1. University of Navarra IDENTIFYING ENTREPRENEURIAL OPPORTUNITIES The Entrepreneurs Club September 27, 2004

2. Ideas are not the same as Opportunities IDEAS …last for ever …are free …everybody has ideas …do not need customers to survive OPPORTUNITIES …are perishable …require work …require fit …must create customer value Always consider investing in a Grade A man with a Grade B idea. Never invest in a Grade B man with a Grade A idea. George Doriot, ‘father’ of the VC industry

3. Inventions – new technologies are not the same as Opportunities The BAR CODE - method of automatic identification and data collection. –The first patent for a bar code type product (US Patent #2,612,994) was issued to inventors Joseph Woodland and Bernard Silver on October 7, 1952 –Bar code was first used commercially in 1966 –In June of 1974, the first U.P.C. scanner was installed at a Marsh's supermarket in Troy, Ohio. The first product to have a bar code included was a packet of Wrigley‘s Gum.

4. What is an Opportunity? An idea that is timely, attractive, durable anchored in a product or service that creates or adds value for its buyer and user –WINDOW - time sensitive (fleeting) occasion –ATTRACTIVE – to stakeholders (entrepreneurs, investors, clients) –DURABLE – sustainable over time or sustainable long enough to reap expected benefits

5. The Concept of FIT PEOPLE AND RESOURCES PEOPLE AND RESOURCES CONTEXT BUSINESS MODEL OPPORTUNITY APPROPRIATE EXPERIENCE CONTACTS SKILLS ATTITUDE FAVORABLE SOCIOLOGICAL FACTORS APPROPRIATE RISK/REWARD ALLOCATION AND INCENTIVES INVESTOR-VALUE-ADDED FAVORABLE TECHNOLOGY MACROECONOMY FAVORABLE RULES OF THE GAME PROJECT APPROPRIATE FINANCING OPTION PRESERVATION

6. Sources of Opportunities Context –The Unexpected –Incongruities –Process need (Dell&Chang/Taiwan Semiconductors) –Industry and Market structures –Demographics –Changes in perception (Case/AOL, Omidyar/eBay, Yang/Yahoo) –New Knowledge (Noyce&Moore/Intel, Boyer&Swanson/Genentech) Others –Reading trade publications (Gates&Allen/Microsoft) –Engaging in consulting projects (Kelleher/SWA) –Idea arbitrage (Schultz/Starbucks) –Business Models (Amazon)

7. People: Opportunity Identification Personality Traits: Creativity Optimism Personality Traits: Creativity Optimism Social Networks: Weak ties Partnerships Inner circle Social Networks: Weak ties Partnerships Inner circle Prior knowledge: Special interests Industry knowledge Customer problems Ways to serve customers Academic background Prior knowledge: Special interests Industry knowledge Customer problems Ways to serve customers Academic background Entrepreneurial Alertness Entrepreneurial Alertness + + + + + Perception Discovery Creation Perception Discovery Creation Development Evaluation Venture Formation Abortion Source: Based on Fig.3 from Ardichvili, Cardozo, Ray (2003) "A theory of entrepreneurial opportunity identification and development«, Journal of Business Venturing Opportunity Development

8. Where 100 of the 1989 Inc. 500 founders got their ideas Discovered by luck 20% Swept in by PC revolution 5% Systematic search 4% Idea from previous job 71% Source: Amar Bhide (1994), “How entrepreneurs craft strategies that work,” Harvard Business Review (March-April).

9. Good Opportunities come from SI VI Customers75%25% Employees59%37% Professional acquaintanc41% 49% Suppliers47%35% Trade publications40%38% Magazines, newspapers26%51% NI Investors54% Technical literature64% Hobby63% Libraries78% Patent Filings84% Top of the listBottom of the list VI= Very Important, SI= Somewhat Important, NI= Not Important, VI+SI+NI=100% Source: Hills and Schrader, « Successful Entrepreneur’s Insights into Opportunity Recognition », 1998

10. Keep An Opportunity Register Inventory of your entrepreneurial ideas In a database or ‘diary’, record the following items: –Business concept, trends, key data, obstacles, competences & resources, competition (see McGrath & McMillan, Figure 2-1) Technique applied by successful habitual entrepreneurs Increases your chances of realizing the right opportunity at the right time at the right place