Whenever man comes up with a better mousetrap, nature immediately
comes up with a better mouse.
It is not enough to identify a good opportunity. Finding the right opportunity, which implies a fit between the need or
demand in the market and the ability to satisfy customers, begs a multitude of questions. One professor advises his
entrepreneurship class every year that he knows of at least a dozen opportunities for young would-be entrepreneurs. All
that it tAes is a willingness to spend time, effort and money to check them out and verify them.
This chapter covers material that is probably the most important in beginning the entrepreneurial process. It addresses
issues and a line of inquiry that the student of entrepreneurship will need to know prior to launching a new venture.
understand the need to begin at the beginning-What is the first critical step? gain insight into what really makes up an
opportunity be able to differentiate between a franchise as an opportunity and starting one's own venture,
gain insight into what really makes up an opportunity
be able to differentiate between a franchise as an opportunity and starting one's own venture
• appreciate the need to observe trends and events in history as makers of opportunity
• understand the need for verification; that indeed what is thought to be a market or an efficient way to
manufacture, really is (or is not) what it is presented as being
There are two kinds of new start-ups: "push" entrepreneurs and "pull" entrepreneurs. Those new venturers who are
stimulated by the attractiveness of the business idea, are motivated to per-form, and are more congruent in terms of
objective achievement are a "pull" type. There is a better "fit" between the entrepreneur and the opportunity, perhaps
because of prior experience, and she or he is more successful as a result Of this. On the other hand the "push"
entrepreneur attempts to force things to happen and the outcome is not so positive. I
Entrepreneurs are not necessarily endowed with a unique ability to spot an opportunity and then through innovative
strategies and solutions to maximize profits from it. In fact, there is evidence that the entrepreneur does not have a lock
on maximizing an opportunity any more than the population at large. He or she may be more "alert to opportunities" but
does not have a monopoly on coming up with new ideas.
Cunningham and Lischeron note that "entrepreneurs seemed to fall into their opportunities the same way our general
population came upon their careers. It was evidently the chance and the circumstance of an every day existence that
provided the impetus for a start-Lip."
Webster defines opportunity as a "set of circumstances that provicle a chance or possibility" for something to happen. A
second description has it as a "stroke of good fortune which presents itself and can either be grasped or loSt.,,3 In the
entrepreneurial sense either of these definitions may be seen to take place. It is more likely the case, however, that the
former depiction is the rule.
An anecdote in this vein relates the story told about a Manitoba entrepreneur who wanted to start a specialty bakery
in a small farming community north of Winnipeg. For months he struggled to raise the $50 000 in capital he needed from
friends, family and the townsfolk. After six months he had only raised half the amount he needed and, at wit's end, could
only see one solution and that was to go to Las Vegas and parlay the money up to what he needed.
"There he was," said the story teller, "concentrating heavily, being cautious, stopping when luck was against him. He
played the odds, circulated from table to table, but in the end lost everything, including his ticket home."
"What did he do then?" asked a listener.
"Well, he had to go to the washroom. His luck continued to run against him. He needed 25 cents to use the toilet.
Desperate and literally destroyed he begged a quarter from an elderly lady and went in. But just as he got to the stalls a
chap was coming out and he held the door open for him. So when the Manitoban came out, greatly relieved, he said to
himself, what the heck, and plugged the quarter into a slot machine. He won! A-ad he kept on winning. At the slots, at the
tables, until he had won back all his money and twice as much more. He flew back to Canada, started the bakery. It
became a raging success and in a few short years he built a multi-million-dollar empire. And you know what? Every -year
he goes back, hoping to find his benefactor. hoping to handsomely make a payback."
"The little old lady?" asked one listener,
"No!" exclaimed the raconteur, "She was just the banker. The guy who held open the door to opportunity is who he
For the typical entrepreneur, it is not likely that he will experience a "stroke of good fortune" that will define his
opportunity. Waiting to win Lotto 649 may be as realistic an expectation. Rather, the entrepreneur realizes that there is an
Opportunity when, through experience, intrinsic knowledge or intuition there is the conviction that providing a service to
someone will create something of value both to that person and to the entrepreneur. The entrepreneur becomes a broker
of sorts who realizes that an innovation, product or process is needed by some segment of the population and he sets out
to bring the two together. The entrepreneur sees a value where others may not, at least not until the entrepreneur has
made it evident.
