Recognizing Opportunities and Generating Ideas Day 2 Diane

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Recognizing Opportunities and Generating Ideas Day #2 Diane M. Sullivan (2007) Sections Modified from

Recognizing Opportunities and Generating Ideas Day #2 Diane M. Sullivan (2007) Sections Modified from Barringer & Ireland’s (2006) Chapter 2

Personal Characteristics of the Entrepreneur Characteristics that tend to make some people better at

Personal Characteristics of the Entrepreneur Characteristics that tend to make some people better at recognizing opportunities than others Prior Experience Social Networks Cognitive Factors Creativity

Prior Industry Experience l Prior industry experience helps entrepreneurs recognize opportunities because An individual

Prior Industry Experience l Prior industry experience helps entrepreneurs recognize opportunities because An individual may spot a market niche that is underserved l Can build a network of social contacts who provide insights that lead to new opportunities l Technical term: The Corridor Principle l

Cognitive Factors Opportunity recognition may be an innate skill or cognitive process l Entrepreneurs

Cognitive Factors Opportunity recognition may be an innate skill or cognitive process l Entrepreneurs may have a “sixth sense” so they see opportunities that others miss l l This “sixth sense” is called entrepreneurial alertness l The ability to notice things without engaging in deliberate search

Social Networks l Characteristics of one’s social network affects opportunity recognition and venture development

Social Networks l Characteristics of one’s social network affects opportunity recognition and venture development • A graphical representation of a network of relationships is called a network map. • People indicated as dots/circles • Relationships indicated as lines Network Tie You Refers to any relationship you have with another person The people represented in a network are generally called “actors” When mapping the network of one individual, that person is called the “focal actor”

Important Network Characteristics l Certain network tie characteristics associated with better outcomes (e. g.

Important Network Characteristics l Certain network tie characteristics associated with better outcomes (e. g. , more opportunities recognized, better firm performance, power positions, etc. ) l Network Size l Network Tie Strength l Strong Ties l Weak Ties l Bridging Ties

Network Size You Large Network characterized by many ties 1. 2. 3. 4. 5.

Network Size You Large Network characterized by many ties 1. 2. 3. 4. 5. Benefits of Larger Networks Very helpful in earlier stages of venture development More opportunities identified Better firm performance Faster IPO Network growth You Small network characterized by few ties Benefits of Smaller Networks 1. Helpful in later stages of venture development i. Provides a more parsimonious group of “helpers” later on

Network Tie Strength: Strong Ties Mom Dad You Strong Ties are determined as such

Network Tie Strength: Strong Ties Mom Dad You Strong Ties are determined as such by three characteristics of these relationships: Spouse Best Friend Strong-ties: characterized by frequent interactions between coworkers, friends, and spouses Benefits of Strong Ties 1. Generally trustworthy 2. Provides depth of information 3. Usually helpful in early-stage funding 1. Long duration of relationship 2. Closeness of relationship (close/very close) 3. Frequency of contact (frequently interact) 4. In depicting a “network map”, strong ties are indicated by solid lines from the focal actor to the connecting strong tie. 5. Drawbacks of Strong Ties 6. Provide access to redundant information 7. Provide access to similar or redundant contacts (e. g. , no help in expanding an actor’s network)

Network Tie Strength: Weak Ties are determined as such by three characteristics of these

Network Tie Strength: Weak Ties are determined as such by three characteristics of these relationships: 1. Short duration of relationship 2. Closeness of relationship (not close) You 3. Frequency of contact (infrequently interact) 4. In depicting a “network map”, weak ties are indicated by, dotted, lines from the focal actor Weak-ties: characterized by infrequent to the connecting weak tie. interactions between acquaintances 5. Drawbacks of Weak Ties 6. May be difficult to sort through information 7. Over time tend to become strong ties 8. Sometimes difficult to create exchange relationship with (requires cues of legitimacy) Benefits of Weak Ties 1. Provide unique perspectives 2. Helpful for identifying opportunities 3. Helps entrepreneurs expand their network

Group 1 Bridging Ties Group 2 You Broker between 3 network groups Group 3

Group 1 Bridging Ties Group 2 You Broker between 3 network groups Group 3 Bridging ties describe the situation where an actor is tied to another actor within the network who has no other links with that network. Benefits of Bridging Ties Drawbacks of Bridging Ties 1. Actors holding bridging positions are more likely to 1. If you do not hold the bridging receive novel information vs. the rest of the network position, you may be in a weak position 2. Bridging actors more likely to receive new information earlier than others in the network 3. This leads to more power and control benefits for the actors holding the bridge position (e. g. , the brokering position)

Other Important Entrepreneurial Network Issues to Consider l Understanding your network can help to

Other Important Entrepreneurial Network Issues to Consider l Understanding your network can help to know where network contact “gaps” need to be filled l Understanding others’ networks can help to know where they can add value and where they need value added l l Note: Understanding your partner’s networks can also help you understand what they value (e. g. , what your value proposition must/must not do for them) The types of networks that are beneficial to entrepreneurs vary during different phases of venture development l For example, early-stage entrepreneurs seem to benefit from large, diverse networks. Later-stage entrepreneurs seem to benefit from more parsimoniously diverse networks.

