Entrepreneurs are innovative opportunity seekers. They have endless curiosity to discover new or different ideas and see whether these ideas will work in the marketplace. This is what separates entrepreneurs from the ordinary businessman whose main objective is simply to earn profits from producing, buying, and selling goods.
Entrepreneurs create value by introducing new products or services or finding better ways of making them. These may include innovation in terms of product design or addition of new product features to existing ones. They may also tinker on improving their operational capability by employing new technologies that will bring them greater efficiency, better economies, and even enable them to reach unparalleled superiority. They may also consider expanding their reach by creating new markets or maximizing existing market reach. At the highest level, entrepreneurs may totally change the prevailing business paradigm by rendering it obsolete through the introduction of disruptive technologies, processes, and systems.
Entrepreneurial Mind Frame, Heart Flame, and Gut Game
Essential to an entrepreneur’s opportunity-seeking are the entrepreneurial mind frame, heart flame, and gut game.
The entrepreneurial mind frame allows the entrepreneur to see things in a very positive and optimistic light in the midst of crisis or difficult situations. Instead of being discouraged, the entrepreneur is able to use these problematic situations as inspiration in creating something innovative. In fact, in Chinese writing, the word crisis is composed of two characters. The first character means danger while the second character means opportunity.
If there is one commonality between an inventor and an entrepreneur, it is their surging passion or the entrepreneurial heart flame. Driven by passion, they are drawn to find fulfillment in the act and process of discovery.
Passion is that great desire to attain a vision or fulfill a mission. It is about wanting something so much that a person would be willing to totally devote one’s self to the quest. Despite several setbacks or disappointments, the entrepreneur is not easily disheartened but is rather driven to persevere even more.
The heart flame is also about emotional intelligence or EQ, which is often manifested in the entrepreneur’s efforts to nurture relationships with customers, employees, and suppliers. The entrepreneur also looks after the interests of his or her people by motivating and encouraging them to be the best they can become. This creates a caring culture within the organization that brings about synergy among the people working toward a common vision.
The final ingredient is the entrepreneurial gut game. This refers to the ability of the entrepreneur to sense without using the five senses. This is also known as intuition.
Somehow, the entrepreneur just knows whether something will work or not without necessitating logical, systematic, and sequential thinking. The gut game also connotes courage or, in the local dialect, “lakas ng boob” (strong intestinal fortitude). It is simply confidence in one’s self and the firm belief that everything is within reach so long as you aspire for it.
The Many Sources of Opportunities
There are many ways to uncover or discover opportunities. Some have to do with looking at the big picture and noticing emerging trends and patterns. Others have to do with finding out what specific customer segments are being targeted in the marketplace. Still, others come from new technologies and new knowledge. These different sources of opportunity are discussed in this lesson.
Macro Environmental Sources of Opportunities
The macro-environment refers to the “big or macro forces” that affect the area, the industry, and the market, which the enterprise belongs to. They influence how business should be conducted, how consumers will behave, how supply and demand will move, how different competitors would position themselves, and how the cost of doing business will proceed. The macro-environment forces can be divided into five categories composed of the Social, Political, Economic, Ecological, and Technological dimensions or SPEET. The macro-environment forces create their own opportunities for the enterprise to exploit, and their own threats for the enterprise to counteract.
1. Socio-Cultural Environment
The socio-cultural environment includes the demographics and cultural dimensions that govern the relevant entrepreneurial endeavor. Taking this aspect into consideration helps the entrepreneur assess the trends and dynamics of the bigger consumer population, their beliefs, tastes, customs, and traditions. It looks at social structure and shifts in social status and behavior.
2. Political Environment
The political environment defines the governance system of the country or the local area of business. It includes all the laws, rules, and regulations that govern business practices as well as the permits, approvals, and licenses necessary to operate the business. Specifically, it regulates the use of natural resources; the disposal of wastes; the taxation of income; the importation of goods and services; the accounting and reporting of business financial statements; public and private education; health programs; use of public funds; and other such concerns. It includes the establishment of vital infrastructures, logistical access, and interventions that affect the cost of doing business. These factors are important influencers in evaluating the attractiveness of any political domain where the entrepreneur intends to locate and do business in.
