Chapter 2Modified from: Barringer & Ireland (2006)

Recognizing Opportunities and Generating Ideas

Part II

Personal Characteristics of the EntrepreneurPersonal 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 ExperiencePrior Industry Experience

Prior Industry ExperiencePrior Industry Experience Prior industry experience helps entrepreneurs recognize Prior industry experience helps entrepreneurs recognize

opportunities becauseopportunities because An individual may spot a market niche that is underservedAn individual may spot a market niche that is underserved Can build a network of social contacts who provide insights that Can build a network of social contacts who provide insights that

lead to new opportunitieslead to new opportunities Technical term: Technical term: The The Corridor PrincipleCorridor Principle

Cognitive FactorsCognitive Factors

Opportunity recognition may be an innate skill Opportunity recognition may be an innate skill or cognitive processor cognitive process

Entrepreneurs may have a “sixth sense” so Entrepreneurs may have a “sixth sense” so they see opportunities that others missthey see opportunities that others missThis “sixth sense” is called This “sixth sense” is called entrepreneurial entrepreneurial

alertnessalertnessThe ability to notice things without engaging in The ability to notice things without engaging in

deliberate searchdeliberate search

Social NetworksSocial Networks

Characteristics of one’s social network affects Characteristics of one’s social network affects opportunity recognition and venture developmentopportunity recognition and venture development

You

Network TieRefers to any

relationship you have with another person

Important Network CharacteristicsImportant Network Characteristics

Certain network ties characteristics associated Certain network ties characteristics associated with better outcomes (e.g., more opportunities with better outcomes (e.g., more opportunities recognized, better performance, etc.)recognized, better performance, etc.)Network SizeNetwork SizeNetwork Tie StrengthNetwork Tie Strength

Strong TiesStrong TiesWeak TiesWeak Ties

Network SizeNetwork Size

You You

Large Network characterized by many ties Small network characterized by few ties

Benefits of Larger Networks1. Very helpful in early stages of venture

development2. More opportunities identified3. Better firm performance4. Network growth

Benefits of Smaller Networks1. Helpful in later stages of venture

developmenti. Provides a more parsimonious

group of “helpers” later on

In depicting a “network map”, strong ties are indicated by short lines from the focal actor to the connecting strong tie partner.

Drawbacks of Strong Ties

• Provide access to redundant information• Provide access to similar or redundant contacts (e.g., no help in expanding an actor’s network)

Network Tie Strength: Strong TiesNetwork Tie Strength: Strong Ties

Strong-ties: characterized by frequent interactions between coworkers, friends, and spouses

Benefits of Strong Ties1. Generally trustworthy2. Provides depth of information3. Usually helpful in early-stage funding

You

MomDad

Spouse

Best Friend

Weak-ties: characterized by infrequent interactions between acquaintances

You

Benefits of Weak Ties1. Provide unique perspectives2. Helpful for identifying opportunities3. Helps entrepreneurs expand their

network

In depicting a “network map”, weak ties are indicated by long, dotted, lines from the focal actor to the connecting weak tie.

Drawbacks of Weak Ties

• May be difficult to sort through information• Over time tend to become strong ties• Sometimes difficult to create relationship with (requires cues of legitimacy)

Network Tie Strength: Weak TiesNetwork Tie Strength: Weak Ties

CreativityCreativity

CreativityCreativity Creativity is the process of generating a novel Creativity is the process of generating a novel ANDAND useful useful

idea.idea. Opportunity recognition may be, at least in part, a creative Opportunity recognition may be, at least in part, a creative

process.process. Per the text, for an individual, the creative process can be Per the text, for an individual, the creative process can be

broken down into five stages (next slide)broken down into five stages (next slide)

CreativityCreativity

Figure 2.2

Five-Steps to Generating Creative Ideas

12

34

Variation

Evaluation and SelectionRetention

Evolutionary View of Creativity and Idea Generation

5

6

BrainstormingBrainstorming Focus GroupsFocus Groups SurveysSurveys Other TechniquesOther Techniques

