Opportunity Analysis

According to the late management guru, Peter Drucker (who firmly believed that entrepreneurship could be taught), there are seven sources of opportunity to look for in the environment.

The Unexpected. When current businesses are surprised by an unanticipated event, they are often unable to adapt quickly enough to take advantage of that event. The event can be an unexpected success (good news) or an unexpected failure (bad news). For example, if war breaks out where it is unexpected, it changes the economics and demand structure of the warring parties and their populations. The war can provide opportunity if it is ethically pursued. Similarly, a breakthrough in a peace negotiation can also provide opportunity, because it can change the economies of the former combatants. For example, if the Israeli and Palestinian conflict can be resolved, the beachfront property in the Gaza strip (now a dormant resource) would become one of the premier vacation resorts in the world.

Sometimes the unexpected happens directly to the company; The shock can be fatal or it can be the source of new opportunities. For example, in August of 2000, the Walt Disney Company released a movie called “Coyote Ugly” about a wild and raucous bar in New York. The movie was not especially believable and the reviews were bad. It faded from mainstream consciousness, but then an unexpected event occurred: the movie became a cult hit. Sudddenly, the real Coyote Ugly bar received a great rush of interest and publicity. The owner, Lilliana Lovell, had a hit business on her hands. “What business ever anticipates getting $40 million in free national advertising? We decided to take advantage of it,” she said. So she cleverly imitated all the details of the movie set and now has 13 bars and is a millionaire. “Most people have to build a business to get the brand and name recognition, she did it in reverse. There has never been a woman to build a [national] chain of bars, period,” remarked Morris Reid, a branding specialist.

The Incongruous. Incongruity is dissonance, something that “ought to be” but is not. Incongruity creates instability and opportunity. For example, it is incongruous for a growing industry with increasing sales not to be profitable, but such a scenario is possible and is taking place now on the Internet. Some key to the industry’s economics has yet to be discovered. When reality and conventional wisdom collide, incongruity exists. Listen for “expert old-timers” who use the words never and always to explain how things should be. These unexamined assumptions may have once been right, but may now be wrong and therefore may provide opportunities for the responsive entrepreneur.

The Process Need. The process need has its source in technology’s inability to provide the “big breakthrough.” Technicians often need to work out a way to get from point A to point B using some process. Currently, researchers are making efforts in the areas of superconductivity, fusion, interconnectivity, and the search for a treatment and cure for AIDS. Thomas Edison and others knew that in order to start the electric energy industry, they needed to solve a process need—to develop a light bulb that worked. Process need opportunities are often addressed by program research projects, which are the systematic research and analysis efforts designed to solve a single problem, such as the effort against AIDS.

Industry and Market Structures. Changes in technology, innovation, and invention alter market and industry structures by altering costs, quality requirements, and volume capabilities. This alteration can potentially make existing firms obsolete if they are not attuned to it and are inflexible. Similarly, changes in social values and consumer tastes, as well as demographics, shift the economics of industries to a new equilibrium. The markets of firms that do not adapt to these changes are fair game for the entrepreneur.

Demographics. Demographic changes are changes in the society’s population or subpopulations. They can be changes in the size, age, structure, employment status, education, or incomes of these groups. Such changes influence all industries and firms by changing the mix of products and services demanded, the volume of products and services, and the buying power of customers. Some of these changes are predictable, because people who will be older are already alive, and birth and death rates stay fairly stable over time. Other changes are not predictable and are caused by natural disasters, war, social change, and immigration. Population statistics are available for assessment of demographic changes, but opportunities can be found before the data are published if the entrepreneur observes what is happening in the street and being reported in the newspaper.

Changes in Perception. Is the glass half full or half empty? The two perceptions are logically equivalent but reflect significantly different attitudes and behaviors. People hold different perceptions of the same reality, and these differences affect the products and services they demand and the amounts they spend. Some groups feel powerful and rich; others, disenfranchised and poor. Some people think they are thin when they are not; others think they are too fat when they are not. The entrepreneur can sell power and status to the rich and powerful, and sell relief and comfort to the poor and oppressed. Whether people are rich or poor, if they perceive that they are middle class, they will demand education for their children, good housing for their families, and travel for their vacations.

New Knowledge. New knowledge is often seen as the “superstar” of entrepreneurial opportunity. However, it can be “temperamental, capricious, and hard to manage.” Having new knowledge is not enough: entrepreneurs must also find a way to make products from this knowledge and to protect the profits of those products from competition as the knowledge is spread to others. In addition, timing is critical. It frequently takes the convergence of many pieces of new knowledge to make a product. 

Reference: Entrepreneurship