Introduction/definition of concepts
Opportunity refers to the extent to which possibilities for new ventures exist and theextent to which entrepreneurs have the leeway to influence their odds for successthrough their own actions. Simply put, opportunity is a perceived means of generatingincomes that previously have not been exploited and are not currently being exploitedby others. Opportunity identification can, in turn, be defined as the cognitive process orprocesses through which individuals conclude that they have identified an opportunity. Itis important to note that opportunity identification is only the initial step in a continuingprocess, and is distinct both from detailed evaluation of the feasibility and potentialeconomic value of identified opportunities and from active steps to develop themthrough new ventures. It is essentially a situation in which new goods, raw materials,markets and organizational strategies can be introduced through the formation of newmeans, ends or means-ends relationships.
The focus these days is on innovative opportunities which are the ones that truly breaknew grounds rather than merely expand or repeat existing business models. Opening anew Hausa or Igbo cafeteria in a neighbourhood dominated by a populace from theseextractions thatcurrently do not have one is an example. Not everyone can identifyopportunities. Some individuals are more likely to identify and exploit opportunities thanare others. Opportunity is a major process of self-evaluation of one’s ability to start,operate and run a business venture with the popular analysis often referred to as SWOT(Strength, Weaknesses, Opportunity and Threat). It helps to check the chances ofsucceeding in a particular choice of venture open to an individual through his experiences. These experiences include family,religious or professional linkages,membership of any network group.
Searching for a business opportunity that is right for them is the major challenge would-be entrepreneurs face. New startups always focus on introducing a new product orservice based on an unmet need, select an existing product or service from one marketand offer it in another where they are not available; and sometimes the firm relies on atried and tested formula that has worked elsewhere in a franchise setup.
Business Opportunity Identification Process
It is pertinent to know how entrepreneurs identify and decide a new businessopportunity with the best chance to succeed. The most important part of all businessattempts common to most successful start-ups is answering an unmet need in the market. Customers are always interested in products that add value. They buyproducts needed only to satisfy some problems. In actual fact, there is no substitutefor indulging the unmet needs of customers.Most entrepreneurs searching for new business ideas fundamentally consider threecentral issues. The main one is the potential economic value. He first considers if theventure has the capacity to generate profit. The second is the newness of such aventure. He/She will prefer products, services or technology that does not previouslyexist in that environment. The third is the perceived desirability whether their producthas the moral or legal acceptability in that environment. He then considers if:
• his final business decision idea corrects a deficiency in the market.
• the resources and capability to carry out this business idea are availableto him/her.
• the market for it are readily available and at profit sales.
• the new business idea can compete favourably with existing relatedcompetitors and their market.
• this business market is growing or not and how one should prepare to jointhat business.
ii. The Stages of Opportunity Identification process
Opportunity identification is the collection of three main factors, which are theentrepreneur’s background, the business influence and the general business environment. Opportunity identification has five stages that lead to ‘recognition’. The five stages are discussed in relationship with the process of opportunity identification. These stages are:
Preparation stage is that knowledge and experience exercised just before theopportunity discovery process. These knowledge and experience are not oftendeliberately acquired. However, preparation itself is usually a deliberate attempt towiden capability in an area and become sensitive to concerns in a field of interest.In an organized situation, the background of the business, the products or servicesor the technological knowledge must have majorly informed the main ideas of the successful venture. One cannot however, rule out the role of new ideas andexpertise originating from individuals in the organization that will eventually result ina new business.
Incubation stage is the part of the opportunity identification process that involvesthe consideration of a concept or a specific problem ordinarily not subjected toconscious or formal analysis by a businessman or his team. It is usually notconsciously done and therefore more often than not, an instinctive and unempiricalapproach for the consideration of several potential alternatives.
Insight stage occurs at the moment a fundamental solution suddenly becomesrecognized unexpectedly. It is a particular moment that keeps occurring persistentlyright through the process of opportunity identification. Insights have been found tobe extensive channels to the discovery of startup businesses and sometimes revealadditional knowledge for the development of a current process of discovery. Inrespect of a business venture, insight predictably encompasses the abruptrecognition of an opportunity in business, the answer to an adequately ponderedcrisis and the possession of a concept from social networks and associates.
