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New Business Ventures Session #3: Opportunity Recognition

New Business Ventures Session #3: Opportunity Recognition. BALAGOPAL VISSA INSEAD 1, Ayer Rajah Avenue Singapore 138676 --- Office: (65) 67995382 Hand phone: (65) 94244573 Email: balagopal.vissa@insead.edu.

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New Business Ventures Session #3: Opportunity Recognition

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  1. New Business Ventures Session #3: Opportunity Recognition BALAGOPAL VISSA INSEAD 1, Ayer Rajah Avenue Singapore 138676 --- Office: (65) 67995382 Hand phone: (65) 94244573 Email: balagopal.vissa@insead.edu These notes are intended to support class discussions. They should not be considered a comprehensive set of issues to be dealt with.

  2. Frog & Rosbif Key takeaways….. • Creating a new venture from scratch is a process – what you do and how you do it are more crucial than your personality or cultural background • Opportunities are like diamonds in the rough – need to be polished thru hard work • Luck matters a great deal – but on the other hand, fortune favors the prepared!! • It always takes longer than you think – so persistence pays

  3. Today’s session – How do entrepreneurs pursue opportunity • Discuss the Opportunity Assessment Sheet exercise & Readings • Lecture on what is generalizable • Invited Speaker: Darran Nathan Chief Strategy Officer (Project Proteus) • How his team is pursuing an opportunity in reconfigurable computing • His personal journey as an entrepreneur

  4. Sample of Business Concepts using “Reconfigurable Computing”

  5. What’s the difference between an idea and a business opportunity? An attractive business opportunity consists of • A great business concept • Large potential market • Technically feasible product • Protectable IPR

  6. Pursuing Opportunity is a subjective process Three sources of subjectivity • Perception • Ability • Motivation

  7. Perceiving Opportunity analogous to signal detection Interpretation of a noisy signal is dependent on stocks of prior knowledge Ultimate outcome Decision to act on the opportunity

  8. Avoiding Type I & II errors requires…. Immersion in operational details which • Accrues slowly (albeit reliably) through prior experience or • Can be acquired rapidly (albeit less reliably) through vicarious learning

  9. “Self Knowledge” is equally important … • Do you have the needed abilities (e.g. social networks, team building skills etc.) to execute? • Are you truly motivated to pursue this activity?

  10. So, is it a good opportunity for you? Perception Motivation Seriously pursue an opportunity when: You perceive it and Have the ability to exploit it – or get a partner who does – and Are motivated to pursue it Ability

  11. Points to Ponder… • An idea or invention is not a business opportunity • Pursuing opportunity is a subjective process – lookout for type I or II errors • Always ask the question – Why is this a great opportunity for me?

  12. As an entrepreneur - how do you deal with an uncertain future?

  13. What’s Knight got to do with it? Source: Dew & Sarasvathy(2003)

  14. Predictive Reasoning The goal to be attained is well understood and clear  Focus your attention on the best / most creative means to attain the goal Effectual Reasoning The goal to be attained is not clear  Focus attention on the means at your disposal. Ask the question: What possible goals can I achieve with these means Contrasting effectual Vs predictive reasoning

  15. Predictive Reasoning To the extent that we can predict the future, we can control it. Effectual Reasoning To the extent that we can control the future, we don’t need to predict it. Difference in underlying logic

  16. Effectual Reasoning – core principals • Leverage contingencies (as opposed to executing a pre-determined plan) • Build parternerships (as opposed to competitor analysis) • Focus on affordable loss (as opposed to expected return) source: Sarasvathy (2001)

  17. Effectual reasoning – the process • Lives and breathes execution • A coherent story binds people together and makes sense of their actions • The set of means and their effects get reconfigured till some effects coalesce into a clear goal

  18. Key Takeaways • Pursuing opportunity entails dealing with an uncertain future • Two different ‘rational’ ways of dealing with uncertainty – Predictive and Effectual • Effectual thinking likely requires more creativity than predictive thinking

  19. Preview of next session(Session #4 & #5) – ACG case • Venture design choices concerning • Business Model design • Market Entry • Immerse yourself in the operational details and link above choices to the P&L of ACG

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