Identifying Opportunity

Opportunity recognition

Every entrepreneur gets their idea from different inspiration, but we can separate them all into two groups.

• Effort
  Some ideas start with a problem that someone is trying to solve. This approach means that the venture is not limited to certain technology and can try to find the best solution for their target market. However, the quality of the solution that they come up with can depend on their expertise.

• Accident
  There are many common products that we take for granted today were actually invented by accident. This can be referred to as a solution without a problem, the person never set out to find the idea. In this case, the entrepreneur also does not necessarily need expertise in the area but simply to be an active observer and think outside the box.

Customer needs

Whether a business is providing their product or service to another business or direct to consumers, it is important that they understand their customer. This means grasping what, where, when, why and how they are going to do business and the fundamental value they are creating. It also helps to acknowledge the size of the potential market and realising when something is a niche.

In some business models, your customer and your user are not necessarily the same person. It is important to recognise this to ensure you can meet your customer’s needs while also keeping good standards for your users.

In some rare cases where a company has developed more radical innovation, it can be possible for their product to create new needs that didn’t exist before. A prime example of this is when Apple launched the first iPhone. It was unlike anything that came before and completely changed how people use and think about their phones. Whole new industries such as the mobile app market were even born out of it.

Market & industry

For any given business idea, we can define the segments of the overall economy that it sits in. A market for a product or service is the group of people who would be potential buyers. The industry refers to the group of existing sellers who currently provide that product or service or something that meets the same needs.

For example, the pharma industry sells products to the market of sick people and travel industry sells products to the market of people going on holiday. Bear in mind that each industry could have several markets and actually diversifying like that is a great way to grow a business.

These pairings of markets and industries also often work in chains. So for the above example, a plane engine manufacturer sells engines to a plane manufacturer. Then plane manufacturers sell planes to airlines and airlines sell flights to people looking to travel long distances. These chains can get very long, especially in the manufacturing supply chain.

Opportunity evaluation

When we are trying to evaluate a new opportunity, we do so in terms of properties of the markets and industry that relate to it. Properties of a market can include its size, if it’s growing or shirking, spending trends over recent years and anything else that indicates where there might be money to be made. Properties of an industry can include the barrier to entry, the number of competitors and the brand loyalty they have, and anything else that suggests if you have any significant advantages and how easy they might be to protect.

Other metrics can be used to measure opportunity attractiveness but they must be justified. This often depends on the purpose of the evaluation and who needs to be convinced. Just remember that quantitative data will always win over anecdotes.

Competitive advantages

Good opportunities for new ventures often come with at least one competitive advantage, especially in stagnant industries where you can innovate. Sources of sustainable advantage include unique resources such as IP, exclusive partnerships, customer lock-in, significant innovation, being a first mover or a strong team.

This course is very clear that good intentions are not a source of advantage but remember that customers vote with their wallet. If your company has good morals and you develop that reputation then can boost your brand more than you think. The key is not to forget that that isn’t a substitute for a better product.