Innovation And Entrepreneurship

Dr. Natarajan Venkateswaran, Dr.T. Poongodi, Dr. Sridhar S K, Dr George

Fernandez , Dr. Praveen Kulkarni, Dr.Kumar Dilip, Prof. Mala B A
&
Dr. Sivananda Reddy E
 Module-2
Developing Successful Business Ideas
 • The differences Between opportunities
Ch1: and ideas
Recognizing • Three Ways to identify opportunities
Opportunities
• Techniques for generating ideas
and Generating
• Encouraging the development of new
Ideas ideas

• Product/Service Feasibility analysis

Ch2: • industry/target market Feasibility analysis
Feasibility • organizational Feasibility analysis
Analysis • Financial Feasibility analysis
1.The Differences Between Opportunities And
Ideas
Opportunities…

Definition: An opportunity is a favorable set of

circumstances that creates a need for a new
product, service, or business.
Entrepreneurs recognize an opportunity and turn
it into a successful business.
Entrepreneurial ventures are started in one of two
ways:
• externally stimulated
• internally stimulated
 Externally Stimulated

• An entrepreneur decides to launch a firm, searches for

and recognizes an opportunity, and then starts a business.

• Ex: Jeff Bezos did when he created Amazon.com. In 1994,

Bezos quit his lucrative job at a New York City investment
firm and headed for Seattle with a plan to find an
attractive opportunity and launch an e-commerce
company
 Internally Stimulated
• An entrepreneur recognizes a problem or an opportunity
gap and creates a business to address the problem or fill the
identified gap.

• In this instance, Wiivv’s founders’ seek to build “ . . . a better

foundation for every step you take with made-to-fit-you
insoles and footwear.”

• A bionics company, Wiivv uses 3D-mapping technology to

solve a problem of shoes not fitting customers as well as
they want to be the case
 Problems with entrepreneurs

• A common mistake entrepreneurs make in the

opportunity recognition process is picking a
currently available product or service that they like
or are passionate about and then trying to build a
business around a slightly better version of it.

• Although this approach seems sensible, such as

usually not the case. The key to opportunity
recognition is to identify a product or service
that people need and are willing to buy, not
one that an entrepreneur wants to make and sell.
Four Essential Qualities of an Opportunity
 Four Essential Qualities…
1.Attractive: The opportunity should appeal to customers and stakeholders.
Example: A new fitness app that offers unique features appealing to fitness
enthusiasts.
2.Timely: The opportunity should be relevant to current market conditions.
Example: Launching a remote work software during the COVID-19
pandemic.
3.Durable: The opportunity should have the potential for long-term success.
Example: Renewable energy solutions that address long-term environmental
concerns.
4.Value-Adding: The product or service should create or add value for the
buyer or end user.
Example: An online learning platform that enhances user skills and
knowledge.
Four Essential Qualities of an
Opportunity….

• For an entrepreneur to capitalize on an opportunity, its

window of opportunity must be open.
• The term window of opportunity is a metaphor
describing the time period in which a firm can realistically
enter a new market.
• Once the market for a new product is established, its
window of opportunity opens.
• As the market grows, firms enter and try to establish a
profitable position.
• At some point, the market matures, and the window of
opportunity closes.
Four Essential Qualities of an
Opportunity….

Ex: the first search engine, appeared in 1995, and the

market grew quickly, with the addition of Lycos, Excite, and
several others.

Google entered the market in 1998, sporting advanced

search technology. Since then, the search engine market has
matured, and the window of opportunity is less prominent.

Bing, Microsoft’s search engine, is gaining ground with

approximately 20.9 percent market share (compared to 63.9
percent for Google), but only after Microsoft has exerted an
enormous amount of effort in head-to-head competition
with Google.
 Ideas

Definition: An idea is a thought, an impression, or a notion.

