Opportunity Search and Identification

 Introduction/definition of concepts

Opportunityrefers 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 notbeen exploited and are not currently being exploitedby others. Opportunityidentification can, in turn, be defined as the cognitive process orprocessesthrough which individuals conclude that they have identified an opportunity.Itis important to note that opportunity identification is only the initial stepin 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 asituation in which new goods, raw materials,markets and organizationalstrategies can be introduced through the formation of newmeans, ends ormeans-ends relationships.

Thefocus these days is on innovative opportunities which are the ones that trulybreaknew grounds rather than merely expand or repeat existing business models.Opening anew Hausa or Igbo cafeteria in a neighbourhood dominated by a populacefrom theseextractions thatcurrently do not have one is an example.  Not everyone can identifyopportunities. Someindividuals are more likely to identify and exploit opportunities thanareothers.  Opportunity is a major  process of self-evaluation of  one’sability  to  start,operate and run a business venture withthe 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.  Theseexperiences include family,religious or  professional  linkages,membership of any network group.

Searchingfor a business opportunity that is right for them is the major challengewould-be entrepreneurs face.  New  startups  always focus  on  introducing a  new product  orservice based on an unmet need, select anexisting product or service from one marketand offer it in another where theyare not available; and sometimes the firm relies on atried and tested formulathat has worked elsewhere in a franchise setup.

Business OpportunityIdentification Process

It  is pertinent  to  know how  entrepreneurs  identify and  decide  a  new  businessopportunity with the best chance tosucceed. The most important part of all businessattempts common to mostsuccessful start-ups is answering an unmet need in the market. Customers arealways interested in products that add value. They buyproducts needed only tosatisfy some problems. In actual fact, there is no substitutefor indulging theunmet needs of customers.Most entrepreneurs searching for new business ideasfundamentally consider threecentral issues. The main one is the potentialeconomic value. He first considers if theventure has the capacity to generateprofit. The second is the newness of such aventure. He/She will preferproducts, services or technology that does not previouslyexist in thatenvironment. The third is the perceived desirability whether their producthasthe moral or legal acceptability in that environment.  He then considers if:

•           his final business decision ideacorrects a deficiency in the market.

•           the resources and capability to carryout this business idea are availableto him/her.

•           the market for it are readilyavailable and at profit sales.

•           the new  business  idea can  compete  favourably with  existing  relatedcompetitors         and their market.

•           this business market is growing ornot and how one should prepare to jointhat business.

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ii.  The Stages of Opportunity Identificationprocess

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:

1. Preparation
2. Incubation
3. Insight
4. Evaluation
5. Elaboration

Preparation

Preparation  stage is  that  knowledge and  experience  exercised just  before  theopportunity  discovery process.  These knowledge andexperience are not  oftendeliberatelyacquired. However, preparation itself is usually a deliberate attempt towidencapability in an area and become sensitive to concerns in a field ofinterest.In an organized situation, the background of the business, theproducts or servicesor the technological knowledge must have majorly informedthe main ideas of the successful venture. One  cannot  however, rule  out  the role  of  new ideas  andexpertise originatingfrom individuals in the organization that will eventually result ina newbusiness.

 Incubation

Incubationstage is the part of the opportunity identification process thatinvolvesthe  consideration  of  a  concept or  a  specific  problem ordinarily  not  subjected toconscious  or  formal analysis  by  a businessman  or  his team.  It is usuallynotconsciously done and therefore more often than not, an instinctive andunempiricalapproach for the consideration of several potential alternatives.

Insight

Insight  stage occurs  at  the moment  a  fundamental solution  suddenly  becomesrecognized unexpectedly. It is aparticular moment that keeps occurring persistentlyright through the process ofopportunity identification. Insights have been found tobe extensive channels tothe 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 anopportunity in business, the answer to an adequately ponderedcrisis and thepossession of a concept from social networks and associates.

Evaluation

Evaluationstage is about investigating if the recognized and developed ideas arefeasible,if the businessman has the required abilities to realize the ideas and iftheidea is sufficiently innovative for prospects.  It sometime involves full feasibilityanalysisof the ideas through all forms of research instruments and criticismsfromrelevant business acquaintances. It is fundamental to also investigate theprospectand viability of the new insight ideas as the spirit of   entrepreneurship is to makesatisfactory andsensible profits.