An opportunity is the recognition that an item or service can be made to be of value to someone. The key, however, is
to determine how much value, not only to those who presumably will enjoy what is created, but also the entrepreneur
who initiates it, hence the need for the verification process.
In the philosophy of the economist, the entrepreneur plays a significant role through opportunity identification. Frank
Knight stated it as the "identification of, or seeing disequilibria, and managing resources to gain pure profit ... by
supplying those markets until equilibrium is reached again." Schurnpeter, on the other hand, opines that opportunity
occurs when "entrepreneurs create disequilibrium by bringing about new combinations of productive resources."4 Here
we see the yin and yang of market side opportunity and production side opportunity.
Identifying the Opportunity
The understanding of what might be an opportunity, how to recognize it and what to do with one is a source for continued
discussion and debate. Presumably, there are as many variations as one would like and as many interpretations as one
would choose. There is also the situation where what might appear to be an opportunity in a local sense might already be
in the works somewhere else. Then an opportunity is a multifaceted event that is comprised of a number of factors,
including timing. But for the most part an opportunity can be said to have two origins. It is derived from humankind; that
is, a population of people, a market, a community. Or an opportunity may arise as a consequence of innovation. In this
event the effort focuses on identifying the latent demand in the market that may be stimulated by introducing a new
concept to it.
For example, who had need of the personal computer before it was introduced by Apple in the 1970s? The personal
computer was seen in the context of a hobby that a relative few "hackers" enjoyed. No one really envisioned that the PC
would take on the demand significance it did. In the 1970s IBM predicted there would be fewer than 150 000 PCs
world-wide by the end of the century. In this illustration we see that technology literally created its own demand and
The Opportunity Field
There are dozens of expressions that can define or be appropriate in discussing opportunities:
• Ideas become opportunities.
• Opportunities arise from events.
The entrepreneur suddenly became aware of an opportunity
The opportunity presented itself.
What an opportunity!
To some, opportunity knocks but once. To others it is like a bus, another always on its way. The fact is that an
opportunity is like beauty, in the eye of the beholder, or perhaps more suitably, in the eye of the entrepreneur who is
"ever alert to" the new opportunity.
Society provides any number of opportunities to the receptive individual as illustrated in
Figure 10. 1. Essentially there is a single domain, the marketplace, that determines the outcome of an opportunity, but
opportunities can be said to have their generation from a field in time that includes technology and innovation, and
EXISTING MARKET OPPORTUNITIES
Most entrepreneurial opportunities arise from everyday life experiences and activities. An individual, after using a
product or service for some time, comes to realize that "there is a better way" of providing the utility of that product or
service and they come up with a better idea. There are hundreds of "new" carburetor inventions that give better mileage
for automobiles, thousands of gadgets that improve TV watching and hundreds of thousands of new food recipes. There
are better ways to get fit with "Abdomenizers," walkers and exercise machines. There are better ways of looking
beautiful, cleaning one's home and improving it.
These "new and improved" products and services may be initiated by an innovation process or they may be prompted
by the market itself. But while the process for arriving at an enhanced or beneficially developed product, and putting it to
the market may be the same, the origins are different.
Consumer Product Modifications
Existing businesses working in existing markets are the most obvious sources for technical change. There are few
consumers who have not struggled with a candy wrapper that refused to easily peel off who didn't think about an
improvement that would make it easier to get at the sweet. There are thousands of kitchen laboratoiles that have
prototypes of one form or another in some stage of development. The patent office spends over 60 percent of its time
processing applications for fishing lures and breadmakers and the balance on reasonably serious intellectual property.
There is little empirical evidence on the success quotient for technology-driven opportunities, but using what is
known about success in industry for new product ideas it is suggested that successful new products here would be one ina
The "better mousetrap" approach to opportunity is pernicious and will continue for some time to come. Its major
barrier is that even if an improvement should be offered to the market, there must be existing demand to support the
New business ideas are the grist that feeds an existing company's bottom line. Without changes to product and service
offerings, the customer soon switches to other suppliers who will provide the special attention and need benefit that a
dynamically shifting market demands. Most entrepreneurial firms rely on this as a regeneration process that assures prof-
itability and survival.