Evaluation stage is about investigating if the recognized and developed ideas arefeasible, if the businessman has the required abilities to realize the ideas and if theidea is sufficiently innovative for prospects. It sometime involves full feasibilityanalysis of the ideas through all forms of research instruments and criticisms fromrelevant business acquaintances. It is fundamental to also investigate the prospectand viability of the new insight ideas as the spirit of entrepreneurship is to makesatisfactory and sensible profits.
Elaboration is that stage that exposes the opportunity/ideas to external analysiswith the tedious and time–consuming options selection, choice decision andorganization of resources. It is customarily in search of all legalities that could buildconfidence and guarantee the practicability of the business. Elaboration alsoreduces uncertainties by providing the detailed planning activities after theevaluation viability confirmation. This will eventually reveal the concept areas thatstill need further analysis and attention
Types of Opportunity
The main purpose of any type of opportunity is to strategize to achieve appropriatesearch. In other words, appropriate searching strategies are a function of the type ofopportunity. Business search opportunities could be classified into three types, theseare the:
- recognized type
- discovered type
- created/enacted type
Each of these types of opportunity is associated with a certain level of uncertainty.These are low uncertainty for recognition opportunity, moderate uncertainty fordiscovery opportunity and ultimate uncertainty for created/enacted opportunity.
For opportunities that are recognized, deductive reasoning is used to either actively or passively filter for venture worthy ideas.Entrepreneurial alertness attitude enables recognition because the entrepreneurwill be very sensitive and alert to information available in his/her environment.Personal insights and intuition are equally important for identifying opportunitiesas a purposeful search. Recognition type consists of accidental recognition of anopportunity for a business solution to a challenge and realization of idea or ideasfrom others like colleagues and associates.Accidental recognition occurs in the passive search style and is more likely whenthe entrepreneur possesses a very sensitive entrepreneurial alertness. It couldalso be noticed that businesses established through accidental recognition breakeven earlier than any other formal one. Recognition type is characterized by
several other factors such as the background of the entrepreneur, the influenceof the business and its general environment. This type of opportunity has to dowith the exploitation of the existing markets where both sources of supply anddemand that exist are recognized and brought together. Opportunity recognitionoccurs under condition of near certainty. This low uncertainty or near certaintyopportunity in recognition type is referred to as analysis inducing.
In this type of opportunity,when only the demand exists, but supply does not, and vice versa, then the non-existent side has to be discovered. This type of opportunity has to do with the exploration of existing and latent markets. For the discovered type opportunities to occur, a purposeful search is necessary. The entrepreneurs of the discovery type narrowed theirsearch to areas where they had specific prior knowledge and they basically donot rely on alertness. An example is demand exists for ‘Published texts inentrepreneur education in Nigeria’ while the supply has to be discovered.Another example is the existence of supply for ‘application of computers inNigerian rural schools,’ demand has to be discovered. As earlier mentioned, withopportunity discovery the uncertainty level is moderate. With this moderateuncertainty task, the discovery opportunity is known as quasi-rationality inducing.
Creation/Enactment Type: This type of opportunity is based on theprinciple of enactment where the entrepreneur creates new means and newends by using effectual reasoning. This reasoning includes three types of means. The entrepreneur themselves, prior knowledge and experience, whom they know especially in the social, religiousand professional sector. In this typeofopportunity, the supply and demand will not apparently exist; one or both of them have to be created. This demands that severaleconomic inventions likemarketing, financing and others have to be created for the opportunity to exist.
