Opportunity Search and Identification

 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.

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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:

  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 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

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

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

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

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:

  1. recognized type
  2. discovered type
  3. 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.

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

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.

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. 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

e. Creativity

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.

Creativity Factor

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.

Strengths:

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.

Weaknesses:

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

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.

Threats:

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.