3. Economic Environment
Supply and demand forces mainly drive the macroeconomic environment. They are the same factors that drive the interest and foreign exchange rates that fluctuate with the movement of the market forces. In any country, the income levels and the purchasing power of its people as well as the competitiveness (or uncompetitiveness) of its industries and enterprises are sources of opportunities. However, in any opportunity, there is always a threat that lurks behind it. In this case, the entrepreneur must be able to think critically through each and every single economic event that impacts his or her enterprise. For example, a very fast-growing demand for housing may lead to the overbuilding of houses. This threat is what house financing institutions are afraid of.
4. Ecological Environment
The ecological environment includes all-natural resources and the ecosystem, habitat of men, animals, plants, and minerals. There is a growing awareness in the world today that will make this factor more and more important for countries, industries, and businesses.
The threats of ecological degradation have generated countless opportunities such as smoke and spill detectors, filters and screens, pollution counters, and energy-saving devices. Opportunities abound for greener, cleaner, and healthier products, whose objectives are to save the planet and prolong lives.
5. Technological Environment
New scientific and technological discoveries, which often lead to the launch and commercialization of new products with superior attributes or to rendering the old ones obsolete, are the entrepreneur’s nightmares. In such cases, the entrepreneur is left with no choice but to invest in new technologies in order to keep up with competition. Technology does not only come in the form of advanced machinery or equipment, but it can also be in the form of new systems, new processes, or new products.
The table shows examples of opportunities and threats that are present within the macro environment of a fast-growing fast-food chain offering chicken meals and other Filipino favorites.
Examples of Relevant Opportunities and Threats to a Fast Food Chain
Industry Sources of Opportunities
After the macro environment, the next biggest sources of opportunities are the industry and the market. One of the most difficult aspects about industry analysis is defining what constitutes an industry in the first place. The proper classification of what industry the enterprise is competing in is important if the entrepreneur’s intention is to define who are the relevant customers, who are the direct and indirect competitors, and what are the critical characteristics of the market as to the quality of products or services to be delivered.
Participants in an industry include:
- Rivals or competitors in a particular type of business (e.g., Jollibee vs. McDonald’s, Coca-Cola vs. Pepsi, Samsung Galaxy vs. Apple’s iPhone, etc.). True rivals or competitors are those competing for the same or similar markets.
- Suppliers of input (e.g., fuel, electricity, raw materials) to rivals as well as suppliers of machinery and equipment, suppliers of manpower and expertise, and supplies of merchandise.
- Consumer market segments being served by rivals or competitors.
- Substitute products or services, which customers shift or turn to.
- All other support and enabling industries.
After identifying the participants, it would help the entrepreneur to determine the logic of the industry. How do these participants in the industry make or lose money? What critical factors drive the industry’s success? What critical factors lead to failures?
A thorough analysis of industry structure and dynamics yields opportunities for the clever entrepreneur. Situating his or her enterprise within the realm of an industry provides many profitable opportunities for the entrepreneur.
There are several ways of defining an industry. The most common way of defining an industry is according to product types or according to the functions of the product or service. Classic examples of these industries include the computer industry (Microsoft vs. Apple), beer industry (San Miguel Beer vs. Beer na Beer), fast food industry (McDonald’s vs. Jollibee), and cola industry (Coca-Cola vs. Pepsi Cola).
Another way of defining an industry is by tracing the industry from its most basic raw material down to its various consumer applications, otherwise known as product or value-added chain. The difference between the product and value-added chain is the focus of the analysis. Product chain focuses on the volume produced or converted at each link of the chain. On the other hand, the value-added chain focuses on the economic rather than the volume aspect of the chain.
To illustrate the tracing of a product chain, a good example would be the coconut industry. The coconut tree, regarded as the ‘tree of life,’ is useful for different purposes. Its trunk, shell, meat, husk, and leaves find their way to all types of products such as oils, soap, handicraft, oleochemicals, furniture, wallboards, coir, etc. Looking at this value chain alone presents many potential opportunities for the entrepreneur.
However, defining an industry with a narrower scope presents a threat because of its limiting effect. For example, to simply classify all those using coconuts in their production process as being in the coconut industry per se might not be too useful. The reason is that most of the coconuts harvested are processed into coconut oil, which is just one of the many substitutes in the fats and vegetable oils industry traded worldwide.
