Identification of business opportunities08/03/2020
In general sense, the term opportunity implies a good chance or a favourable situation to do something offered by circumstances. In the same vein, business opportunity means a good or favourable change available to run a specific business in a given environment at a given point of time.
The term ‘opportunity’ also covers a product or project. Hence, the identification of an opportunity or a product or project is identical and, therefore, all these three terms are used as synonyms. The Government of India’s “Look East Policy” through North East is an example of ‘opportunity’ to do business in items like tea, handicrafts, herbals, turmeric, etc.
Opportunity identification and selection are like comer stones of business enterprise. Better the former, better is the latter. In a sense, identification and selection of a suitable business opportunity serves as the trite saying ‘well begun is half done.’ But, it is like better said than done. Why? Because if we ask any intending entrepreneur what project or product he/she will select and start as an enterprise, the obvious answer he/she would give is one that having a good market and is profitable. But the question is how without knowing the product could one know its market?
Whose market will one find out without actually having the product? Whose profitability will one find out without actually selling the product? There are other problems, besides. While trying to identify the suitable product or project, the intending entrepreneur passes through certain processes.
The processes at times create a situation, or say, dilemma resembling ‘Hen or Egg’ controversy. That is, at one point, the intending entrepreneur may find one product or project as an opportunity and may enchant and like it, but at the other moment may dislike and turn down it and may think for and find other product or project as an opportunity for him/her. This process of dilemma goes on for some intending entrepreneurs rendering them into the problem of what product or project to start. Then, how to overcome this problem of product identification and selection?
One way to overcome this dilemmatic situation is to know how the existing entrepreneurs identified the opportunity and set up their enterprises. An investigation into the historical experiences of Indian small enterprises in this regard reveals some interesting factors.
To mention the important ones, the entrepreneurs selected their products or projects based on:
- Their own or partners’ past experience in that business line;
- The Government’s promotional schemes and facilities offered to run some specific business enterprises;
- The high profitability of products;
- Which indicate increasing demand for them in the market?
- The availability of inputs like raw materials, labour, etc. at cheaper rates;
- The expansion or diversification plans of their own or any other ongoing business known to them;
- The products reserved for small-scale units or certain locations.
Now, having gained some idea on how the existing entrepreneurs selected products/projects, the intending entrepreneur can find a way out of the tangle of which opportunity/product/project to select to finally pursue as one’s business enterprise.
One of the ways employed by most of the intending entrepreneurs to select a suitable product/project is to firstly generate ideas about a few products/ projects. Accordingly, what follows next is a discussion idea generation about products.
Sources of Ideas:
In a sense, opportunity identification and selection are akin to, what is termed in marketing terminology, ‘new product development.’ Thus, product or opportunity identification and selection process starts with the generation of ideas, or say, ideas about some opportunities or products are generated in the first instance.
The ideas about opportunities or products that the entrepreneur can consider for selecting the most promising one to be pursued by him/her as an enterprise, can be generated or discovered from various sources- both internal and external.
These may include:
(i) Knowledge of potential customer needs,
(ii) Watching emerging trends in demands for certain products,
(iii) Scope for producing substitute product,
(iv) Going through certain professional magazines catering to specific interests like electronics, computers, etc.,
(v) Success stories of known entrepreneurs or friends or relatives,
(vi) Making visits to trade fairs and exhibitions displaying new products and services,
(vii) Meeting with the Government agencies,
(viii) Ideas given by the knowledgeable persons,
(ix) Knowledge about the Government policy, concessions and incentives, list of items reserved for exclusive manufacture in small-scale sector,
(x) A new product introduced by the competitor, and
(xi) One’s market insights through observation.
In nutshell, a prospective entrepreneur can get ideas for establishing his/ her enterprise from various sources. These may include consumers, existing products and services presently on offer, distribution channels, the government officials, and research and development.
A brief mention about each of these follows in turn:
No business enterprise can be thought of without consumers. Consumers demand for products and services to satisfy their wants. Also, consumers’ wants in terms of preferences, tastes and liking keep on changing. Hence, an entrepreneur needs to know what the consumers actually want so that he/she can offer the product or service accordingly. Consumers’ wants can be known through their feedback about the products and services they have been using and would want to use in future.
Existing Products and Services:
One way to have an enterprise idea may be to monitor the existing products and services already available in the market and make a competitive analysis of them to identify their shortcomings and then, based on it, decide what and how a better product and service can be offered to the consumers. Many enterprises are established mainly to offer better products and services over the existing ones.
