Entrepreneurship: Successfully Launching

New Ventures
Seventh Edition

SEHS4675
LECTURE 2

Recognizing Opportunities
and Generating Ideas

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2-1
Learning Objectives
2.1 Explain the difference between opportunities and ideas.
2.2 Describe the three general approaches entrepreneurs
use to identify opportunities.
2.3 Discuss the personal characteristics of entrepreneurs
that contribute to their ability to recognize business
opportunities.
2.4 Identify and describe techniques entrepreneurs use to
generate ideas.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2-2
2.1 The Differences Between
Opportunities and Ideas (1 of 2)
What is an opportunity?
• An opportunity is a favorable set of circumstances that
creates a need for a new product, service, or business.
– Entrepreneurs recognize opportunity gaps and create
businesses to fill them.
▪ For an entrepreneur to capitalize on an opportunity,
its window of opportunity must be open.
▪ The term window of opportunity is a metaphor
describing the time in which a firm can realistically
enter a new market.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2-3
Figure 2.1 Four Essential Qualities of
an Opportunity

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2-4
2.1 The Differences Between
Opportunities and Ideas (2 of 2)
What is an idea?
• An idea is a thought, an impression, or a notion that may
or may not meet the criteria of an opportunity.
– Before getting excited about a business idea, it is
crucial to understand if the idea fills a need and
satisfies the criteria for an opportunity.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2-5
Figure 2.2 Three Ways to Identify an
Opportunities

Observing Trends Solving a Problem Finding Gaps in

the Marketplace

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2-6
First Approach: Observing Trends
• Observing Trends
– Trends create opportunities for entrepreneurs to
pursue.
– The most important trends are:
▪ Economic forces
▪ Social forces
▪ Technological advances
▪ Political and regulatory changes
– It’s important to be aware of changes in these areas.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2-7
Figure 2.3 Environmental Trends Suggesting
Business, Product, or Service Opportunity Gaps

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2-8
Trend 1: Economic Forces
Economic trends help determine areas that are ripe for new
start-ups and areas that start-ups should avoid.
Example of Economic Trend Creating a Favorable
Opportunity
• A weak economy favors start-ups that help consumers
save money.
– An example is GasBuddy.com , a company started
to help consumers save money on gas.
• The emergence of the creator economy is an important
economic trend.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2-9
Trend 2: Social Forces
Social trends alter how people and businesses behave and set
their priorities.
• Examples of Social Trends
– Aging of the population
– The increasing diversity of the population
– Shifting attitudes and buying behaviors of Gen Z
– Emphasis on sustainability
– A focus on physical fitness, mental health, and wellness
– Desire for connection to people and brands
– Desire for more flexible work schedules

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 10
Trend 3: Technological Advances
Advances in technology frequently create business
opportunities.
• OpenTable.com helps people perform an everyday task
in a more convenient and expedient manner.
• Artificial intelligence is helping startups provide enhanced
products and services.
• Entire industries have been created as the result of
technological advances.
– Compatible products for Apple iPhone and Apple
Watch

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 11
Trend 4: Political Action and Regulatory
Changes (1 of 2)
Political and regulatory changes also provide the basis for
opportunities.
General Examples
This happened with the passage of the Affordable Care Act
in 2010. The provisions of the act yielded opportunities for
entrepreneurs to launch electronic records start-ups, apps
to help patients monitor their medication, and similar
companies.
The Secure Act 2.0, signed into law in the United States in
December 2022, makes it easier for small businesses to
establish retirement plans.
Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 12
Trend 4: Political Action and Regulatory
Changes (2 of 2)
Political change also engenders new business and product
opportunities.
• For example, global political instability and the threat of
terrorism have resulted in many firms becoming more
security conscious.
Cybersecurity is another threat for many nations and
companies competing within them.
• Claroty is a cybersecurity startup providing its clients with
a full range of cybersecurity controls for visibility, threat
detection, risk, and vulnerability.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 13
Second Approach: Solving a Problem (1 of 2)
• Solving a Problem
– Sometimes identifying opportunities simply involves
noticing a problem and finding a way to solve it.
– These problems can be pinpointed through observing
trends and through more simple means, such as
intuition, serendipity, or chance.
– Many companies have been started by people who
have experienced a problem in their own lives, and
then realized that the solution to the problem
represented a business opportunity.
▪ Java Jacket

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 14
Second Approach: Solving a Problem (2 of 2)
Technological advances often result in problems for people who
want to use the new technology but lack training to do so or it is
not convenient for them to use it.
• Both DARTdrones and Pilot Institute are startups that provide
drone consulting and pilot training.

