Special issue on Complexity:
Innovation Content A key question that all would-be entrepreneurs face is finding the business opportunity that is right for them. Should the new startup focus on introducing a new product or service based on an unmet need? Should the venture select an existing product or service from one market and offer it in another where it may not be available?
Or should the firm bank on a tried and tested formula that has worked elsewhere, such as a franchise operation?
In the process, he offers insights into how entrepreneurs can identify new business opportunities and evaluate their potential and their risks. An edited transcript of the conversation appears below: Our guest today is Raffi Amit, professor of Management at Wharton.
We are going to be speaking with him about identifying new business opportunities. Professor Amit, thank you so much for joining us today.
The National Federation of Independent Business said its optimism index remains strong at in October. Although down slightly, that was still close to the index’s high. The U.K. is in. Today’s organizations have to deal with dynamic and uncertain environments. are unfolding. They should actively look for opportunities to exploit their strategic abilities, adapt and seek improvements in every area of the business, building on awareness and understanding of current strategies and In the case of some small businesses. Small business fraud and the trusted employee Protecting against unique vulnerabilities accounting personnel may be tasked with completely inappropriate job functions that provide easy opportunities for committing financial frauds. Only a small number of small business embezzlement victims — roughly two percent — report crimes even.
Could you offer some guidance on that? There are many sources for new venture opportunities for individuals. Clearly, when you see inefficiency in the market, and you have an idea of how to correct that inefficiency, and you have the resources and capability — or at least the ability to bring together the resources and capability needed to correct that inefficiency — that could be a very interesting business idea.
In addition, if you see a product or service that is being consumed in one market, that product is not available in your market, you could perhaps import that product or service, and start that business in your home country.
Many sources of ideas come from existing businesses, such as franchises. You could license the right to provide a business idea. You could work on a concept with an employer who, for some reason, has no interest in developing that business.
You could have an arrangement with that employer to leave the company and start that business. You can tap numerous sources for new ideas for businesses. Perhaps the most promising source of ideas for new business comes from customers — listening to customers.
That is something we ought to do continuously, in order to understand what customers want, where they want it, how they want a product or service supplied, when they want it supplied, and at what price. Obviously, if you work in a large company, employees might come up with ideas.
Indeed, you might want to listen to what they have to say.
Is the product or service real? What are the risks? And is it worth it? Could you offer an example of a start-up that evaluated an opportunity and demonstrates some of the principles you just mentioned?
Well, obviously in the age of the Internet, there is no shortage of examples of entrepreneurs who started a company based on a perceived need.
You could go back to the beginning of E-Bay, where they saw an opportunity to connect people through launching a virtual flea market. It offered a platform that connected buyers and sellers directly.
Knowledge Wharton High School Other companies have found similar models.
The company provided people the opportunity to pay online. It addressed issues of advertising on-line. All of these companies have one thing in common. They addressed an unmet need in the marketplace.
There is no substitute for understanding the unmet needs of customers. That will allow you to discover whether you are able to supply those needs, at the price customers want to pay, and if you can still make a profit. Let us suppose a would-be entrepreneur has identified what he or she thinks is a promising unmet need.
Can you take us through the process of evaluating and identifying the risks that should be considered in deciding whether or not to pursue that business opportunity?
The first step that everyone should go through is to ask the question, is the market real? In order to do so, the first thing you want to do is conduct what we call a customer analysis. You can do that perhaps in a very technical way, by conducting surveys.
When does the customer want to buy? What price is the customer willing to pay? At the end of the day, the one thing every entrepreneur is looking for is revenue, and the revenue will come from customers.
That is why you need to ask yourself, is there a market here?A small business SWOT analysis is most commonly used as part of a marketing plan, but it is also a good tool for general business strategizing.
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