RECOGNIZING OPPORTUNITY CHAPTER THREE

New Ventures Fundamental realities Most new ventures are works in process and works of art Most business plans are obsolete at the printer Speed, adroitness of reflex, and adaptability are crucial The key to succeeding is failing quickly and recouping quickly

New Ventures Fundamental realities Success is highly situational, depending on time, space, context, and stakeholders The best entrepreneurs specialize in making “new mistakes” only Starting a company is much harder than it looks, or you think it will be; but you can last a lot longer and do more than you think if you do not try to do it solo

Sources of New Venture Ideas

Ideas as Tools Finding a good idea is the first step in the process of converting an entrepreneur’s creativity into an opportunity. The new business that simply bursts from a flash of brilliance is rare. Usually a series of trail-and-error iterations is necessary before a promising product or service fits what the customer is willing to pay for. Starting a business is very much a series of fits and starts, brainstorms and barriers.

The Great Mousetrap Fallacy Ralph Waldo Emerson helped create the great mousetrap fallacy. It is often assumed that success is possible if an entrepreneur can just come up with a new idea. But ideas are inert and worthless. Only 1-3% of investment ideas receive financing.

Contributors to the Fallacy Oversimplified accounts of the ease with which such ventures as Xerox, IBM, and Polaroid made their founders wealthy contribute to the fallacy Inventors may underestimate the importance of what it takes to make a business succeed. Contributing to the fallacy is the inventor’s psychological ownership of the invention rather than the business venture. Another source of the fallacy lies in a technical and scientific orientation: a desire to do it better.

Idea an Opportunity? Attractive Timely Durable Is anchored in a product or service, which creates or adds value for its buyer or end user. Timely The “window of opportunity” must be open and remain open long enough. Durable Also, having the best idea first is not a guarantee of success. Unless having the best idea also includes the capacity to preempt other competitors, the first does not necessarily mean most viable.

Where are Opportunities Born? Technology sea change Moore’s Law Metcalf’s Law Disruption Market sea change Value chain disruption/obsolescence/vulnerability Deregulation

Moore’s Law & Peter Drucker’s Postulate Moore’s Law—the power of the computer chip will double every eighteen months at constant price—is actually being exceeded by modern chip technology. Peter Drucker’s Postulate states that a tenfold increase in the productivity of any technology results in economic discontinuity. (radical innovation) These innovations have led to creation of major new inventions and technologies.

Gilder’s & Metcalf’s Law Gilder’s Law – the total bandwidth of communication systems triples every twelve months. New developments seem to confirm that bandwidth availability will continue to expand at a rate that supports Gilder's Law. Robert Metcalf's law states that the "value" or "power" of a network increases in proportion to the square of the number of nodes on the network. In other words, if you have four nodes, or computers, on a network, say, an office intranet, its "value" would be four squared (4^2), or 16. If you added on addition node, or PC, then the value would increase to 25 (5^2).

Ideas versus Opportunities: Search for Sea Changes

New Product/Service Ideas Sources Technological Trends Gene Therapy Nanotechnology Wireless Technology Who will have the next great idea?!

How to Continuously Uncover and Evaluate Entrepreneurial Opportunities IRRITATION/PLEASURE SURPLUS/SHORTAGE Boston London Galveston LIMITS MARKET INEFFICIENCY IMPORT/EXPORT - GEOGRAPHIC - INDUSTRIAL COPYCAT

Creativity Little is really know about the process Attributes of people considered creative?

The Nature of Creativity What is known about creativity: Function perspective- it is the production of novel and useful ideas. Outcome perspective- it generates valuable, useful products and services, procedures and processes. It occurs at both an individual and a group level. It is a matter of choice on the part of the person involved. Creativity as a process Time is an important variable Creativity is NOT a linear process but is iterative and chaotic

PATTERN RECOGNITION Is not logical, linear and additive Intuitive and inductive The creative linking (or cross association) of two or more in-depth “chunks” of experience, know-how, and contacts. “50,000 chunks” of experience

Risk Propensity Prospect Theory

An Exercise CONNECTIONS

The Invention Process

Challenges to Creativity No time for creativity No confidence No creative skills

Removing the Roadblocks Start with the familiar Identify a problem and solve it Use your personal network Make time for creativity and innovation Think in opposites

Taking Advantage of a Disconnect A Paper Airplane