4 Techniques For Generating Ideas4 Techniques For Generating Ideas

Technique 1: BrainstormingTechnique 1: Brainstorming

Used to generate a large number of ideas/ solutions quicklyUsed to generate a large number of ideas/ solutions quickly Typically involves a group of people and is targeted to a Typically involves a group of people and is targeted to a

specific topicspecific topic Can generate more ideas than traditional meetings because Can generate more ideas than traditional meetings because

usually when an idea is suggested, the group immediately usually when an idea is suggested, the group immediately starts to evaluating itstarts to evaluating it

Rules for a brainstorming session:Rules for a brainstorming session: No criticism No criticism

Promotes people offering more ideas than they otherwise mightPromotes people offering more ideas than they otherwise might

Freewheeling is encouragedFreewheeling is encouraged The session should move quicklyThe session should move quickly Leap-frogging is encouragedLeap-frogging is encouraged

Technique 2: Focus GroupTechnique 2: Focus Group

Are used for a variety of purposes and can be used to Are used for a variety of purposes and can be used to help generate new business ideashelp generate new business ideas

Gathering of 5-10 people, selected based on common Gathering of 5-10 people, selected based on common characteristics relative to the issues being discussedcharacteristics relative to the issues being discussed

Groups led by a trained moderator who tries to gain Groups led by a trained moderator who tries to gain insight into why people feel they way they do about insight into why people feel they way they do about the issuethe issue

Technique 3: SurveysTechnique 3: Surveys

Is a method of gathering information from a sample of individualsIs a method of gathering information from a sample of individuals The sample is a fraction of the population of interestThe sample is a fraction of the population of interest

This class is a sample of the entire UD student population and even a smaller This class is a sample of the entire UD student population and even a smaller sample of the entire university-student population within the USsample of the entire university-student population within the US

The most effective surveys select a “random” portion of the populationThe most effective surveys select a “random” portion of the population Every person in the population of interest should have the same probability of Every person in the population of interest should have the same probability of

being selected to participate in the surveybeing selected to participate in the survey Using a random sampling procedure allows us to feel more confident in the Using a random sampling procedure allows us to feel more confident in the

information we gather from the surveyinformation we gather from the survey This class is not a This class is not a randomrandom sample of the UD student population sample of the UD student population

If we put every UD student name in a hat a selected 30 out of the hat, that would be 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 populationa 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 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 populationhat, that would be a random sample of the US university population

Can also use a random numbers table from MS Excel Can also use a random numbers table from MS Excel Surveys can help to gain information about people’s perceptions, needs, Surveys can help to gain information about people’s perceptions, needs,

and problems related to potential new product, service, and business ideasand problems related to potential new product, service, and business ideas

Technique 4: Other TechniquesTechnique 4: Other Techniques

Customer Advisory BoardsCustomer Advisory Boards Regular meetings of a sample of a company’s customers to Regular meetings of a sample of a company’s customers to

discuss needs, wants, and problems discuss needs, wants, and problems

Day-In-The-Life ResearchDay-In-The-Life Research The employees of a company spend a day with a customerThe employees of a company spend a day with a customer

A type of anthropological researchA type of anthropological research Can watch customers using the firm’s offeringsCan watch customers using the firm’s offerings

Have to be careful of the “Hawthorne Effect”Have to be careful of the “Hawthorne Effect” The employee can actually practice using the firm’s offerings as a The employee can actually practice using the firm’s offerings as a

customer wouldcustomer would

Initial Steps for Protecting IdeasInitial Steps for Protecting Ideas

Step 1Step 1 Put idea in a tangible form (e.g., enter into a physical idea Put idea in a tangible form (e.g., enter into a physical idea

logbook or computer disk)logbook or computer disk) Include the date when the idea was first conceived Include the date when the idea was first conceived

Step 2Step 2 Secure the idea (e.g., password protect, put in safe, etc.)Secure the idea (e.g., password protect, put in safe, etc.)

Step 3Step 3 Avoid inadvertent or voluntary disclosuresAvoid inadvertent or voluntary disclosures Doing so could forfeit the right to claim exclusive rights to it Doing so could forfeit the right to claim exclusive rights to it

Other, more formal, stepsOther, more formal, steps Copyright, Trademarks, Patents, etc.Copyright, Trademarks, Patents, etc.

Discussed in more detail in Chapter 8 Discussed in more detail in Chapter 8