How entrepreneurs identify new business opportunities

H.K. Dharmadasa didn’t have a medical or business degree. But he envisioned the need for a state-of-the-art, fully-equipped, multi-disciplinary hospital. He saw a business opportunity in the State-dominated healthcare sector 27 years ago. The hospital provides patients the ability to receive specialised care without having to leave the country.

Opportunities

Market opportunity is defined as “the chance to meet a market need, interest or want through a creative combination of resources and deliver superior values” (Schumpeter, 1934; Kirzner, 1973; Casson, 1982).

Opportunity identification is a decisive task in entrepreneurship. It is a skill that every entrepreneur must have in order to exploit new business endeavours. So what helps entrepreneurs to identify new business opportunities?

1. Think outside the box

People think differently, feel differently and act differently based on the experiences they have gained throughout their lives. These differences are critical and central to the process of identifying opportunities.

In the absence of variation, everyone would recognise the same opportunities and act upon them, causing many people to compete for the same opportunities. The task of an entrepreneur is to find a real pain point and come up with an innovative solution for the situation. Entrepreneurs analyse information at hand to find opportunities where others did not see any.

Dharmdasa searched for new business opportunities. The small trade business that he started in 1942 has expanded its operation in many fields including construction, timber and health care with more than 4,000 employees.

2. Gain knowledge and experience

Alistair R. Anderson and Claire J. Miller explain that knowledge and experience play key roles in opportunity identification and exploitation. Knowledge and experience vary among individuals so that individual who has knowledge and experience of a particular market or business sector would be in a better position to judge the market trends and spot opportunities faster.

Therefore, entrepreneurs should acquire as much knowledge as possible about the industry in order to find new opportunities. Individuals with better access to information and knowledge are highly likely to exploit those opportunities.

Samsung has been making smartphones and tablets that run on Google’s Android operating system. The recent patent battle between Apple Computer and Samsung makes Android system less attractive to manufacturers. After Samsung lost its smartphone patent case in the United States, Samsung announced that its next tablets will run Window Phone (WP)8 operating system that will be released in November, 2012. The world’s second-largest mobile phone maker, Nokia has already announced that its new smartphone Lumia 920 will also run on WP8.

Many tech analysts believe that WP8 could be the next game changer due to its new features and functionalities. Today, there are thousands of apps available for iPhone. However, there are only limited apps available for Window Phone. Those who have the knowledge and expertise in apps development may find opportunities to create new applications for WP8. But there is no certainty – only opportunity.

Organisations, private businesses, universities and governments invest in research and development to discover and create new knowledge. This new knowledge is crucial to a nation as it may lead to innovations that can be capitalised in creating new products and processes. That would ultimately contribute to the country’s development by creating new employment and increasing the productivity.

3. Understand needs and wants

Entrepreneurs who understand the society’s needs, problems, and wants can recognise possibilities for new products and processes.

Let us first clarify the deference between needs and wants. Needs are something we must have, something we cannot live without. For example, we all need food. Without food we can’t live. Wants are something we would like to have. We can live without eating ice cream. So it is a want.

In today’s world, people are confused when identifying whether something is a need or a want. When someone really likes a product, the line between need and want becomes unclear. Some entrepreneurs benefit from that. These entrepreneurs create desire for the new product by presenting benefits and values of their products.

Let’s look at this invention. In many countries cyclists are reluctant to wear helmet. Yes – cyclists don’t bother to wear helmet and there is no legal obligation. The Sri Lanka Police traffic statistics show that 2,654 cyclists were involved in accidents in 2010. It is not sure how many deaths resulted from it. Despite the fact, wearing helmets specially designed for cyclists would prevent and reduce fatalities. Prevention is better than cure so safety should be first. You decide whether safety is a need or a want. This innovation story transpired in Sweden. It is about the safety of cyclists.

Many cyclists in Sweden are reluctant to wear helmet. The reasons for helmet avoidance can be numerous. Traditional helmets are bulky – feel like wearing a mushroom and also it could mess-up expensive hairstyles. Two graduates – Anna Haupt and Terese Alstin – wanted to find a solution to this problem. They looked for opportunities and came up with an idea of an “invisible” helmet. Yes, that sounds really funny but interesting.

After years of studying bike accidents and various movements that involved, the duo created an invisible helmet named Hovding (http://www.hovding.com).

Here is how it works. It doesn’t sit on your head. It is a fabric-collar that a biker wraps around the neck. During an accident the Hovding’s sensor detects abnormal movements and triggers an airbag inside the collar in 0.1 second and it covers the biker’s head. It is an airbag helmet for bikers. This interesting invention is only available in Europe now. The two inventors formed a company and are loaded with orders.

What can we learn from this invention? Let’s take a closer look at this helmet again. This invention is a result of mixture of two existing products – helmet and airbag. First commercially available bicycle helmet was designed in 1975. And the first commercial airbag was introduced for vehicles around 1970. After 40 years, two inventors mixed these two products and created a new product. That’s the beauty of entrepreneurship.

Entrepreneurs have to be innovative. They can mix exiting products, technologies, processed and add their own flavour to create new products, processes that do not exist yet.

Entrepreneurship isn’t always about making money or profit. The true essence of entrepreneurship is providing solutions to the problem and needs. Money is the reward, not the goal.

Founder of the Nawaloka Group late Deshamanaya H.K. Dharmadasa was convinced of the need for a fully equipped hospital. For him it was not only financial satisfaction or another business opportunity but also gave him personal satisfaction. As he put it: “It is the satisfaction of seeing a person ill, going home fully recovered and the happiness of that person and his family that gives me my own personal satisfaction about the hospital.”



(The writer is currently working on a technology start-up in Toronto and has over 10 years of experience in Enterprise Resource Planning (ERP) systems. He holds a Master of Business, Entrepreneurship and Technology from the University of Waterloo and a B.Sc. in Accounting from the University of Sri Jayewardenepura. He can be reached at [email protected].)