• An idea may or may not meet the criteria of an
opportunity.
• This is a critical point because many entrepreneurial
ventures fail not because the entrepreneurs that
launched them didn’t work hard, but rather because
there was no real opportunity to begin with.
• Before getting excited about a business idea, it is crucial
to understand if the idea fills a need and satisfies the
criteria for an opportunity
2.Three Ways to identify opportunities
 Observing Trends

• One of the most important attributes of a good

entrepreneur is having a keen observation ability.
• Basically seeing what’s needed in people’s everyday
lives and coming up with innovative new ideas and
services that meet those needs
• Maintain observations of what’s needed . . . to solve
those needs will have a higher chance of succeeding
in the marketplace
 Observing Trends…

Study how they create

opportunities for
entrepreneurs to pursue.

Political action
Economic Technological and regulatory
Social trends
trends advances changes
Environmental Trends Suggesting Business,
Product, or Service Opportunity Gaps
 Economic trends
• Economic trends help determine areas that are ripe for new
start-ups and areas that start-ups should avoid.
• Example of Economic Trend Creating a Favorable
Opportunity.
▪ A weak economy favors start-ups that help consumers
save money.
▪ An example is GasBuddy.com, a company started to
help consumers save money on gas
 Social trends
• how they affect new product, service, and business ideas is a
fundamental piece of the opportunity recognition puzzle.
• Changes in social trends alter how people and businesses
behave and how they set their priorities.
• Sample of the social trends
▪ Aging of the population
▪ The increasing diversity of the population
▪ Millennials entering the workforce
 Social trends…
• Sample of the social trends
▪ Growth in the use of mobile devices
▪ An increasing focus on health and wellness
▪ Emphasis on clean forms of energy, including wind, solar,
biofuels, and others
▪ Continual migration of people from small towns and rural areas
to cities
▪ Desire for personalization (which creates a need for products
and services that people can tailor to their own tastes and
needs)
 Technological advances
• Advances in technology frequently create business
opportunities.
• Examples of Entire Industries that Have Been Created as
the Result of Technological Advances
▪ Computer industry
▪ Internet
▪ Biotechnology
▪ Digital photography
 Technological advances…
• Once a technology is created, products often emerge to
advance it.
• Example: Rokit Boost
▪ An example is Rokit Boost, a high-end mobile
accessories company that makes smartphone cases,
headphones, portable USB device chargers, and
Bluetooth speakers. Rokit Boost wouldn’t exist if it
weren’t for the advent of the smartphone.
 Political action and regulatory changes
• Political and regulatory changes also provide the basis for
opportunities.
• General Example
▪ This happened with the passage of the Affordable Care
Act in 2010. The provisions of the act yielded
opportunities for entrepreneurs to launch electronic
records start-ups, apps to help patients monitor their
medication, and similar companies.
 Political action and regulatory changes….
• Political change also engenders new business and product
opportunities.
• For example, global political instability and the threat of
terrorism have resulted in many firms becoming more
security-conscious.
• Specific Example Evolv Technology is a start-up that has
assembled a multidisciplinary team of experts to identify,
invent, and apply new technologies to meet current
terrorism-related threats.
Examples of How Changes in Environmental
Trends Provided Openings for
New Business and Product Opportunities
Solving a problem
• Sometimes identifying opportunities simply involves
noticing a problem and finding a way to solve it.
• These problems can be pinpointed through observing
trends and through more simple means, such as
intuition, serendipity, or chance.
• Many companies have been started by people who have
experienced a problem in their own lives, and then
realized that the solution to the problem represented a
business opportunity.
"Every problem is a brilliantly disguised opportunity"
Solving a problem….
Specific Example
Sometimes people aren’t able to access energy to recharge
their smartphones for a period of time. A number of
companies have solved this problem in innovative ways. An
example is the $70 Eton BoostTurbin 2000, which is a device
that weighs less than four ounces. It combines a battery with
a hand crank that provides enough power to fully charge a
typical smartphone.
Businesses Created to Solve a Problem
Finding Gaps in the marketplace
Finding Gaps in the marketplace…

• A gap in the marketplace is often created when a product

or service is needed by a specific group of people
but doesn’t represent a large enough market to be of
interest to mainstream retailers or manufacturers.
Finding Gaps in the marketplace…

• There are many gaps in the marketplace to be filled.