The acceptance of modifications or product innovation is seen to follow an adoption process that includes five market
sectors. These are identified as:
a. Innovators who are presumed to account for 2.5 percent of those who would purchase the product. These
individuals, should they accept the changes in the first place are classed as being venturesome, willing to try new things.
In some respects these individuals take on the role of early trend setters, or at least may see themselves in this role.
b. Early adopters are the community trendsetters. They adopt new product with caution and comprise 13.5 percentof the
c. Early majority make up an estimated 34 percent of the rnarket and, though they are not opinion leaders, they adapt to
change ahead of the average buyer.
d. Late majority reprised 34 percent of this sector who ore somewhat conservative and skeptical about change and
e. Laggards are about 16 percent of the market and are very much bound by tradition. They adopt only if the change
itself becomes a traditional thing to do.
Thus, under a probabilistic examination, the new product not only has a small market to appeal to, but it faces the
further barrier of being unknown and lacking in credibility. In this situation, the innovation is far likely to succeed by
forming a strategic alliance with a company already in the market, rather than trying to go it alone. See Figure 10.2.
When innovations are "requested" by the market, the adoption process takes on a different colour. The major effort of
existing companies is to effect changes in their brands so as to heighten differentiation between their product and the
competitor's. Thus, the technological modifications are made in response to both corporate needs and those of the
customer. These changes take place in an environment that has accepted the basic product, perhaps prefers the brand
name and willingly uses it. Kotler and Tumer6 list five characteristics that have an influence on the adoption process.
These indicate the factors that a new entrepreneurial innovator must address if she expects to launch her new venture.
Relative Advantage Is the innovation readily and apparently superior to products already on the market? Will the new
software quickly be graphed and seen to be an improvement over what is available? If not, or if an educationa I program
is required to illustrate the advantage and instruct the buyer as to its usage, the probabilities for success are low, or it will
cost a great deal to see if it works.
Compatibility The degree to which the change fits with current customer behaviour. If a buyer were to purchase a new
computer keyboard, would it "fit in" with existing PCs in the office or would it require special training or spare parts. If
so, the likelihood for success Is diminished.
Complexity Can the user quickly make use of the product? Is it literally a "no assembly needed, user friendly item"?
Divisibility Does one have to buy the whole concept, product or service at once or can it be obtained incrementally? The
success of the Xerox 914 Copier in the mid- 1 960s can be attributed to the introductory short term lease program the
company offered, rather than coming up with the equivalent of about $10 000 at the time. A particularly attractive feature
that sold buyers was that they paid only for copies that were made. This control factor had great appeal and was
compatible with corporate behaviour.
Communicability The degree to which the product's utility can be impressed on others. Can word-of-mouth and other
endorsements be readily passed on to others about the advantageous product features?
A successful entry by the entrepreneur can be made if the product can meet the foregoing tests. Of equal importance
is that the new venturer or "non-venturist" chooses an appropriate and smaller niche to begin the selling campaign.
Most of the consumer opportunities in existing markets are obvious. These include modifications in such areas as
- health food
• fitness equipment as programs
• telecommunications equipment, cellular phones and accessories
• personal services, tourism
Society continues to grow. The demand for new goods and services will be extensions of existing goods and services.
Walter Good cites ten trends in the consumer market that will spell out opportunities for entrepreneurs. These include:
"Cocooning" Increased emphasis on eating, entertaining, shopping, or just relaxing at home, which has implications for
such businesses as takeout foods, home entertainment systems, electronic security systems, the demand for "smart"
homes, home renovations, and a broad range or other home-oriented products and services.
Time-Saving Convenience The desire to "save" time by many consumers will result in growing demand for all sorts of
products and services that leverage time, from quick-serve meal systems to non-store retailing concepts.
Attractive Aging Products that will help the consumer age gracefully are expected to be in vogue. This will include things
like anti-wrinkle creams, cosmetic surgery, hairpieces, clothes that flatter sagging bodies, and similar products.
Wellness The health and fitness craze we see today is expected to continue and even grow. Future consumers will live
longer and be more concerned about their health. Exercise, good-tasting nutritional foods with appropriate labelling,
environmentally safe products, and other items that contribute to a positive lifestyle are expected to prosper.