The value-added chain follows the product chain but concentrates on the ‘value’ added from one stage of the product to the other—a value that is given by the market price differential between stages of production. The differential would include the additional costs of processing the product from one stage to the next and the profit margins added on each stage by the processor (or distributor). A good example of the value-added chain would be a cup of designer coffee. At farm gate prices, one would get a few pesos out of a bag of freshly picked coffee beans. The coffee beans will then get processed and packaged by the coffee manufacturer. Cost and profit margins are added before selling the product to distributors. Once it gets in the hands of the distributors, the latter will have to market and sell the finished product to coffee shops for a few more pesos added to cover for the logistical and transportation costs incurred. The coffee shops will then proceed to concoct their own versions of designer coffees. The fancier the coffee gets, the more expensive a cup of designer coffee becomes. The figure shows the relationship between product and value-added chain.
The entrepreneur may discover weak links in the chain that need strengthening or gaps in the whole chain that need filling. Sometimes, the opportunity lies not in finding gaps and weaknesses but in assailing the strongest links where there may be a concentration of bargaining power. In this case, the entrepreneur should determine which players produce the most volume of goods, which ones control the flow of those goods, which ones make the most profits, and which ones push the most volume through the market channels all the way to the final customers. These processes may uncover strategic opportunities for industry intervention.
The entrepreneur should always be alert in detecting windows of opportunities emanating from shifts in the industry power equation or changes in the industry rules of the game.
Market Sources of Opportunities
The entrepreneur must also be able to measure the actual demand and supply as well as the potential demand and supply of the industry that the enterprise belongs to. Equally important is the monitoring of the prevalence of product substitutes and their market impact on the existing players in the industry. Market trend analysis is also conducted by determining the critical variables, which would most likely affect the future directions of the industry. Lastly, market traits, characteristics, and behavior are identified in order to match these customer traits with the product offerings of the enterprise.
Market sources of opportunities can be discovered from increased or decreased demand as well as higher or lower supply. An example of this is the battle of the value/ combo meals, otherwise known as “more-for-less” strategy in the fast food restaurant industry. The demand for more affordable but filling meal is continuously growing particularly for the working population. This, in turn, creates an increased demand in the items that come with the value/combo meal such as rice, chicken, pasta, sidings (e.g., mashed potato, buttered corn, french fries, etc.) and beverage drink. Although smaller in portions, the volume served is more, particularly during peak hours (lunch and dinner). It also opens up the opportunity of offering breakfast items and strengthening this time-of-the-day segment. More and more consumers are resorting to having their breakfast near their workplaces or along the way to work in order to avoid getting stuck in the rush hour traffic. However, the threat of price war remains strong such that the industry players are compelled to strengthen their supply chain for better leverage.
Micromarket refers to the specific target market segment of a particular enterprise. These are the target customers that represent the immediate customers of an enterprise, meaning those who are currently buying the goods or services offered by the enterprise and its direct competitors. It likewise pertains to a clearly defined location or specific customer group that an enterprise wishes to serve.
The need for segmentation would be crucial in micromarket analysis because the definition of value for money differs from group to group. If they do not differ, then the entrepreneur is better off by aggrupating rather than segmenting. For example, the Makati office crowd has several choices where to eat. Observing the behavior of customers during lunch would indicate what groups of customers prefer fast food establishments, what group brings their own pack lunches, and what.group goes for casual dining. Several opportunities can be spotted by the entrepreneur, such as opening up a new food outlet or offering food delivery services to a particular office crowd.
Consumer Preferences, Piques, and Perceptions
Consumer preferences, piques, and perceptions can be sources of opportunities.
Consumer preferences refer to the tastes of particular groups of people. Some examples are the clothes people wear, the food they eat, the music they listen to, and the movies they watch. The consumers’ age, culture, and status affect their preferences. In contrast, consumer dislikes refer to the things that irritate customers. Either way, the entrepreneur can explore opportunities brought about by consumer preferences or dislikes.
For example, if consumer trends show a rising preference for “fast casual” dining, then this would be an opportunity worth exploring. If customers show great annoyance at standing in long queues in fast food outlets, then sit-down “fast casual” dining could be a great opportunity.
There are times when the product is not changed by the enterprise but what changes is the way consumers perceive the product. A classic example is Listerine mouthwash. It was first offered as a surgical antiseptic and, later, a cure for athlete’s foot during the war.
Because of the many choices that customers have to struggle with every day, a product or service must be able to win the battle for the customer’s mind. First, awareness of the new product or service must be generated. This is followed by arousing the customers’ interest to buy, going to the evaluation of the product, and finally, the decision to purchase the product. After a customer purchased the product, there is a need to build brand loyalty and retain the customer for a long time to get a bigger share of his or her wallet, not just his or her mind.