The advent of electric cars spawned an entire industry to help

people recharge their cars while they are away from home.
• EV Safe Charge is one startup with a solution to this problem.
EV Safe Charge provides nationwide safe, reliable, and robust
residential and commercial electric vehicle charging solutions

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 15
Third Approach: Finding Gaps in the
Marketplace
• A third approach to identifying opportunities is to find a
gap in the marketplace.
– A gap in the marketplace is often created when a
product or service is needed by a specific group of
people but doesn’t represent a large enough market
to be of interest to mainstream retailers or
manufacturers.
▪ Daisy Rock Guitars are made specifically for
women and girls.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 16
2.3 Personal Characteristics of the
Entrepreneur
Opportunity recognition refers to the process of perceiving
the possibility of a profitable new business or a new
product or service. That is, people cannot pursue an
opportunity until someone recognizes it.
Characteristics that tend to make some people better at
recognizing opportunities than others are the following.
• Prior Industry Experience
• Cognitive Factors
• Social Networks
• Creativity
Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 17
Prior Industry Experience (1 of 2)
• Prior Industry Experience
– Studies have shown that prior experience in an
industry helps an entrepreneur recognize business
opportunities.
▪ By working in an industry, an individual may spot a
market niche that is underserved.
▪ It is also possible that by working in an industry, an
individual builds a network of social contacts who
provide insights that lead to recognizing new
opportunities.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 18
Prior Industry Experience (2 of 2)
• Prior Industry Experience
– It is also important to note that anecdotal evidence
suggests that people outside an industry can
sometimes enter it with a new set of eyes, and as a
result innovate in ways that people with prior
experience might find difficult.
▪ For example, Richard Branson, founder of the
Virgin Group, suggests that thinking about the
changes you’d like as a customer can lead to a
new disruptive product or service.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 19
Cognitive Factors
• Cognitive Factors
– Studies have shown that opportunity recognition may
be an innate skill or cognitive process.
– Some people believe that entrepreneurs have a “sixth
sense” that allows them to see opportunities that
others miss.
– This “sixth sense” is called entrepreneurial alertness,
which is formally defined as the ability to notice things
without engaging in deliberate search.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 20
Social Networks (1 of 2)
• Social Networks
– The extent and depth of an individual’s social network affects
opportunity recognition.
– People who build a substantial network of social and professional
contacts will be exposed to more opportunities and ideas than
people with sparse networks.
– Research results suggest that between 40% and 50% of people
who start a business got their idea via a social contact.
• Research also shows network entrepreneurs (those who identified
their ideas through social contacts) identify significantly more
opportunities than solo entrepreneurs (those who identified their
business ideas on their own).

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 21
Social Networks (2 of 2)
• Strong-Tie V s Weak-Tie Relationships
ersu

– All of us have relationships with other people that are

called “ties.”
• Strong-tie relationships are characterized by frequent
interaction and form between coworkers, friends, and
spouses.
– Weak-tie relationships are characterized by infrequent
interaction and form between casual acquaintances.
• Result
– It is more likely that an entrepreneur will get new
business ideas through weak-tie rather than strong-tie
relationships.
Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 22
Creativity
• Creativity
– Creativity is the process of generating a novel or
useful idea.
– Opportunity recognition may be, at least in part, a
creative process.
– For an individual, the creative process can be broken
down into five stages, as shown on the next slide.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 23
Figure 2.4 Five Steps to Generating
Creative Ideas

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 24
2.4 Techniques for Generating Ideas
• Brainstorming
• Focus Groups
• Library and Internet Research
• Other Techniques

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 25
Figure 2.5 The Opportunity Recognition
Process

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 26
Brainstorming
• Brainstorming
– Is the process of generating several ideas about a
specific topic.
– A brainstorming “session” typically involves a group
of people, and should be targeted to a specific topic.
– The following are the rules for a brainstorming
session.
▪ No criticism
▪ Freewheeling is encouraged
▪ The session should move quickly
▪ Leap-frogging is encouraged
Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 27
Focus Groups
• Focus Group
– Focus groups involve a group of people who are
familiar with a topic, are brought together to respond
to questions, and who are able to shed light on an
issue through the give-and-take nature of group
discussions.
– They work best as a follow-up to brainstorming, when
the general idea for a business has been formulated
but further refinement of the idea is needed.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 28
Library and Internet Research (1 of 2)
• Library Research
– Libraries are an often underutilized source of
information for generating new business ideas.
– The best approach is to talk to a reference librarian,
who can point out useful resources, such as industry-
specific magazines, trade journals, and industry
reports.
– Simply browsing through several issues of a trade
journal or an industry report on a topic can spark new
ideas.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 29
Library and Internet Research (2 of 2)
• Internet Research
– If you are starting from scratch, simply typing “new
business ideas” into a search engine will produce
links to newspaper and magazine articles about the
“hottest” and “latest” new business ideas.
– If you have a specific topic in mind, setting up
Google mail alerts will provide you with links to a
constant stream of newspaper articles, blog posts,
and news releases about the topic.
– Targeted searches are also useful.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 30
Other Techniques
• Customer Advisory Boards
– Some companies set up customer advisory boards
that meet regularly to discuss needs, wants, and
problems that may lead to new ideas.
• Day-in-the-Life Research
– A type of anthropological research, where the
employees of a company spend a day with a
customer.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 31
Copyright

This work is protected by United States copyright laws and is

provided solely for the use of instructors in teaching their
courses and assessing student learning. Dissemination or sale of
any part of this work (including on the World Wide Web) will
destroy the integrity of the work and is not permitted. The work
and materials from it should never be made available to students
except by instructors using the accompanying text in their
classes. All recipients of this work are expected to abide by these
restrictions and to honor the intended pedagogical purposes and
the needs of other instructors who rely on these materials.

Copyright © 2025, 2019, 2016 Pearson Education, Inc. All Rights Reserved 2 - 32