• Entrepreneur launched a start-up that runs after-school
programs for students interested in STEM (Science,
Technology, Engineering, and Mathematics) projects.
• These children recently competed in a national robotics
competition for students in their age group.
Businesses Created to Fill a Gap in the
Marketplace
3. Personal Characteristics of the Entrepreneur

• Characteristics that tend to make some people better

at recognizing opportunities than others

Prior Industry
Experience

Cognitive
Creativity
Factors

Social
Networks
1. Prior Experience
• Several studies have shown that prior
experience in an industry helps an entrepreneur
recognize business opportunities.
▪ By working in an industry, an individual may spot a
market niche that is underserved.
▪ It is also possible that by working in an industry, an
individual builds a network of social contacts who
provide insights that lead to recognizing new
opportunities.
 2. Cognitive Factors
• Studies have shown that opportunity recognition
may be an innate skill or cognitive process.
• Some people believe that entrepreneurs have a
“sixth sense” that allows them to see
opportunities that others miss.
• This “sixth sense” is called entrepreneurial
alertness, which is formally defined as the ability to
notice things without engaging in deliberate search.
3. Social Networks
• The extent and depth of an individual’s social
network affects opportunity recognition.
• People who build a substantial network of social
and professional contacts will be exposed to
more opportunities and ideas than people with
sparse networks.
• Research results suggest that between 40% and
50% of people who start a business got their
idea via a social contact.
 3. Social Networks….
• Nature of Strong-Tie Vs. Weak-Tie Relationships
▪ Strong-tie relationships are characterized by
frequent interaction and form between
coworkers, friends, and spouses.
▪ Weak-tie relationships are characterized by
infrequent interaction and form between casual
acquaintances.
• Result
▪ It is more likely that an entrepreneur will get
new business ideas through weak-tie rather
than strong-tie relationships. (See next slide.)
 3. Social Networks….
Why weak-tie relationships lead to more new
business ideas than strong-tie relationships

Strong-Tie Relationships Weak-Tie Relationships

These relationships, which
These relationships, which form between casual
typically form between acquaintances, are not as
like-minded individuals, apt to be between like-
tend to reinforce insights minded individuals, so one
and ideas that people person may say something
already have. to another that sparks a
completely new idea.
4. Creativity….

• Creativity is the process of generating a novel or useful

idea.
• Opportunity recognition may be, at least in part, a
creative process.
• For an individual, the creative process can be broken
down into five stages, as shown on the next slide.
4. Creativity

Five Steps to Generating Creative Ideas

FIVE STEPS TO GENERATING CREATIVE IDEAS

• Preparation. Preparation is the background, experience, and knowledge that

an entrepreneur brings to the opportunity recognition process.
• Incubation. Incubation is the stage during which a person considers an idea
or thinks about a problem; it is the “mulling things over” phase.
• Insight. Insight is the flash of recognition when the solution to a problem is
seen or an idea is born. It is sometimes called the “eureka” experience.
• Evaluation. Evaluation is the stage of the creative process during which an
idea is subjected to scrutiny and analyzed for its viability.
• Elaboration. Elaboration is the stage during which the creative idea is put
into a final form: The details are worked out and the idea is transformed into
something of value, such as a new product, service, or business concept.
Full View of the Opportunity Recognition
Process
Depicts the connection between an awareness of emerging
trends and the personal characteristics of the entrepreneur
4.Techniques for generating ideas

Focus Groups
 1. Brainstorming
• Is a technique used to generate a large number of ideas and
solutions to problems quickly.
• A brainstorming “session” typically involves a group of
people, and should be targeted to a specific topic.
• Rules for a brainstorming session:
• No criticism.
• Freewheeling is encouraged.
• The session should move quickly.
• Leap-frogging is encouraged.
2. Focus Groups

• A focus group is a gathering of five to ten people, who have

been selected based on their common characteristics relative
to the issues being discussed.
• These groups are led by a trained moderator, who uses the
internal dynamics of the group environment to gain insight
into why people feel the way they do about a particular
issue.
• Although focus groups are used for a variety of purposes,
they can be used to help generate new business ideas.
3. Library and Internet Research
• Libraries are an often underutilized source of information
for generating new business ideas.
• The best approach is to talk to a reference librarian, who
can point out useful resources, such as industry-specific
magazines, trade journals, and industry reports.
• Simply browsing through several issues of a trade journal
or an industry report on a topic can spark new ideas.
 3. Library and Internet Research…..