Other Sources of Opportunities
As an opportunity seeker, the entrepreneur will surely discover other sources of opportunities. Unexpected successes (or failures) can lead to good opportunities.
Another potential source of opportunity is the entrepreneur’s own set of skills or expertise, or hobby. New knowledge as well as new technology can be the source of highly innovative opportunities.
1. Customer preferences change over time.
Example: The prevalence of sugar-free products is now becoming the new normal, particularly to products that used to be sugar-full like soft drinks and desserts. Cola manufacturers have long introduced their respective sugar-free cola drinks as healthier alternatives to their regular cola drinks. This caters to the health-conscious consumers who have shifted due to fear of obesity and diabetes.
2. People's tastes in clothes, music, shoes, entertainment, dance, sports, hobbies, and even careers have evolved over the years.
Example: The 1980s could be best described as the era that gave birth to music television or MTV. This era was all about image that went with the popular artists at that time such as Michael Jackson and Madonna. These artists had become iconic because of their talent, fashion styles, and persona, which defined the 80s decade. Hip hop, new wave, and hair metal were the musical genre that emerged.
3. What piques customers is a great source of opportunities.
Example: Government-related services are now made more available to the public because they have opened up satellite offices in major malls. Before, people had no choice but to go to the main office, line up for hours, to apply or renew their licenses, clearances, passports, etc. Now, with these satellite services closer to the public, more people are encouraged to transact with these government agencies because it has become more convenient.
4. Before the customer is won over, there is first a battle for the mind.
Next, there is a battle for the heart. Finally, there is a battle for the wallet. Example: When the new smartphones came out, customers were being convinced by the different competitors on what was the best choice to make. This is the battle for the mind. When customers got attracted to the features and brand image of one competitor, it had won the battle of the heart. Finally, when customers lined up to buy their preferred smartphone, the competitor had won the battle for the wallet.
5. The longer the customer wants to use the product, the greater the chances of creating lasting loyalty.
Example: Among Filipinos, there is this old adage of “nakasanayan no” (got used to it) especially when it comes to loyalty to certain products. This is true in the case of Jollibee, which has captured the hearts of the Filipinos. Jollibee has been so successful due to the “Filipino taste” of their products such as its spaghetti, which is a little sweeter than many of its Italian counterpart. Kids got used to the taste of Jollibee spaghetti and became repeat customers over and over again.
6. Opportunities abound in shaping consumer perceptions or occupying spaces in their minds or places in their hearts that have not yet been filled.
Example: A television commercial of a supplementary drink for diabetics instills ‘fear of death’ in the minds and hearts of its potential consumers. The product is meant to aid in controlling the blood sugar level of diabetics, together with the proper diet and a healthy lifestyle. The commercial ad instills fear that shapes the consumer’s perception about what is good or bad to drink.
7. New inventions, new systems and work processes, new insights about the human psyche, new applications for old knowledge, new revelations about how the physical world works, new interpretations, new combinations based on the convergence of previous technologies, new outlooks about how life should be led, and a host of other new things are tremendous sources of opportunities.
Example: Due to the advancement of technology applied to the medical field, open surgery has become a thing of the past when removing smaller cysts or tumors. This was made possible by the invention of laparoscopy, one of the technological breakthroughs in medicine. Laparoscopy is a type of surgical procedure that allows surgeons to access the inside of the abdomen and pelvis without having to make large incisions on the skin. This is a go-to procedure for people who want to avoid the surgeon’s knife.
8. Determining personal preferences and competencies lay the foundation for a new business venture.
Example: The mushrooming of culinary schools indicates the booming interest of students in pursuing their love for cooking and/or baking. One of the career tracks offered by these culinary schools is enabling the student to put up his or her own restaurant or pastry shop. Several weekend markets and food bazaars have also opened up to showcase the talents of these young culinary students.
9. Unexpected occurrences in both the external and internal environment of the enterprise indicate that significant changes are happening and opportunities are sprouting.
Example: Who would have thought that videos taken by closed-circuit televisions (CCTV) would make waves in the news headlines as one of the best evidences in a crime? Installed practically everywhere, the use of CCTVs has created a tremendous opportunity for entrepreneurs, particularly those already engaged in the safety and security industry. In fact, there are cities and municipalities that have already issued ordinances requiring the installation of CCTVs before renewing or issuing business permits.