Distribution channels called, market intermediaries, also serves as a very effective source for new ideas for entrepreneurs. The reason is that they ultimately deal with the ultimate consumers and, hence, better know the consumers’ wants.
As such, the channel members such as wholesalers and retailers can provide ideas for new product development and modification in the existing product. For example, an entrepreneur came to know from a salesman in a departmental store that the reason his hosiery was not selling was its dark shade while most of the young customers want hosiery with light shade. The entrepreneur paid heed to this feedback and accordingly changed the shade of his hosiery to light shade. Entrepreneur found his hosiery enjoying increasing demand just within a month.
At times, the Government can also be a source of new product ideas in various ways. For example, government from time to time issues regulations on product production and consumption. Many a times, these regulations become excellent sources for new ideas for enterprise formation.
For example, government’s regulations on ban on polythene bags have given new idea to manufacture jute bags for marketing convenience of the sellers and buyers. A prospective entrepreneur can also get enterprise idea from the publications of patents available for license or sale.
Besides, there are some governmental agencies that assist entrepreneurs in obtaining specific product information. Such information can also become basis for enterprise formation.
Research and Development:
The last but no means the least source of new ideas is research and development (R&D) activity. R&D can be carried out in-house or outside the organization. R&D activity suggests what and how a new or modified product can be produced to meet the customers’ requirements.
Available evidences indicate that many new product development, or say, new enterprise establishments have been the outcome of R&D activity. For example, one research scientist in a Fortune 500 company developed a new plastic resin that became the basis of a new product, a plastic molded modular cup pallet. Most of the product diversifications have stemmed from the organization’s R&D activity.
Methods of Generating Ideas:
As seen above, there could be variety of sources available to generate ideas for enterprise formation. But, even after generating ideas to convert these into enterprise is still a problem for the prospective entrepreneur. The reason is not difficult to seek.
This involves a process including first generating the ideas and then scrutinizing of the ideas generated to come up with an idea to serve as the basis for a new enterprise formation. The entrepreneur can use several methods to generate new ideas. However, the most commonly used methods of generating ideas are: focus groups, brainstorming, and problem inventory analysis.
These are discussed as follows:
A group called ‘focus group’ consisting of 6-12 members belonging to various socio-economic backgrounds are formed to focus on some particular matter like new product idea. The focus group is facilitated by a moderator to have an open in-depth discussion. The mode of the discussion of the group can be in either a directive or a non-directive manner.
The comment from other members is supplied with an objective to stimulate group discussion and conceptualize and develop new product idea to meet the market requirement. While focusing on particular matter, the focus group not only generates new ideas, but screens the ideas also to come up with the most excellent idea to be pursued as a venture.
Brainstorming technique was originally adopted by Alex Osborn in 1938 in an American Company for encouraging creative thinking in groups of six to eight people. According to Osborn, brainstorming means using the brain to storm the issue/problem. Brainstorming ultimately boils down to generate a number of ideas to be considered for the dealing with the issue/problem.
However, brainstorming exercise to be effective needs to follow a modus operandi involving four basic guidelines:
- Generate as many ideas as possible.
- Be creative, freewheeling, and imaginative.
- Build upon piggyback, extend, or combine earlier ideas.
- Withhold criticism of others’ ideas.
There are two principles that underlie brainstorming. One is differed judgment, by which all ideas are encouraged without criticism and evaluation. The second principle is that quantity breeds quality. The brainstorming session to be effective needs to work like a fun, free from any type of compulsions and pressures.
Each member needs to have willingness and capacity to listen to others’ thoughts, to use these thoughts as a stimulus to spark new ideas of their own, and then feel free to express them. As such, efforts are made to keep the brainstorming session free from any sort of dominance and obstruction derailing and inhibiting discussion to proceed in a desired manner to serve its purpose. A normal brainstorming session lasts for from ten minutes to one hour and does not require much preparation.
Here is an example of brainstorming used to generate ideas to make the organizations presence noticed.
A national level institute of the Government of India took its faculty to a resort in Himachal Pradesh for a brainstorming session for two days to generate ideas on what it can do to be known, noticed and recognized at the national and international arena.