This opportunity exploits principally the creation of new markets. Theentrepreneurs imagine, rather than recognize or actively search for opportunities that represent the execution of a selection of possible futures. Creation orenactment opportunity is associated with true or ultimate uncertainty. This highuncertainty task in opportunity creation can be recognized as intuition-inducing.Factors that Influence Business Opportunity IdentificationThere are five factors that influence identification of opportunities. These are:
a. Entrepreneurial Alertness
b. Prior Knowledge
c. Discovery versus Purposeful Search
d. Networking versus Solo Entrepreneur
f. Entrepreneurial Alertness Factor
This is a predisposition to observe and be responsive to information about objects,incidents, and patterns of behaviour in the environment, with special sensitivity tomaker and user problems, unmet needs and interests, and novel combinations ofresources. This is usually preceded by a position of enthusiastic awareness ofinformation. Entrepreneurs constantly search about for opportunities that have beenoverlooked before then but unfortunately not all that have entrepreneurial alertness become successful entrepreneurs. Opportunity identification is only an indispensablestage of a process in initiating a new successful business.
There are two types of alertness. These are the potentially worthwhile goals thathave remained unnoticed and the unnoticed but potentially valuable resources. Thealert entrepreneur is said to be alert to the receipt of information rather than alreadybeing inpossession ofit. Entrepreneurial alertness is of major importance inopportunity identification. Alertness for a venture is built upon the three ideas ofpersonality traits, social networks and prior knowledge.
People’s self-perception of creativity, high intelligence and a supportive familyenvironment that encourages creative thinking contributes highly to execution ofentrepreneurial plans. The optimism acquired from these builds up a self confidenceattitude and eventually success in recognizing entrepreneurial opportunities when itcomes. It is the belief by many people that they are very good experts in decisionmaking, thereby detect opportunities and take risks.
Prior Knowledge Factor
People tend to discover opportunities from the information that is related to theinformation they already know. Prior knowledge and experience are the primarysource of searching for opportunities. Entrepreneurs narrowed their search to areaswhere they had specific prior knowledge. Prior knowledge triggers identification ofthe value of new information. There are two main areas of prior knowledge relevant to the identification process. The first one is the knowledge that is of specialfascinating interest to the entrepreneur. The second area is the knowledgeaccumulated over the years and eventually got familiar with customer problems andissues involved. The fascinating interest compels the entrepreneur to intensify his orher competences that eventually result in an insightful knowledge of the subjectmatter.
Discovery versus Purposeful Search Factor
Some entrepreneurs absolutely believe that opportunity identification has to bethrough a purposeful search for opportunities while others believe that opportunity issomething that had been readily available and overlooked but now discoveredaccidentally. Businesses established on accidentally discovered venture ideas andwhich had not been subjected to prescribed screening achieved break-even salesfaster than those businesses that had undergone purposeful searches.
Networking versus Solo Entrepreneurship Factor
Entrepreneurs’ network is vital in opportunity identification. The main contribution ofnetwork toidentifying potential venture opportunities is from information gatheredfrom social exchange of ideas. The common sources for such opportunity are from friends, relatives, businessmen, lawyers, bankers, participation in professionalseminars, workshops and conferences, newspapers, books, periodicals andmanuals. It is the belief that an individual’s strong-tie network within the family andfriends set up are fragile information sources compared with weak ties that are casual acquaintances. People with widespreadnetworks discover more pungentopportunities than those businessmen who do not have social networks. There are three categories of opportunity recognition attitudes from social networks.These are the solo, the network and the informal categories.
The solo entrepreneur category has a very creative, opportunistic and distinctive alertness attitude. Theydevelop business ideas on their own with the belief that new opportunities which isclaimed to be theirs alone, come naturally. Network entrepreneurs obtain their ideasfrom their social networks. With them, enduring opportunities are not related to eachother while entrepreneurial ideas emanate only from accidentalroutes.Entrepreneurs with informal attitudes get their ideas when relaxed.
There is a link between creativity and entrepreneurship and are sometimes refer tobe same. The nature of creativity is about innovation leading to the creation of newventures while entrepreneurship itself is a form of creativity or can even be referredto as business creativity and in most cases new businesses are creatively originaland functional. Most successful entrepreneurs identify opportunities that others donot see due to the special creativity attribute they possess. These creative attributeshas a lot to do in business decision making and therefore very significant inopportunity- identification process. To entrepreneurs, the more innovative the ideathe better the idea This makes creativity a fundamental component in theentrepreneurial process. Hence creative entrepreneurship is described as theaccomplishment of original useful ideas to start a new business to product and
service delivery level.