Large public and university

libraries typically have Examples of Useful Search
access to search engines and Engines and Industry Reports
industry reports that would • BizMiner
cost thousands of dollars to • ProQuest
access on your own. • IBISWorld
• Mintel
• LexisNexis Academic
 3. Library and Internet Research….
• Internet Research
• If you are starting from scratch, simply typing “new
business ideas” into a search engine will produce links
to newspapers and magazine articles about the “hottest”
new business ideas.
• If you have a specific topic in mind, setting up Google
mail alerts will provide you with links to a constant
stream of newspaper articles, blog posts, and news
releases about the topic.
• Targeted searches are also useful.
 Other Techniques
• Customer Advisory Boards
• Some companies set up customer advisory boards that
meet regularly to discuss needs, wants, and problems
that may lead to new ideas.
• Day-In-The-Life Research
• A type of anthropological research, where the employees
of a company spend a day with a customer.
CH2: FEASIBILITY ANALYSIS

Product/Service Industry/Target
Feasibility analysis market Feasibility
analysis

Organizational Financial
Feasibility analysis Feasibility analysis
 Feasibility Analysis
• Feasibility analysis is the process of determining if a business idea is
viable.
• If a business idea falls short on one or more of the four components of
feasibility analysis, it should be dropped or rethought, as shown in the
figure.
• Many entrepreneurs make the mistake of identifying a business idea and
then jumping directly to developing a business model to describe and
gain support for the idea.
• A mental transition must be made when completing a feasibility
analysis from thinking of a business idea as just an idea to thinking of it
as a business.(whether the idea is worth pursuing)
Feasibility Analysis….
• A feasibility analysis is an assessment of a potential business
rather than strictly a product or service idea.
• The sequential nature of the steps shown in Figure tells the
business idea from the planning and selling portion of the
process.
• Feasibility analysis is investigative in nature and is designed to
critique the merits of a proposed business.
• A business plan is more focused on planning and selling.
Role of Feasibility Analysis in
Developing Successful Business Ideas
COMPONENTS OF FEASIBILITY ANALYSIS
Feasibility Analysis….
• Primary research is research that is collected by the person or
persons completing the analysis.
• Ex: prospective customers, getting feedback from industry experts,
conducting focus groups, and administering surveys.
• Secondary research probes data that is already collected.
• Ex: industry studies, Census Bureau data, analyst forecasts, and
other pertinent information gleaned through library and Internet
research.
• It should be emphasized -revised, altered, and changed as a result
of the feedback.
Feasibility Analysis….
The key objective

eliciting feedback from potential customers,

talking to industry experts,

studying industry trends,

thinking through the financials, and scrutinizing it in

other ways.
FEASIBILITY ANALYSIS….
PRODUCT/SERVICE FEASIBILITY
ANALYSIS

• It is an assessment of the overall appeal of the product

or service being proposed.
• There are two components to product/ service
feasibility analysis:
1. product/service desirability
2. product/service demand.
PRODUCT/SERVICE DESIRABILITY
• The first component of product/service feasibility is to affirm, the
following questions to determine the basic appeal of the product or
service:
■ Does it make sense? Is it reasonable? Is it something real customers
will buy?
■ Does it take advantage of an environmental trend, solve a problem,
or fill a gap in the marketplace?
■ Is this a good time to introduce the product or service to the
market?
■ Are there any fatal flaws in the product or service’s basic design or
concept?
 CONCEPT TEST
A concept test involves showing a preliminary description of a product or service
idea, called a concept statement, to prospective customers and industry experts to
solicit their feedback.
It is a one-page document that normally includes the following:
■ A description of the product or service-probably won’t have a working prototype
of your product, but you might have a sketch or a rough model to show your
participants.
■ The intended target market-consumers or businesses who are expected to buy
the product or service.
■ The benefits of the product or service-account of how the product or service
adds value and/or solves a problem.
■ A description of how the product or service- positioned relative to competitors.
A company’s position describes how its product or service is situated relative to its
rivals.
■ A brief description of the company’s management team.
NEW VENTURE FITNESS DRINKS’ CONCEPT STATEMENT
Table 3.2 Online Tools Available For Completing A
Feasibility Analysis
• This young entrepreneur is out talking to potential customers. She’s
assessing the feasibility of a new travel service that she and two other
entrepreneurs are thinking about launching.
PRODUCT/SERVICE DEMAND

