Opportunity Identification for 99% (1): Looking for a Needle in a Haystack

In a previous post (Entrepreneurs-beware-the-rubric-of-innovation-is-different) I described 4 key elements; 1. Opportunity: Identification of one, 2. The Team: that can exploit this opportunity, 3. The Plans and Strategy: for monetizing the opportunity, and 4.The Resources: needed to make it happen. All 4 elements have to be in balance throughout the process of creating a successful venture. A “hole” in any one of them is a risk that can sink your boat (9 Questions to Answer Before Launching Your Boat ).

The process of success creation, is a systematic reduction of risk in any and all of these 4 elements. The formula I use is Innovation= Ideation X Implementation, which takes 9 steps (How-to-be-lucky-ideation-x-implementation) through the cycle of Try, Fail, Pivot.

The process remains the same whether it is in a large company setting or an entrepreneurial venture.

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If you are in Large company or a VC quality entrepreneur (1%) you have access to many tools and experts.

As a mentor to the other 99% entrepreneurs, who are never going to access Venture Capital, I find your minds have been screwed up by partial knowledge of the (inappropriate for you) success creation process propagated by VC’s and their followers.

Even the VCs are lamenting that the pursuit of Unicorns is screwing up Entrepreneurship. Only the Cockroaches will survive.

From hereon out, I write only for the 99% (Cockroaches), hoping that a substantial number of you can avoid the pain and agony of a, needless, failure.

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For an entrepreneur, the process begins with the recognition of an Idea. An idea, that you believe, can be transformed into a business proposition. You are guided in your deliberations, for a suitable idea to exploit, by two factors: 1. your previous experience; which provides an initial insight into the rough aspects of a new thing; and 2. the advice, assistance and additional learning that you receive as you move forward. The second factor may enlarge the scope of your project; modify it, partially or substantially, or; reach a conclusion to abandon the direction completely. We must consider all these outcomes as successful results of the process.

If you want a bountiful crop, you must start with healthy seeds. Similarly, a good idea is an essential ingredient of the process. In Generate-good-ideas-the-worst-thing-you-can-do , I posit that generating Good Ideas is a two step process instead of the efficient, but ineffective, one step process. Step 1: Generate lots and lots of ideas and Step 2: After generating a lot of ideas, set aside the ones that are not opportunities for you now.

In the search for lots of Ideas, the following factors are important:

The Trigger

What is propelling you to seek this opportunity? Research has shown that majority of individuals are held to a given path by a “sum of vectors in their lives: a job, family situations, inertia, daily pushes and pulls” that make up daily life.

“Negative displacement” (forced emigration, being fired, angered or bored, mid-life crisis, between jobs, change in marital status , etc.) are found to precipitate far more company formations than positive possibilities (inducement from client, a better way of doing something, etc.).

What is your trigger? The triggering event is often an indicator of the commitment. The stronger the triggering event, the stronger the commitment. Unfortunately, the strength of commitment itself does not reflect the quality of your idea.

If you are in the majority and coming from a negative displacement, be specially careful in following the steps because you are more susceptible to jumping in, without due process, to your chagrin.

Search For Ideas

The common source of good venture ideas are:

Problem Presented to You

Entrepreneurs report their common sources of ideas as:

1. By invitation: Asked by a credible source, if you can do something that they want to buy.
2. Through Prior Employment: Learnt of holes, better method, etc. These include i. Customer Problems, Internal problems (Production, etc.), Competitor problems,
3. Transfer of Valuable Resources: (sometimes illegally) i.e trade secrets, know-how, solicitation of former employer’s customers and inventions.
4. Obtain Rights: to produce things and sell in areas not of interest or abandoned by others.
5. Hobbies: your passion and incidental venture that has identified a market.
6. Social Encounters and Interactions: someone asks you if you could do something.
7. Observation: see something needed in the market place.

Active Search

1. Strategic job selection: take a job in the industry of interest to learn the ropes.
2. Exposure to other ventures: from which your idea emerges.
3. Moonlighting: to deliberately learn the business.
4. Associating with knowledgable individuals: who can hook you up.