Concern for Quality Consumers seem to be becoming increasingly concerned about quality and consider the total life
cycle cost of many of their purchases more so than the initial purchase price. This appears to be particularly true among
the so-called yuppies in their acquisition of everything from homes to clothes to cars.
Personal Services Consumers and businesses alike are more prepared to pay others to perform tasks they cannot or will
not do themselves. This is particularly true of services that help save time or reduce the amount of time the customer has
to spend performing personal and home-related tasks. Examples include everything from house, plant and pet sitting to
the home delivery of luxurious gourmet meals.
Exotica Having more discretionary income, many consumers, particularly older people, are prepared to indulge
themselves in more exotic personal, leisure, and entertainment purchases. Sales of everything from spas and hot tubs to
custom-made golf clubs and long holidays in distant regions of the world have boomed and are likely to continue to grow.
Maintaining Tradition While demand for the exodc has exploded, there are still strong feelings about maintaining a sense
of tradition. Large, traditional weddings are back in style, and there seems to be a return to a stronger family orientation
after a decade or two of the "me generation." This will be reflected in people's purchasing; patterns and how they spend
More Customization Today's consumers seem to be becoming more concerned with distinctiveness and individuality
rather than following the crowd. Products that can be tailored to exact specifications ofthe customer while maintaining
competitive prices--e.g., homes, cars, clothes, vacations, and even perfumes--will likely do well.
Affordability While many of the earlier trends presume a more affluent consumer market, not everyone will fall into that
category. Products and services that offer good continuing value will always be in demand and innovative ways to
provide familiar things at lower prices will be very popular. Witness the recent growth in discount and off-price retailing
of well-known branded products. Good value at an affordable price is always in demand and will continue to be so.
These are but a few opportunity areas in addition to the more abundantly evident consumer goods sectors.
Peter Drucker makes the observation that innovation is a social contrivance. "In innovation, technology is used as a
means to bring about change in the economy, in society, in education ... and so on. - -thus modem technology influences
traditional society and culture...."
Where innovation drives a new opportunity, the consequences are social, cultural and, occasionally, political change.
The creation of computers has set the trend in business communications, in education and society, that will have a
long-term effect on society. The fact that the market so willingly embraced the technology is a clear example of
innovation whose time has come.
Opportunities for the entrepreneur in this domain are more risky, less promising as to success and often must await
the market to catch up. Television had been perfected twenty years before it became a commercial success in the mid- I
950s. Seat belts were offered in 1955 by the Ford Motor Company, but were not accepted until legal action forced their
The rewards, of course, can be considerable. George Green founded Tridon Inc. in the 1970s in Burlington, Ontario.
The company was based on an all plastic windshield wiper assembly. Until that time the wiper was fabricated from
chrome plated steel or stainless steel. Green came up with the idea of replacing the steel with plastic. However, the
development of the product and its initial acceptance by Ford Motor Company, followed by others later, took about five
years. Fortunately, Green had previously f)unded a successful stainless steel clamp manufacturing company that could
absorb the costs.
The emerging changes to society are forced, in some cases by technology, in others by the character and style of the
population. Demographics play a significant role in this development. The "Baby Boomers" are now maturing and
beginning to reach toward retirement age. This trend is causing a shift in the market. "Demographics holds the key to
winning consumer hearts and minds. An aging population means changing values, and creates demands for hosts of new
products and services ... It's a question of shifting priorities." And of course key to winning over increasingly
sophisticated customers with increasingly discriminating taste is the ability to bring innovation into products and services
that meet these new needs.
Trends carry society toward a changed future. Nuella Beck has captured a vision of the future by examining
businesses and industries on their knowledge content or knowledge ratios. If a business has a high content of low
technology to knowledge (or high technology) the ratio is low as in the case of a grocery store. However, the production
of electronic computing equipment has a high knowledge content. Beck ranks these industries and declares that the "New
Economy," that is, the era we now occupy, is now being powered into the future by four engines.
I Computers and Semiconductors
• computer equipment
- information services
2. Health and medical
- medical care and diagnostics
• surgical and medical instruments
• surgical and medical supplies .