Three commonly utilized methods for doing this are :

(1) talking face-to-face with potential customers
(2) utilizing online tools, such as Google AdWords and
landing pages, to assess demand, and
(3) library, Internet, and gumshoe research.
1. Talking Face-to-face With Potential Customers
• The only way to know if your product or service is what people want
and need is by talking to them.
• The idea is to gauge customer reaction to the general concept of what
you want to sell.
• Entrepreneurs are often surprised to find out that a product idea that
they think solves a compelling problem gets a lukewarm reception
when they talk to actual customers.
• In some instances, you have to pause and think carefully about who
the potential customer is.
• In hindsight, most viewed this as a mistake. “You’ll learn more from
talking to five customers than you will from hours of market
Categories of People To Talk To as Part of A Product/ Service
Feasibility Analysis
2. Utilizing Online Tools to Assess Demand

• such as administering surveys, utilizing Q&A

sites, and conducting online marketing
research.
• Surveys are most effective in validating what
you’ve learned from face-to face interviews,
rather than collecting initial data.
3. Library, Internet, and Gumshoe Research

• For example, Wonder Workshop makes educational toys that

teach kids how to code.
• Sounds like a good idea. But “sounds like a good idea,” as
mentioned in previous sections, isn’t enough. We need
feedback from prospective customers and industry-related
data to make sure.
• Your university or college library is a good place to start, and
the Internet is a marvelous resource.
• Simple gumshoe research is also important for gaining a
sense of the likely demand for a product or service idea.
• A gumshoe is a detective or an investigator that scrounges
around for information or clues wherever they can be found.
INDUSTRY/TARGET MARKET FEASIBILITY
• Definition: is an assessment of the overall appeal of the industry and
the target market of the product or service being proposed.
• There is a distinct difference between a firm’s industry and its target
market; having a clear understanding of this difference is important.
• An industry is a group of firms producing a similar product or
service, such as computers, children’s toys, airplanes, or social
networks.
• A firm’s target market is the portion of the industry that it goes after
or to which it wants to appeal.
• Wonder Workshops, for example, is not trying to target the entire
children’s toy industry. Its target market is the set of parents who
are willing to pay a premium for educational toys that teach kids
how to code.
 INDUSTRY/TARGET MARKET FEASIBILITY…

• There are two components to industry/target market

feasibility analysis:
1. Industry attractiveness
2. Target market attractiveness.
INDUSTRY ATTRACTIVENESS
• Industries vary in terms of their overall attractiveness.
• In general, the most attractive industries have the
characteristics depicted in Table 3.4.
• For example, the degree to which environmental and
business trends are moving in favor of rather than against
the industry are important for its long-term health and its
capacity to spawn new target or niche markets.
INDUSTRY ATTRACTIVENESS
INDUSTRY ATTRACTIVENESS
• Are changing economic and societal trends helping or
hurting industry incumbents?
• Are profit margins increasing or decreasing?
• Is innovation accelerating or waning?
• Are input costs going up or down?
• Are new markets for the industry’s staple products opening
up or are current markets being shut down by competing
industries?
TARGET MARKET ATTRACTIVENESS
• Find a market that is large enough for the proposed business but yet is
small enough to avoid attracting larger competitors, at least until the
entrepreneurial venture can get off to a successful start.
• Ex : Tommy John, a maker of men’s Tshirts, and began in 2008 by
making custom-fitted men’s Tshirts, and has now expanded to men’s
briefs, socks, and other apparel.
• One key to its success is that it has remained laser-focused on a
clearly defined target market.
• The number one question the company gets is “when will it start
producing women’s cloths?”
ORGANIZATIONAL FEASIBILITY ANALYSIS