Frustrations

1. Experiences as a Consumer: Why can’t they….?
2. Daily Life: Anytime you hear yourself or someone else say, “I wish someone would….” , or “Does anyone know anyone doing….”, you have got an idea.

Review of the Environment

1. Reverse Salient: In the study of prolific entrepreneurs, we find that they identify successful opportunities through a systematic search for “reverse salients”. The term means a backward bulge in the advancing line of a military front. Advancing technologies, events, etc. (like opposing military forces) create uneven sections in the market place (battle lines). Further forward progress is slowed down or halted. The high quality opportunity is in bringing the reverse salient section forward, in line with the rest of the line; as opposed to pushing the line where substantial advancement has already been made.
2. Search: Creative exploration of opportunities.
3. Literature Review: with identified unmet needs
4. Periodic Review: Active search of the environment.

Avoid

What are less likely to be a good source of Ideas for Entrepreneurs are:

1. Futuristic Reports
2. Expert Projections
3. One and only one idea that you have

If you try to force an idea that will be the next Unicorn, you might do it; but it will not likely get you anywhere. You are more likely to find ideas with profit potential out in the marketplace and between the lines in our conversations with customers and colleagues.

The best place to find a great idea is in the midst of hundreds of ideas that may range from absolutely worthless to almost adequate.

I would love to hear from readers on where and how they found their idea!

Identifying “Key” Ideas

Ultimately, ideas generated are dime a dozen. You couldn’t possibly evaluate all of them with any rigor on the four key elements of Opportunity, Team, Plans and Resources. On the other hand, we have agreed that moving ahead without that rounded evaluation is inviting a disaster.

The process, therefore, involves a series of screens, each getting tighter and tighter, for the ideas to go through till you have your shining Opportunity that has gone through the rigorous evaluation. The process identifies high-potential ideas and allows weaker ones to “fail” quickly and cheaply, on paper instead of real life. The process also strengthens the ideas by providing a flow of improved ideas to emerge as we move forward.

Screen # 1

Here is the very first screen.

In a previous post, Ideas-are-dime-a-dozen-opportunities-are-priceless-i presented a $64,000 question to subject each idea to. It requires no analysis. Just go with your or group intuitive response.

Q: Is this Idea an Opportunity for me (us) today (now)?

Depending upon your immediate response to the question, sort each idea into three piles 1. No, go to a bin of discards, 2. Yes, a potential opportunity and 3. Maybe. Only the second and third pile get further review. Put pile #1 on a shelf, some of them may play a role later in the journey.

Some of you will feel discomfort with rejecting ideas on the basis of such a simple question. You may say there isn’t much information as a basis for screening. It may seem like a sloppy, seat-of the-pants effort. This will more likely come from Corporate retreads, used to a more rigorous ROI for requisitioning a pencil.

Just remember Statistics 101, the consequences of making a Type 1 error (when an idea is rejected although it is good) has minor consequences. On the other hand the goal is to reduce substantially the Type 2 error (accepting an idea as an opportunity when it actually is not). The Type 2 error is the source of so much misery and consternation. Again, in statistics, you cannot reduce both Type 1 and 2 errors at the same time. To reduce the risk of moving ahead with an idea that is a poor opportunity (Type 2 error), we have to accept some good ideas being rejected (Type 1 error).

So, don’t be fooled by the simplicity of the question, it is an extremely potent one and can help sort and enrich your numerous ideas into Key Ideas. Note that in one easy sentence it has covered the elements of Opportunity and Team (Me, Us) and Resources (Today). In several actual engagements we end up reducing the raw ideas by 90%, to get Key Ideas in a very efficient manner.

Innovation Process

In this post we have covered the first 2 steps (Ideation) of a 9 step process (How-to-be-lucky).

As we go down the path with future screens (Implementation), in future posts, 4 elements will require much more thorough evaluation. However, the thoroughness of the evaluation will continue to be proportional to the emergence of higher quality of ideas.

If you found this useful please alert other 99% of the entrepreneurs who may also find these posts of value.

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Dr. Rajiv Tandon is an Entrepreneur, Educator and Mentor. He facilitates peer groups for CEOs of fast-growing companies in Minnesota. To learn more, sign up to get the email newsletter.