3. Communications and telecommunications
- telecommunications services
• guided missiles and space equipment
• radio and microwave communications
• optical instruments and lenses
• engineering and scientific equipment
- process controls
- environmental consulting and equipment
Many entrepreneurs are sensitive to the timing that may have an effect on successful business entry. Too soon into the
market and the new venturist may spend a good deal of time and money pushing a product at a market that is not ready
Steve Podborski, the 1982 Olympic downhill ski champion, has spent years attempting to introduce his new ski boot.
Designed and developed in 1989, the boot is unique in that it is articulated about two points, at the ball of the foot and at
the ankle. It is also a rear-entry that permits the boot to fit two to three sizes. The foot is held rigidly in the sideto-side
plane, but the knee can bend without putting strain on it and, as often occurs, breaking the leg. Testing has established
that wearing the boot can improve downhill performance as much as 30 percent. Podborski, known as one of the
Canadian "wild ones" during the 1980s, has spent over $1 million on the venture without finding a way to break into the
Alternatively, the competition may come out with a substitute pro'duct before the entrepreneur has had a chance to set
up business. The "window of opportunity" becomes an issue for some discussion and concern. As Timmons notes, "the
ability to recognize a potential opportunity when it appears and the sense of timing to seize it as the window is opening,
rather than slamming shut, are critical.
Timing can also be related to the product life cycle curve. Obviously the entrepreneur would want to begin entry at
the start of the growth cycle since this point is where the market is appreciative of the new good being offered. If entry
takes place earlier the firm takes on a pioneering strategy, while a later entry puts one into a follower category. (See
Finally, there is the observation that there are product opportunities awaiting the entrepreneur who will spot them.
Vesper makes the observation "The elements that combine to make an opportunity may have all been present well before
discovery or may only have come together recently. An opportunity may lie quietly awaiting discovery, like the message
in a code ... or a story waiting to be written." Some examples include:
• hot-air com poppers
• fibreglass skis
* smart card
- tamegochi, the eyber pet
There are many opportunity sources for the entrepreneurial person. They occur almost everywhere, in daily life, in the
workplace, in Industry, virtually anywhere. Essentially, seven categories define the sources for opportunity development:
I Improvement an Existing Products and Services The application of innovation, whether in process or technology to
current items in the industrial and consumer markets. (product modification, packaging)
2. Technology Transfer Whereby the knowledge, techniques and methodologies in other markets or countries can be
imported and applied to existing systems. (licensing of new Methods)
3. Demographic Shifts Trends that will emerge as some part of the population changes in age, wealth, location. (baby
4. New Consumer Knowledge Breakthroughs in innovative applications of existing products and services, rebirth of old
methods. (herbal medicine)
5. Inventions High technology, scientific findings that signal new potential trends in industry, commerce and consumer.
6. Serendipity Individual research and accidental discovery.
7. Intuition Inspiration, insight into new ways. Mystical revelations.
The challenge is to determine whether any particular opportunity is worth pursuing and developing into a business.
Dr. Rein Peterson of York University's Entrepreneurial Studies program suggested that small firms can be found in one of
three categories: the successful, easily identifiable; the unsuccessful, those that did not (or will not) succeed; and the
"walking dead," those that are marginally successful at best and presumably hardly worth keeping alive. Clearly those in
the last category did not turn out to be good opportunities. What is required, in order to offset or reduce the risk of falling
into the second and third category, is a sound verification process or research undertaking that will clarify the focus of the
opportunity and help to establish its economic worthiness.
THE VERIFICATION PROCESS
The decision to pursue an opportunity begins with its identification and the determination that it is congruent with all that
the entrepreneur has to give. Does she or he have the technical, physical, mental, and emotional ability to fully exploit the
situation? If the answer is positive, the next step is to test the efficacy of the opportunity in terms ofthe market, technical
criteria, costs, operations and delivery. See Figure 10.4.
Three sectors are the focus for the verification process: the market, the delivery and the environment. The most
important first phase begins by examining the market and its promise for the new venture. This is followed by an
examination of the ability to produce and deliver the goods, while surviving elements in the macroenvironment. It is
usually the procedure to examine all sectors, obtain hard facts concerning various areas that might impact on the venture,
all at the same time. Most entrepreneurs, once they are fired with enthusiasm for the new project, charge off in search of
hard evidence that will support and encourage the vision they have of the venture. But the most important question is
whether in fact there is a solid market.