Elaboration

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 alllegalities that could buildconfidence and guarantee  the practicability  of  the business.  Elaborationalsoreduces   uncertainties   by  providing   the   detailed  planning   activities   after  theevaluation viability confirmation. This will eventually reveal theconcept areas thatstill need further analysis and attention

Types of Opportunity

Themain purpose of any type of opportunity is to strategize to achieveappropriatesearch. In other words, appropriate searching strategies are afunction of the type ofopportunity. Business search opportunities could beclassified into three types, theseare the:

1. recognized type
2. discovered type
3. created/enacted type

Eachof these types of opportunity is associated with a certain level ofuncertainty.These  are  low uncertainty  for  recognition opportunity,  moderate  uncertainty fordiscovery opportunity and ultimate uncertainty for created/enactedopportunity.

Recognition Type: 

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

severalother factors such as the background of the entrepreneur, the influenceof thebusiness and its general environment. This type of opportunity has to dowiththe exploitation of the existing markets where both sources of supply anddemandthat exist are recognized and brought together. Opportunity recognitionoccursunder condition of near certainty. This low uncertainty or nearcertaintyopportunity in recognition type is referred to as analysis inducing.

Discovered Type:

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. Thisreasoning includes three types of means. The entrepreneur themselves, priorknowledge and experience, whom they know especially in the social, religiousandprofessional sector.  In thistypeofopportunity, the supply and demand will not apparently exist; one or bothof them have to be created. This demands that severaleconomic inventionslikemarketing, financing and others have to be created for the opportunity toexist.

This   opportunity  exploits   principally   the  creation   of   new markets. Theentrepreneurs imagine,rather than recognize or actively search for opportunities that represent theexecution of a selection of possible futures. Creation orenactment opportunity is associated with true or ultimateuncertainty. This highuncertainty task in opportunity creation can berecognized as intuition-inducing.Factors that Influence Business OpportunityIdentificationThere are five factors that influence identification ofopportunities. These are:

a.Entrepreneurial Alertness

b.Prior Knowledge

c.Discovery versus Purposeful Search

d.Networking versus Solo Entrepreneur

e.Creativity

f.Entrepreneurial Alertness Factor

Thisis a predisposition to observe and be responsive to information aboutobjects,incidents,  and  patterns of  behaviour  in the  environment,  with special  sensitivity  tomaker and user problems, unmet needs andinterests, and novel combinations ofresources. This  is  usually preceded  by  a position  of  enthusiastic awareness  ofinformation.Entrepreneurs constantly search about for opportunities that havebeenoverlooked before then but unfortunately not all that have entrepreneurialalertness become successful entrepreneurs. Opportunity identification is onlyan indispensablestage of a process in initiating a new successful business.

Thereare two types of alertness. These are the potentially worthwhile goals thathaveremained unnoticed and the unnoticed but potentially valuable resources.Thealert entrepreneur is said to be alert to the receipt of information ratherthan 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 aself confidenceattitude and eventually success in recognizing entrepreneurialopportunities when itcomes. It is the belief by many people that they are verygood 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 priorknowledge. Prior knowledge triggers identification ofthe value of newinformation. There are two main areas of prior knowledge relevant to theidentification process.  The  first one  is  the knowledge  that  is of  specialfascinating   interest  to   the   entrepreneur.  The  second   area   is  the   knowledgeaccumulated overthe years and eventually got familiar with customer problems andissuesinvolved. The fascinating interest compels the entrepreneur to intensify hisorher  competences  that eventually  result  in an  insightful  knowledge of  the  subjectmatter.

Discovery versusPurposeful Search Factor

Some  entrepreneurs absolutely  believe  that opportunity  identification  has to  bethrough a purposeful searchfor opportunities while others believe that opportunity issomething  that had  been  readily available  and  overlooked but  now  discoveredaccidentally. Businessesestablished on accidentally discovered venture ideas andwhich had not beensubjected to prescribed screening achieved break-even salesfaster than thosebusinesses that had undergone purposeful searches.