Creativity l l l Creativity is the process of generating a novel AND useful

Creativity l l l Creativity is the process of generating a novel AND useful idea. Opportunity recognition may be, at least in part, a creative process. Per the text, for an individual, the creative process can be broken down into five stages (next slide)

Creativity Evolutionary View 2. 2 of the Process of Figure Creative Idea Generation Five-Steps

Creativity Evolutionary View 2. 2 of the Process of Figure Creative Idea Generation Five-Steps to Generating Creative Ideas Variation 1 3 2 4 6 Retention 5 Evaluation and Selection

Creative Process and Entrepreneurial Opportunity Construction More V R Extent of S Venture Organization

Creative Process and Entrepreneurial Opportunity Construction More V R Extent of S Venture Organization V Less R S Entrepreneur(s) Idea Generation Market/Industry Idea Exploration Idea Exploitation

5 Other Techniques For Generating Ideas 1. 2. 3. 4. 5. Brainstorming Focus Groups

5 Other Techniques For Generating Ideas 1. 2. 3. 4. 5. Brainstorming Focus Groups Surveys Customer Advisory Boards Day-in-the-Life Research

Technique 1: Brainstorming l Used to generate a large number of ideas/solutions quickly l

Technique 1: Brainstorming l Used to generate a large number of ideas/solutions quickly l Typically involves a group of people and is targeted to a specific topic l Can generate more ideas than traditional meetings because usually when an idea is suggested, the group immediately starts to evaluating it l Rules for a brainstorming session: l No criticism l Promotes people offering more ideas than they otherwise might l Freewheeling is encouraged l The session should move quickly l Leap-frogging is encouraged

Technique 2: Focus Group l Are used for a variety of purposes and can

Technique 2: Focus Group l Are used for a variety of purposes and can be used to help generate new business ideas l Gathering of 5 -10 people, selected based on common characteristics relative to the issues being discussed l Groups led by a trained moderator who tries to gain insight into why people feel they way they do about the issue * Note that focus groups are also useful for developing and/or modifying/researching business offerings once they are identified.

Technique 3: Surveys l Is a method of gathering information from a sample of

Technique 3: Surveys l Is a method of gathering information from a sample of individuals l The sample is a fraction of the population of interest l l This class is a sample of the entire UD student population and even a smaller sample of the entire university-student population within the US The most effective surveys select a “random” portion of the population l Every person in the population of interest should have the same probability of being selected to participate in the survey l l This class is not a random sample of the UD student population l l l Using a random sampling procedure allows us to feel more confident in the information we gather from the survey If we put every UD student name in a hat a selected 30 out of the hat, that would be a random selection of the UD student population If we put every university student’ name in the US in a hat and picked 100 out of the hat, that would be a random sample of the US university population Surveys can help to gain information about people’s perceptions, needs, and problems related to potential new product, service, and business ideas l More on this later in the semester

Techniques 4 and 5: CABs and Day-in-the –Life Research l Customer Advisory Boards l

Techniques 4 and 5: CABs and Day-in-the –Life Research l Customer Advisory Boards l l Regular meetings of a sample of a company’s customers to discuss needs, wants, and problems Day-In-The-Life Research l The employees of a company spend a day with a customer A type of anthropological research l Can watch customers using the firm’s offerings l l l Have to be careful of the “Hawthorne Effect” The employee can actually practice using the firm’s offerings as a customer would

Initial Steps for Protecting Ideas l Step 1 l l l Step 2 l

Initial Steps for Protecting Ideas l Step 1 l l l Step 2 l l Secure the idea (e. g. , password protect, put in safe, etc. ) Step 3 l l l Put idea in a tangible form (e. g. , enter into a physical idea logbook or computer disk) Include the date when the idea was first conceived Avoid inadvertent or voluntary disclosures Doing so could forfeit the right to claim exclusive rights to it Other, more formal, steps l Copyright, Trademarks, Patents, etc. l Discussed in more detail in Chapter 8