Verification of Entrepreneurial Intent
The internal evaluation of the individual usually takes place long before embarking on the venture. Motivational factors,
perhaps vested in the drives for independence, achievement, creation, locus of control and desire or willingness for risk,
or other factors, have likely set the new venturer on the road. But more than drive and motivation, credentials and skills
need to be examined in detail. They certainly will be by prospective investors later on. It is also important for the
entrepreneur to consider the kind of team with prerequisite skills and abilities that will be required later on to execute the
business plan and assure its success.
Timmons lists six attributes that should be examined as to a person's state of "entrepreneurial mind."
1. Commitment and determination in terms of tenacity, self-discipline and ability to dedicate completely to the
2. Market-opportunity obsession, customer or market oriented, understands customer needs, attuned to marketing
requirements, relationship marketing
3. Tolerance for ambiguity, uncertainty and willingness to risk, can work in unstructured environment, resolve
problems, make decisions under uncertainty or ambiguous knowledge
4. Adaptive, self-reliant, lateral thinker, able to adapt, attend to details.
5. Drive to excel, success is important perspective, sense of humour, low esteem needs
6. Leadership, self-starter, reliable, consistent, patient, fair, team builder
It is not critical that all elements are roundly present in the entrepreneur. There is some expectation that luck and
timely support are factors will be operative in those who succeed. Almost certainly professional investors, including
venture capitalists, require an able, dedicated and skilled entrepreneur to look after their interests. If these are not
adequately evident, the entrepreneur faces the prospect of financing the venture personally or over a long, extended
period of time.
Figure 4 Verification Structure
The Market Operations
The essential ingredient that assures success is the knowledge, and relative certainty, that the new venture has or will
have a sufficient number of customrs as to make the enterprise succeed. Woodruff and Cadotte propose that the new
venturist should carry out a market opportunity analysis (MOA) that determines five critical dimensions of the market:
1. Structure of the market
2. Customer requirements and needs
3. Capability and availability of middlemen
4. Strengths and weaknesses of the competition
5. Important environmental factors
Understanding these dimensions permits the entrepreneur to develop a strategy to enter the market and to initiate the
business. The key is in assembling solid, verifiable information with respect to each one of these areas.
Market Structure The market is not a homogeneous mass, a population at large, rather it is comprised of many segments
or clusters of people with similar characteristics and needs. These segments are the target for the entrepreneur's marketing
campaign. Research is needed to establish where those segments are located, how many, their quantity, the number who
will purchase the product.
Customer Needs A clear understanding of why the product will be purchased is resolved by determining what needs will
be satisfied by the new offering and what benefits will be received by the customer through the goods produced by the
This linkage, the product-customer benefit analysis, is a critical factor in finding out customer purchase intentions
and the degree of success in sales. Verification of a strong P-CB link gives a strong indication of success.
Capability of Middlemen A singularly effective verification process is to interview those middlemen-wholesalers,
retailers, etc.-who would carry the proposed product. The one area where an entrepreneur has less control over the
marketing program is in the distribution systems.
The new start-up manufacturer, or a new product reseller who may be importing products for resale, faces a number of
problems in looking to use the distribution system to move product. There are four major items to be examined and a
number of factors that need to be considered when looking into this area.
1 Product orientation
a Why carry the new product, given the variety of competitive products on the market?
b. Conflict between new product and those beling carried by the distribution, retailer
c. What position is needed on the shelf? On delivery9
d. Physical constraints: size, perishability
a. Gross margins per square foot
b. Expected turnover
c. Discounts, damaged goods
d. Expenses incurred by carrying another/new product
a. More or specialty sales people required?
b. Shelf support, shelf "talkers"
c. In-store/channel displays (more space required)
4. Support Services
a. Availability (desirability of training)
b. Inventory requirements
c. Advertising support with customers
d. Financing of inventory?
e. Information support
f. Management systems and product support
Research and verification of the likelihood the distribution system will respond favourably to the entrepreneur's new
products are important. Middlemen present the new product or service to the final customer and play a crucial role in
generating sales for the venture. Their support is critical since they are, in essence, an extension of the entrepreneur's
marketing team. They play an elemental role in the success of the venture and can be key to the sales and promotion of