Networking versus SoloEntrepreneurship Factor

Entrepreneurs’network is vital in opportunity identification. The main contribution ofnetwork toidentifying potential ventureopportunities is from information gatheredfrom social exchange of ideas. Thecommon 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 anindividual’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 socialnetworks. There are three categories of opportunity recognition attitudes fromsocial networks.These are the solo, the network and the informal categories.

Thesolo entrepreneur category has a very creative, opportunistic and distinctivealertness attitude. Theydevelop business ideas on their own with the beliefthat 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   entrepreneurialideas emanate only     fromaccidentalroutes.Entrepreneurs with informal attitudes get their ideas whenrelaxed.

Creativity Factor

Thereis a link between creativity and entrepreneurship and are sometimes refer tobesame. The nature of creativity is about innovation leading to the creation ofnewventures while entrepreneurship itself is a form of creativity or can evenbe referredto as business creativity and in most cases new businesses arecreatively originaland functional. Most successful entrepreneurs identifyopportunities that others donot see due to the special creativity attributethey possess. These creative attributeshas a  lot  to do  in  business decision  making  and therefore  very  significant inopportunity- identification process. To entrepreneurs, the moreinnovative 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

servicedelivery level.

Opportunities from SWOTAnalysis

Someopportunities are sometimes identified while the entrepreneur is having his orherself assessment in terms of strength, weakness, opportunities and threatsuniversallyreferred  to  as SWOT.  SWOT  Analysis is  a  useful self-appraisal  system  for yourstrengths and weaknesses that helps establish your business ordevelop your businessby exploiting your abilities, talents and opportunities. Itis frequently used to understand,underline and identify the opportunities opento you and the threats you are likely toencounter.   SWOT Analysis could also be that initialself appraisal of the ability of thebusiness opportunity to start and survive.

SWOTanalysis was originated in the 1960s by Albert S Humphrey and hasremaineduseful till date as a simple start for strategy articulation or as avital strategy instrument.SWOT also allows achievable goals or objectives to beset for the business while futureprocedure for the accomplishment of theplanning and development of the objectivescould easily be derived from itsSWOT. With your understanding of the weaknesses ofyour business, unexpectedthreats 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 whatyouwant to evaluate but both are good sources of opportunity identification andwithlittle efforts,  it  can facilitate  identification  of exploitable  opportunities.  To use SWOTAnalysis, one should understandthat Strengths and weaknesses are internal to yourorganization whileopportunities and threats generally relate to external factors. HenceSWOTanalysis is often described as internal/external analysis.

Strengths:

Your  strengths should  be  perceived from  both  an internal  position,  and from  thejudgment of the customersand others in the market. You should also be realistic and alist  of your  company’s  characteristics  of  thebusiness  or  project team that  give  it anadvantage over others should help.  In the study of your strengths, consider themwithyour 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 necessityand therefore a weaknessand a threat to your own product. Such strengths couldbe economical, availability ofadequate funding, abundant raw materials, etc.

Weaknesses:

Yourweaknesses are your limitations that characteristically place you or the teamat adisadvantage when compared with others. You are aware of your ownweaknesses thanany other.  It is  a time  to  be  truthful  to yourself  by  asking yourself  some  unpleasantquestions and answers about yourweaknesses. 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 ofthemarket and your competitors’ progress should be done to inform you of yourweakness.

Opportunities

Opportunitiesare external chances  for  accomplishing the  goals  andobjectives of the venture. Theseobjectives may be to improve productions and achievebetter profits in themarket or to start up a new business from emergence to survival. Inconsideringopportunities, it is best to search your strengths for possible businessordevelopment  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, familyespecially inheritance and an acquired experience bythe entrepreneur.

Threats:

Thisrefers to external factors usually outside the control of person or persons inthemarket environment that could impede the business or the entrepreneur fromachievingthe   expected   goals  and   objectives.   These  external   factors   include  unpleasantenvironment, new government regulations, technologicalupgrades 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, tocommemoratehis 60th birthday. He is thinking of handing over the business tohis children in threeyears time and would need a SWOT analysis for the newventure. This has beenprepared for him.