Chapter 4 Opportunity Recognition: Developing Distinctive Competencies

Introduction Kirzner defines an “alert” individual as one who recognizes disequilibria and is willing to make changes in the frame, schema, or evaluation process to accurately accommodate, predict, and profit from the new information.

Introduction Gaglio and Katz suggest that individuals have four outlooks: Assessing – fully alert individual Discounting – marginally alert individual (satisfiers) Dismissing – uselessly alert individual (marginal improvers) Uninterested – nonalert individual (interested in status quo)

Sources of Business Ideas Sources of good ideas are all around us in likely places: Jobs Hobbies Friends Newspapers Television Internet Advertisements Social Gatherings Special Interests Family Life

Sources of Ideas Unexpected Events Incongruity between the Actual and Possible Innovation Based on a Process Need Changes in Industry or Market Structure Demographic Changes Changes in Perception and Meaning New Knowledge Created by Research

The Role of Creativity Although the origin of an idea is important, it is the role of creative thinking that is critical to its development.

The Nature of the Creative Process Phase 1: Background or Knowledge Accumulation Phase 2: The Incubation Process Phase 3: The Idea Experience Phase 4: Evaluation and Implementation

Phase 1: Background or Knowledge Accumulation Read informational material from a variety of fields. Join professional groups and associations. Attend professional meetings and seminars. Travel to new places. Talk to anyone and everyone about your subject. Scan magazines, newspapers and journals for articles related to your subject. Develop a subject library for future reference. Carry a small notebook and record useful information. Devote time to pursuing your natural curiosities.

Phase 2: The Incubation Process Engaging in routine, mindless activities (cutting the grass, painting the house). Exercising regularly. Playing (sports, board games, puzzles). Thinking about the project or problem before falling asleep. Meditating and/or practicing self-hypnosis. Sitting back and relaxing on a regular basis.

Phase 3: The Idea Experience Daydream and fantasize about your project. Practice your hobbies. Work in a leisurely environment (for example, at home instead of the office). Put the problem on the back-burner. Keep a notebook at bedside to record late-night or early-morning ideas. Take breaks while working.

Phase 4: Evaluation and Implementation Increase your energy level with proper exercise, diet and rest. Educate yourself about the business planning process and all facets of business. Test your ideas with knowledgeable people. Take notice of your intuitive hunches and feelings. Educate yourself about the selling process. Learn about organizational policies and practices. Seek advice from others. View the problems that you encounter while implementing your ideas as challenges.

Acceptance of New Ideas Some common attributes of successful ideas: It should have a relative advantage over existing products or services. The innovation must be compatible with existing attitudes and beliefs. It shouldn’t be so complex that the buyer has a difficult time understanding how it should be used. The results or benefits of the innovation must be easily communicable to potential users.

Some Common Attributes of Successful Ideas – Cont’d It is helpful if the innovation is divisible, which means that users can try the innovation without incurring a large risk. The innovation must be readily available for purchase once the buyer decides to make a purchase. The buyer must also believe that the innovation satisfies one of his or her needs by giving some immediate benefit.

The Winning Business Idea Buyer utility Strategic pricing Business model Adapting hurdles

Does a New Idea Create Exceptional Utility? Customer productivity Simplicity Convenience Fun and image Environmental friendliness

Product/ Market Matrix

New Product Development Process Technology Advances Changing Consumer Needs Shortening Product Life Cycles Increased World Competition

The Attrition Rate of New Product Projects Number of Concepts 7 6 5 4 3 2 1 0 10 20 30 40 50 60 70 80 90 100 Screening and evaluation Business analysis Development Testing Commercialization

Contemporary Opportunities

China has a different theory of how to get long-term, sustained growth. The Chinese have doubled their spending on education – with stunning results – and continue to build the world best infrastructure. Reuters reports that Beijing is contemplating a plan to invest $1.5 trillion over the next five years in seven crucial industries. The targeted sectors are alternative energy, biotechnology, new generation, information technology, high and equipment manufacturing, advanced materials, alternative-fuel cars and energy-saving and environmentally friendly technologies. Somehow, housing and retail did not make the list. Ref: Wall Street Journal (12/14/10)

Security firms eyes cybercrime trends Social media platforms, mobile devices and Apple products are going to be hot spots for cybercriminals in 2011, according to a report released this week. In its annual McAfee Threat Prediction report, the tech security company said location-based services such as Foursquare, as well as popular social media sites like Twitter and URL-shortening Web sites, will be targeted by online thieves and hackers. With more online computing being done on smart phone, tablet computers and other portable gadgets, mobile devices will likely be eyed by cybercriminals as well, leading to increase risk of personal and corporate data loss, McAfee said. And Apple product, once largely ignored by hackers and thieves, will see a rise in malware sophistication as their use in professional settings increase, the report said. While social media have grown in popularity, URL-shortening services will be at the forefront of cybercrime activity, the report said. The use of shortened Web addresses leaves users vulnerable to cybercriminals who can easily mask and lead users to malicious Web sites, McAfee said. More than 3,000 URLs are shortened per minute, it sais, and a growing number of those Web addresses are sites that can barrage users with spam, malware and other scams to get a user’s data. Location-based Web sites and apps such as Foursquare, Gowalla and Facebook Places will be exploited. “In just a few clicks, cybercriminals can see in real time who is Tweeting, where they are located, what they are saying, what their interests are, and what operating systems and applications they are using”, McAfee said. Ref: Chicago Tribune (1/1/11)

1. Mobile Apps The Chicago Tribune is ready to launch branded news and weather apps for the iPhone and iPod touch. Leveraging CTMG’s audience, content and consumer trends, what should be next? Your deliverable is come up with the top 10 revenues generating app ideas, their features, pricing, target audience, how to promote and etc. Be creative! Ref: Chicago Tribune

2. Digital Marketplaces Chicago Tribune Media Group currently has strong, high performing digital marketplaces for autos (Cars.com), real state (Homefinder), recruitment (Career Builder), entertainment (Metromix) and soon local shopping. What other market places could be created and/or partner to develop? Provide your ideas and develop one potential marketplace. Ref: Chicago Tribune

3. Monetizing Digital Content Whether it’s video, advertising inventory, photo galleries, or stories, CTMG’s portfolio has a vast amount of digital content, yet it generates pennies to dollar compared to traditional media. How can we monetize digital content beyond display advertising and classified listing? Ref: Chicago Tribune

4. Engaging Consumers through Mobile Technology Geo-location is currently a hot trend in the mobile world. QR Codes, SMS and couponing are other ways to engage consumers to go. Provide specific strategies that leverage and monetize existing mobile and location based technology. Ref: Chicago Tribune