• It is conducted to determine whether a proposed business

has sufficient management expertise, organizational
competence, and resources to successfully launch.
• There are two primary issues to consider in this area:
1. Management prowess
2. Resource sufficiency
MANAGEMENT PROWESS
• A proposed business should evaluate the prowess, or ability, of its
initial management team, whether it is a sole entrepreneur or a
larger group.
• This task requires the individuals starting the firm to be honest and
candid in their self assessments.
• There are no practical substitutes for strengths in these areas.
• A collection of additional factors help define management prowess.
• Managers with extensive professional and social networks have an
advantage in that they are able to reach out to colleagues and friends
to help them plug experience or knowledge gaps.
• In addition, a potential new venture should have an idea of the type
of new-venture team that it can assemble.
RESOURCE SUFFICIENCY
• The proposed venture has or is capable of obtaining sufficient
resources to move forward.
• The focus in organizational feasibility analysis is on nonfinancial
resources.
• The objective is to identify the most important nonfinancial
resources and assess their availability.
• Ex: is a start-up that will require employees with specialized skills.
If a firm launches in a community that does not have a labor pool
that includes people with the skill sets the firm needs, a serious
resource sufficiency problem exists.
A FINANCIAL FEASIBILITY ANALYSIS
• A financial feasibility analysis is the final component of a
comprehensive feasibility analysis.
• A preliminary financial assessment is usually sufficient; indeed,
additional rigor at this point is typically not required because the
specifics of the business will inevitably evolve, making it
impractical to spend a lot of time early on preparing detailed
financial forecasts.
• The most important issues to consider at this stage are total start-up
cash needed, financial performance of similar businesses, and the
overall financial attractiveness of the proposed venture.
TOTAL START-UP CASH NEEDED

• This first issue refers to the total cash needed to prepare the
business to make its first sale.
• Avoid cursory explanations such as “I plan to bring investors on
board,” or “I’ll borrow the money.”
• Although you may ultimately involve investors or lenders in your
business, a more thoughtful account is required of how you will
provide for your initial cash needs.
TOTAL START-UP CASH NEEDED..
FINANCIAL PERFORMANCE OF SIMILAR
BUSINESSES
• It is estimating a proposed start-up’s potential financial performance
by comparing it to similar, already established businesses.
• There are several ways of doing this, all of which involve a little
gumshoe labor.
• First, substantial archival data, which offers detailed financial reports
on thousands of individual firms, is available online. The easiest data
to obtain is on publicly traded firms through Hoovers or a similar
source.
• These firms are typically too large, however, for meaningful
comparisons to proposed new ventures. The challenge is to find the
financial performance of small, more com parable firms.
FINANCIAL PERFORMANCE OF SIMILAR
BUSINESSES…
• IBISWorld, BizMiner
• Find The Company provide data on the average sales and profitability
for the firms in the industries they track.
• Reference USA provides revenue estimates for many private firms,
but fewer libraries subscribe to its service.
• IBIS World also normally provides a chart of the average expenses
for major items such as wages, rent, office and administrative
expenses, and utilities for firms in the industries they follow.
• BizMiner provides a printout of the average sales and profitability for
firms in the industries it follows and provides more detail than similar
reports.
OVERALL FINANCIAL ATTRACTIVENESS OF
THE PROPOSED VENTURE
• A start-up’s projected rate of return should be weighed against the
following factors to assess whether the venture is financially feasible:
■ The amount of capital invested
■ The risks assumed in launching the business
■ The existing alternatives for the money being invested
■ The existing alternatives for the entrepreneur’s time and efforts
For example, it makes no economic sense for a group of entrepreneurs
to invest $10 million in a capital-intense, risky start-up that offers a
relatively low return (say around 3 percent) on the capital the
entrepreneurs are investing.
A FINANCIAL FEASIBILITY TEMPLATE