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									       ENTR 452
(Opportunity Recognition)
WINDOW OF OPPORTUNITY
      (TIMMONS)
     Market Size
  $1 billion
                                    Market


    $500M


    $250M
                            Window of
    $100M                   Opportunity
                                   Time (years)
                   5   10      20
OPPORTUNITY AS MARKET
DISEQUILIBRIA (KIRZNER)

   Price

                        S


   Pe

   P1

                        D
                            Quantity
           Q1   Qe Q2
                THE OPPORTUNITY
              RECOGNITION PROCESS
             (LONG & McMULLAN, 1984)
i) uncontrolled factors   ii) controlled factors   B. Identifying the     C. Elaborating the               D. The Decision
                                                        Field of             Opportunity                      to Proceed
                                                      Opportunity
                                Venture
       Cultural
                                Alertness
       Forces
                               Cultivation



       Social                  Study of
       Forces               Venture Subjects

                                                                        Strategic Idea Elaboration
                                                                                                                      The Decision
      Economic                     Job                   Initial                                         Elaborated   to Proceed:
       Forces                   Selection                Vision                                            Vision     Prestructuring
                                                                                                                      the Venture
                                                                            Strategic Idea Elaboration
                                                    the ‘aha’
                                                    experience
        Job                     Moonlight
       Forces                   Venturing




     Personality             Entrepreneurial
      Factors                   Lifestyle
OPPORTUNITY RECOGNITION
 SEQUENCES (BHAVE, 1994)
 A. Externally Stimulated Opportunity Recognition

                                        Opportunity
                                        Filtration
                                                                             Opportunity
                                                                             Refinement

Decision to             Opportunities                    Opportunity
Start                   Recognized                       Chosen
                                                                                           Business Concept
                                                                                           Identified

 B. Internally Stimulated Opportunity Recognition
                                                                                                         Commitment to Physical
                     Meta Opportunity                                                                    Creation
                     Stage
                                                                             Opportunity
                                                                             Refinement

Need                     Need                         Business Opportunity
Recognized               Fulfilled                    Recognized
    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)
OPPORTUNITY FACTORS

1. Technology
2. Consumer Economics
3. Social Values
4. Political Action and Regulatory Standards
5. Demographics
6. Natural Disasters
7. Resource Discoveries
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.
           MY MODEL OF THE BASIC
            OPPTY REC. PROCESS
Entrepreneur
    - Background
    - Experience
    - Education




                                                         Possible
                                      Entrepreneurial     Firm
              *** Business Idea ***
                                       Opportunity      Founding




Environment
-   Industry
-   Economic Conditions
-   Social Context
-   Regulatory Issues
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
        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%
        OPPTY RECOGNITION
            ACTIVITIES
                    ACTIVITY                        % OF
                                                RESPONDENTS
Sought out information/feedback from business   52.0%
associates
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%
 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%
   TIME LAPSE BETWEEN
OPPORTUNITY AND FOUNDING
       TIME         % OF
               ENTREPRENEURS

       Hours        1.6%

       Days        11.3%

       Weeks       26.2%

      Months       50.8%

       Years       10.2%
 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%
   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).
             STRUCTURAL HOLES
                 EXAMPLE
           A’-2              A’-3


A’-1       A-1                A-2   A’-4        A-1           A-2


                     E-1                               E-2




                     A-3                               A-3


              A’-6         A’-5


          Three holes (look                No holes (not as beneficial
       at immediate contacts)                 to the entrepreneur)

								
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