Chapter 2: Recognizing Opportunities and Generating Ideas
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Copyright ©2016 Pearson Education, Inc.
CHAPTER 2
RECOGNIZING OPPORTUNITIES AND GENERATING IDEAS
BOXED FEATURES: QUESTIONS FOR CRITICAL THINKING
What Went Wrong?
Why a Company that Solved a Problem with a Great Product Went Out of Business
1.
In the context of this chapter, make a list of three “takeaways” from this feature
that you can learn from and try to avoid if you set out to solve a problem by
launching a business.
Answer: This is a good question for a group or individual assignment. Three
potential takeaways are as follows: (1) When building a business, it is important to
focus on both the quality of the product and business that needs to be built to bring
the product to market. Everpix spent too much time on the quality of the product at
the expense of the business; (2) Web-based apps are much more compelling if they
are viral. If a user can share with friends and family what he or she is doing on an
app, then the app is more likely to grow; (3) Marketing matters—you may build
the best product or service in the world, but if no one knows about it, it will
ultimately fail.
2.
To what degree is there a difference between pursuing an opportunity to solve a
problem and building a business? In what ways did Everpix fail to do both?
Answer: There is a big difference. An entrepreneur can pursue an opportunity and
build a very elegant solution to a problem. But a profitable “business” must
ultimately be built to take the solution to market. Everpix built an elegant solution
in part, but it wasn’t viral, which was a big handicap. Everpix failed in terms of
building a profitable business.
3.
According to the feature, Everpix spent almost nothing on advertising and
promotions. How large of a role do you think that decision played in Everpix’s
failure?
Answer: Most students will say that the decision to spend almost nothing on
advertising or promotions played a large role in Everpix’s failure. There has to be
a way for a company to “get the word out” about its business for people to know
about it. Everpix’s shortcoming in this area was compounded by the fact that the
service wasn’t viral, so they weren’t getting as many customers as they might have
via word of mouth.
4.
Venture capitalists are often accused of swinging for the fences—in other words,
they don’t invest in firms that are hitting singles, doubles, or triples. They want
Chapter 2: Recognizing Opportunities and Generating Ideas
Copyright ©2016 Pearson Education, Inc.
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home runs. In hindsight, do you think Everpix was building a business that had the
potential to hit singles, doubles, or triples, or a business that had the potential to be
a home run? Explain your answer.
Answer: Most students will say that Everpix wasn’t thinking big enough—and
ultimately was building a business that was akin to a single or a double rather than
a homerun. Although they were trying to solve a compelling problem (i.e., helping
people store and organize photos in a manner that would encourage people to go
back and look at them), they built a site that wasn’t viral and wasn’t marketed
sufficiently to attract a large number of users.
Savvy Entrepreneurial Firm
How to Learn About Emerging Trends Through the Effective Use of Social Media
There are no questions associated with this feature.
Partnering for Success
Want Help Fine-Tuning a Business Idea? Find a Mentor
1.
If you were working on fine-tuning a business idea, would you check out one of
these online options or an association in your area that provides mentoring and
advice for business founders? Why or why not?
Answer: Students will vary in their answers to this question.
2.
To what degree do you believe that having a mentor can make the difference
between an entrepreneur succeeding or failing? In what areas of the
entrepreneurial process do you believe that mentors are called upon the most?
Answer: Most students will say that having a mentor could make a substantial
difference between an entrepreneur succeeding or failing. An inclination in this
direction results from the fact that most students have had a coach, a teacher, or an
older relative or friend who has “mentored” them in some way, so they see
mentoring as a useful process. Students will vary in terms of what areas of the
entrepreneurial process that they believe mentors are called upon the most. It’s
been our experience that mentoring is particularly helpful in the areas of
manufacturing and production (for start-ups with a physical product) and in raising
financing or funding.
3.
Make a list of the organizations in your area that provide mentorship and advice
for business founders. Which organizations make the most sense to reach out to for
someone who is still in the opportunity recognition stage of the start-up process?
Answer: Students will vary in their answers to this question. Challenge your
students to be as exhaustive as possible in the list they complete for their area.
Chapter 2: Recognizing Opportunities and Generating Ideas
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Copyright ©2016 Pearson Education, Inc.
4.
How do you know what to do with a mentor’s advice? If you get advice from
several mentors or counselors at organizations such as SCORE and local Small
Business Development Centers, how can you best sort through the advice and
know which advice to take and which advice to set aside?
Answer: Students will vary in their answers to this question. A reasonable answer
is to listen to advice, and then pursue the advice that resonates with you. Another
way of thinking about this is to record the advice from different people, and then
pursue the advice that seems to represent the consensus of the people that you talk
to.
REVIEW QUESTIONS
2-1.
What is a product opportunity gap?
Answer: A product opportunity gap is the gap between what is currently on the
market and the possibility for a new or significantly improved product, service,
or business that results from emerging trends.
2-2.
How can an entrepreneur tell if a product opportunity gap exists?
Answer: Via careful observation and then via (1) emphasizing or enhancing
personal characteristics that contribute to opportunity recognition, such as prior
experience, cognitive factors, social networks, and creativity and (2) utilizing the
techniques highlighted in the chapters for improving opportunity recognition,
such as brainstorming, focus groups, and library and Internet research.
2-3.
What is an opportunity?
Answer: An opportunity is a favorable set of circumstances that creates a need
for a new product, service, or business.
2-4.
What are the qualities of an opportunity, and why is each quality important?
Answer: An opportunity has four essential qualities: it is (1) attractive, (2)
durable, (3) timely, and (4) is anchored in a product, service, or business that
creates or adds value for its buyer or end user. An opportunity would not be
attractive if any of the qualities were missing.
2-5.
What four environmental trends are most instrumental in creating business
opportunities? Provide an example of each environmental trend and the type of
business opportunity that it might help create.
Answer: The four environmental trends (or factors) that are most important in
Chapter 2: Recognizing Opportunities and Generating Ideas
creating business opportunities are: economic factors, social factors,
technological advances, and political action and regulatory changes.
Environmental Factor Business Opportunity it Might Create
Economic factor An increase in disposable income in the hands of
teenagers creates opportunities to create new
electronics products that appeal to teenagers.
Social factors An increase in the percentage of elderly people in
the U.S. creates opportunities to create new
products that help elderly people deal with
everyday chores.
Technological factors An increase in the percentage of people who use
smartphones creates opportunities for companies
to create products and services that enhance the
usefulness of smartphones.
Political Action and The passage of new environmental protection
Regulatory Changes regulations creates opportunities for companies to
create products to help firms comply with the
regulations.
adequately serviced. Providing products or services for these people represents a