The seven major ideas generated were to:
(i) Open courses like PGDM for the general public,
(ii) Introduce new courses to meet the emerging market requirements,
(iii) Introduce research activity in terms of research projects and fellow programme,
(iv) Sign Memorandum of Understanding (MOUs) with reputed national and international academic institutions,
(v) Start courses in collaboration with the Government and industry,
(vi) Nominate especially young faculty members to join the Faculty Development Programmes conducted by the Indian Institute of Management, Ahmedabad (IIMA), and
(vii) Publish the Institute’s research journal.
Problem Inventory Analysis:
Problem Inventory analysis though seems similar to focus group method, yet it is somewhat different from the latter in the sense that it not only generates the ideas, but also identifies the problems the product faces. The procedure involves two steps: One, providing consumers a list of specific problems in a general product category.
Two identifying and discussing the products in the category that, suffer from the specific problems. This method is found relatively more effective for the reason that it is easier to relate known products to a set of suggested problems and then arrive at a new product idea.
However, experiences available suggest that problem inventory analysis method should better be used for generating and identifying new ideas for screening and evaluation. The results derived from product inventory analysis need to be carefully screened and evaluated as they may not actually reflect a genuine business opportunity.
For example, General Foods’ introduction of a compact cereal box in response to the problem that the available boxes did not fit well on the shelf was not successful, as the problem of package size had little effect on actual purchasing behaviour. Therefore, to ensure the better if not the best results, problem inventory analysis should be used primarily to generate product ideas for evaluation.
All of above sources and methods may give a few ideas about the possible projects to be examined as the final project or product.
Following are some illustrative sources of generation of business ideas:
- Realizing that especially service class people find it inconvenient to take milk pot with them to office that they need to buy milk while coming back from the office in the evening, to provide milk in sachets or tetra packs could be a new business idea.
- Having faced difficulty in finding out accommodation and transport facility while on visits to a new/tourist place may give one an idea to start a travel agency providing complete package of facilities to the visitors to a new / tourist place.
- Knowing that many people have hobby or even develop passion for gardening may give rise to an idea of setting up one’s own nursery.
- Seeing that most of the people coming from outside to a particular place buy its unique items as souvenir like tea from Assam, the Model of Taj from Agra, etc. may give idea to produce the local item as souvenir.
- Recognizing the increasing application of computers in offices as well as business organizations, irrespective of its size, may give an idea to set-up a computer-training centre.
Once ideas have being generated following the above process, the next step comes is identification of above generated ideas as opportunities.
After going through above process, one might have been able to generate some ideas that can be considered to be pursued as ones business enterprise.
Imagine that someone have generated the five ideas as opportunities as a result of above analysis:
- Nut and bolt manufacturing (industry)
- Lakhani Shoes (industry)
- Photocopying unit (service-based industry)
- Electro-type writer servicing (service-based industry).
- Polythene bags for textile industry (ancillary industry)
An entrepreneur cannot start all above five types of enterprises due to small in size in terms of capital, capability, and other resources. Hence, he/she needs to finally select one idea which he/she thinks the most suitable to be pursued as an enterprise. How does the entrepreneur select the most suitable project out of the alternatives available? This is done through a selection process discussed subsequently.
Having gone through idea generation, also expressed as ‘opportunity scanning’ and opportunity identification, we can distinguish between an idea and opportunity. We are giving below the two situations that will help you understand and draw the line of difference between an ‘idea’ and an ‘opportunity’.
Having completed their Master of Business Administration (MBA), Mrinmoy and Chandan met after about six months. The two were conversing with each other about who is doing what. Mrinmoy is running his business of travel agency and Chandan is still searching for a job. Mrinmoy suggests Chandan to start some business. Observe and read the market scenario and produce what the consumers actually want.
On completion of his engineering degree, Tridip got a job in Assam State Transport Corporation. He was the in-charge of the purchase department. Having worked in the purchase department for over ten years, he had gained good idea about which components have more demand and who are the buyers of these parts in bulk. He, therefore, thought good prospects of manufacturing of some of the components having good demand in bulk.
Now, it is clear that, in the above mentioned two satiations, situation I is at the ‘idea stage’ and situation II at the ‘opportunity stage’. At the idea stage, there is simply an idea about what to do. But at the opportunity stage, idea has actually been germinated about what to start/do. The understanding of such a difference between an ‘idea’ and ‘opportunity’ is very important for the intending entrepreneurs who are seriously trying to identify an ‘opportunity’ to be pursued as an enterprise.