Opportunities from SWOT Analysis
Some opportunities are sometimes identified while the entrepreneur is having his or herself assessment in terms of strength, weakness, opportunities and threats universallyreferred to as SWOT. SWOT Analysis is a useful self-appraisal system for yourstrengths and weaknesses that helps establish your business or develop your businessby exploiting your abilities, talents and opportunities. It is frequently used to understand,underline and identify the opportunities open to you and the threats you are likely toencounter. SWOT Analysis could also be that initial self appraisal of the ability of thebusiness opportunity to start and survive.
SWOT analysis was originated in the 1960s by Albert S Humphrey and has remaineduseful till date as a simple start for strategy articulation or as a vital strategy instrument.SWOT also allows achievable goals or objectives to be set for the business while futureprocedure for the accomplishment of the planning and development of the objectivescould easily be derived from its SWOT. With your understanding of the weaknesses ofyour business, unexpected threats can be eradicated or controlled well ahead, therebycompetefavorably in the market environment. In essence, there is Business SWOTAnalysis (BSA), and there is Personal SWOT Analysis (PSA). It all depends on whatyou want to evaluate but both are good sources of opportunity identification and withlittle efforts, it can facilitate identification of exploitable opportunities. To use SWOTAnalysis, one should understand that Strengths and weaknesses are internal to yourorganization while opportunities and threats generally relate to external factors. HenceSWOT analysis is often described as internal/external analysis.
Your strengths should be perceived from both an internal position, and from thejudgment of the customers and others in the market. You should also be realistic and alist of your company’s characteristics of the business or project team that give it anadvantage over others should help. In the study of your strengths, consider them withyour competitors in mind. The situation where your competitors manufacture goodproducts, but of less quality packaging to yours; your own strength will be qualitypackaging. However, quality product remains a necessity and therefore a weaknessand a threat to your own product. Such strengths could be economical, availability ofadequate funding, abundant raw materials, etc.
Your weaknesses are your limitations that characteristically place you or the team at adisadvantage when compared with others. You are aware of your own weaknesses thanany other. It is a time to be truthful to yourself by asking yourself some unpleasantquestions and answers about your weaknesses. Like your strength, this should also beconsidered from an internal and external pedestal. Such weaknesses in Business SWOT Analysis (BSA) are poor funding, unconducivelocation, inadequateinfrastructure, outdated and poor equipment, poor staffing, while poor comportment,restlessness, drunkenness, low education, irresponsible attitudes, unwarrantedsocializing, reckless financial management, lack of skill and general ineptitude aremostly the weaknesses in Personal SWOT Analysis (PSA). Constant survey of themarket and your competitors’ progress should be done to inform you of your weakness.
Opportunities are external chances for accomplishing the goals andobjectives of the venture. These objectives may be to improve productions and achievebetter profits in the market or to start up a new business from emergence to survival. Inconsidering opportunities, it is best to search your strengths for possible business ordevelopment opportunities. Another tactic is to search your weaknesses for possiblereduction of your weaknesses to identify and explore opportunities from them. Suchopportunities may open up from associations, connections and affiliations in onesreligious, political group, family especially inheritance and an acquired experience bythe entrepreneur.
This refers to external factors usually outside the control of person or persons in themarket environment that could impede the business or the entrepreneur from achievingthe expected goals and objectives. These external factors include unpleasantenvironment, new government regulations, technological upgrades in the industry, Government support for local production of cassava – a major drug component andthe ban on imported drugs, Chief Omotosho is deciding to establish a newpharmaceutical venture of international standard in Aawe, Nigeria, to commemoratehis 60th birthday. He is thinking of handing over the business to his children in threeyears time and would need a SWOT analysis for the new venture. This has beenprepared for him.