Uncovering Opportunities:

Understanding Entrepreneurial
Opportunities and Industry Analysis

BETTER OPPORTUNITIES

INDUSTRIES THAT PRODUCE

HIGH-GROWTH COMPANIES*
1. Pulp Mills
2. Computer/Office
Equipment
3. Guided missiles/space
vehicles/parts
4. Nonferrous rolling &
drawing
5. Railroad car rental

6. Measuring &
controlling devices
7. Paper Mills
8. Search & navigation
equipment
9. Communication
equipment
10. Drugs
(*Derived From Fortune 500 List)

ENTREPRENEURIAL
OPPORTUNITY - DEFINED
An entrepreneurial
opportunity is a situation in
which changes in technology,
or economic, political, social,
and demographic conditions
generate the potential to
create something new.

CHANGES MAKE IT POSSIBLE

To make new products or services

CHANGES MAKE IT POSSIBLE

To develop new production processes

CHANGES MAKE IT POSSIBLE

To organize in new ways

CHANGES MAKE IT POSSIBLE

To open up new markets

CHANGES MAKE IT POSSIBLE

To use new raw materials

OPPORTUNITIES FROM
INFORMATION

Entrepreneurial
opportunities exist because
people have different
information

Soon our country

would be
defaulter

Its going to be
heavy rain this
year.
Great
demand of
local product

Govt is putting
efforts to
develop
businesses

Different information
leads to different decisions.

Superior information leads

to better decisions.

OPPORTUNITIES FROM CHANGE

50% of Inc. 500 companies started business in response to change

Truly valuable entrepreneurial opportunities

come from an external change that either:

Makes it possible
to do things that
had not been
done before

Makes it possible
to do something
in a more
valuable way

SOURCES OF OPPORTUNITY

Technological Change

TECHNOLOGICAL CHANGE

SOURCES OF OPPORTUNITY

Political & Regulatory Change

POLITICAL AND
REGULATORY CHANGE
Makes it possible to develop
business ideas to use resources in
new ways that are either more
productive, or that redistribute wealth
from one person to another.

OPPORTUNITIES FROM POLITICAL

AND REGULATORY CHANGE
Deregulation

Regulations that support particular types of business

activities
Regulations that increase demand for particular activities
or subsidize firms that undertake them

Policy that increases innovation

SOURCES OF OPPORTUNITY

Social & Demographic Change

SOCIAL AND DEMOGRAPHIC

CHANGE
Alters demand for products and services
Makes it possible to generate solutions to
customer needs that are more productive than
those currently available

FORMS OF AN OPPORTUNITY

FORM OF
OPPORTUNITY

TECHNOLOGICA
L CHANGE

BUSINESS
RESPONSE

REASONING

New
Product/Service

Gas engine

Car

Engine to
power cars

New way of
Organizing

Internet

Online book
sales

Sales without
stores

New Market

Refrigeration

Refrigerated
Ships

Meat Exports
to Japan

New Production
Method

Computer

ComputerAided Design

Eliminates
Prototypes

New Raw Material

Oil

Refine to gas

Gas for cars

INDUSTRY ANALYSIS

NEW VS. ESTABLISHED FIRMS

Entrepreneurs most often

Established firms most often

introduce new
products or services

introduce new
production processes

enter new markets

ways of organizing

The most successful entrepreneurs develop new

processes. (Mansfield, 1985)

INDUSTRY CONDITIONS
THAT AFFECT SUCCESS

Knowledge conditions
Demand conditions
Industry lifecycles

Industry structure

KNOWLEDGE CONDITIONS
information that underlies the production of
products & services.
Favourable industries for new firms:
greater R&D intensity (R&D$/sales)
public sector production of technology
Innovation requires flexible and nimble
organizations

DEMAND CONDITIONS
attributes of customer preferences for
products & services
New firms do better in:
Larger markets
Rapidly growing markets
Heavily segmented markets

INDUSTRY LIFE CYCLE

INDUSTRY LIFE CYCLES

Optimal conditions for new firms:
Young Industries
Prior to the establishment of a dominant
design (common approach or standard)

INDUSTRY STRUCTURE

New firms perform more poorly in

Capital-intensive industries
Advertising-intensive industries
Concentrated industries (versus
fragmented industries)
Industries composed of mostly large firms

ADVANTAGES OF ESTABLISHED
FIRMS

The learning curve

Established reputation
Positive cash flow
Economies of scale

COMPETENCE DESTROYING
CHANGE

Large Companies
Locked into old ways of
thinking
Must cannibalize
existing business
Hindered by established
routines
Must seek to satisfy
existing customers

Small Companies
Can think in new ways
No concerns with
existing business
Can form new routines
easily
No existing customer
base to satisfy

ESTABLISHED VS. NEW

FIRMS
OPPORTUNITY EVALUATION
EXAMPLE

DIMENSION

ADVANTAGE WHY?

Jewellery
Store

Reputation

Established

Customers
know & trust

Automobile
Manufacturer

Strong
Learning
Curve

Established

Better at
producing &
distributing

3D Computer
Graphics Chip

Competence
Innovation

New Firm

Undermines
established
firms

Blackberry

Discrete
Innovation

New Firm

Independent
of existing
systems