (“repeat” or “habitual” entrepreneurs) recognize one opportunity after another • Opportunities sometimes exist for years or even decades before someone recognizes them • Bagels • Pizza • Luggage with wheels • Copy machine, that could copy on plain paper • Graphical interface personal • Bitcoin?

7. An opportunity that existed for a long time…

8. Xerox machines—and their inventor

9. Pizza! From Italy to the World

10. But Now...A New Identity!!!

11. What is an opportunity? • “There is a tide in the affairs of men Which, taken at the flood, leads on to fortune; Omitted, all the voyage of their lifeIs bound in shallows and in miseries.” William Shakespeare • “Luck is a matter of preparation meeting opportunity.”--Oprah Winfrey

12. An Opportunity: • Perceived means of generating economic or social value • That has not previously been exploited by others • Is not now being exploited • Is socially acceptable in the entrepreneur’s society (this one is a bit controversial)

13. Where do opportunities come from? From CHANGE: • Technological Change • Political and Regulatory Change • Social and Demographic Change

14. The Field of Entrepreneurship Concurs • Opportunity recognition is a key step • But to date, no unifying theoretical framework for understanding this process has emerged • A Central premise : A cognitive perspectivecan help to provide this framework • Theories of human cognition and perception provide added insight into the nature of opportunity recognition—

15. Opportunity Recognition – Part 2 • Opportunity recognition as pattern recognition • Connecting the dots as a key source of opportunity recognition

16. Previous Research on Opportunity Recognition • Many factors play a role • Active search • Alertness(“unique preparedness to recognize opportunities” when they appear) • Prior knowledge(of industry, customer needs, etc.) • We can, perhaps, understand the impact of all of these factors within the context of one cognitive process: pattern recognition

17. Pattern Recognition • Pattern recognitionis the process of identifying meaningful patterns in events or trends • It involves recognition, by specific persons, of connections between apparently unrelated trends, changes, and • These patterns then point to new business opportunities • Evidence that this approach can be applied to opportunity recognition: • Many opportunities exist for years before anyone spots them Because no one has perceived the patterns • But Pattern recognition is common • Evidence that experienced entrepreneurs are better at it!

18. Opportunity Recognition- • Are all opportunities acceptable? • If they are identified, can they be developed? • Is economic value all that matters?

19. No—Some are, Some are Not • Some are illegal, but acceptable to many people—eg., “knock offs” of famous brands • Some are legal, but unacceptable to many people—new drug that costs $$$$ • Some both illegal and unacceptable—kind of bomb that is smaller than a pen • Some are legal and acceptable—new device for helping kids learn

20. How can Pattern Recognition Explain the Effects of Experience, Alertness, Search? Active search: • first, search for key changes, trends, event • Then, search for potential links between them • Example: 3-D Doodler—Draw in 3 dimensions • Example: Modobag—luggage that you can ride

21. Acceptable? Legal?Common in Places With Huge Numbers of Tourists (e.g., Venice, Italy)

22. https://www.youtube.com/watch?v=bx9xOIFrvQ4

23. Saving the World From…Styrofoam ?

24. Mushrooms as an answer? https://www.youtube.com/watch?v=zmDENxTPn8Q

25. Do You Always Need a Lot of Money to Start a New Business? Ask Sam Walton https://www.youtube.com/watch?v=XBATMIfIl-w

26. Or Ask Sara Blakley, Founder of Spanxx

27. Alertness—Searching for OpporutnitiesWhat? How? • Somewhat “mystical” in the past • Kirzner: People differ in their capacity to recognize opportunities • But how, and why? • As an economist, he wasn’t really interested • He just knew that they did differ!

28. Tang, Kacmar, Busenitz (2012)—Answered these questions Alert scanning & search Alert association and connection Alertness Evaluation and judgment

29. Practical Implications • Why do specific persons but not others identify specific opportunities? • We all have unique life experience—hence, unique cognitive frameworks • Differential amounts of experience = prototypes differing in clarity, development • In essence, some people recognize specific opportunities that others overlook because they have the “right” cognitive equipment for doing so • Can individuals be trainedto be better at recognizing opportunities? • Train them not merely to be alert but to search in best places and in best ways • Focus on changes in technology, demographics, markets, etc. • Search for emergent patterns • Broad range of experience will result in better prototypes and exemplars • Exposure to wide range of business opportunities also helpful

30. A Final word From Soren Kierkegaard (Philsopher): If I were to wish for anything…it would not be wealth or power, but the passionate sense of the potential, for the eye which, ever young…sees the possible…What wine is so sparkling, what so fragrant, what so intoxicating as possibility?”