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Section 3: Opportunity Recognition: Discovery and Formulation

This section of the book covers the process of reading the landscape and anticipating key cultural shifts, employing design thinking for opportunity finding and development, and an overview of tools and techniques for discovery and probing customer development.

Opportunity is the nuclear center of the entrepreneurial process. It is motivated by innovation and is central to new venture creation. An idea can be a real opportunity if it improves the current solution by being a new, better, faster, or cheaper offering. As the creator of new ventures, a scholar, and a teacher of entrepreneurship, I have always been bothered by the Darwinian approach to opportunity recognition. “I have a good idea” tends to be the starting point of businesses. The idea often begins as a result of the aspiring entrepreneur having an experience that is less than fulfilling. The idea for improvement leads the entrepreneur to search for a business model that will launch, nurture, and sustain the idea. But success rates tend to be dismally small (as low as 9%) and failures personally devastating.3 This Darwinian process is effective for survivors but not optimal. With design thinking as a process for ideating, shaping, and creating opportunities, we can do better, especially in the opportunity-scoping phase, as shown in Figure 1.4, where failure rates are the highest. In Chapter 8, “Design Process and Opportunity Development,” Tod Corlett delves into application of design thinking as a key driver in better opportunity development.

Figure 1.4

Figure 1.4 Capital markets context.

In my entrepreneurship textbook I write about the “3M’s”—market demand, market size and structure, and margin analysis—as defining characteristics of an opportunity. In this book you will find a close association of thoughts and practices that bring sophisticated methods to the understanding of the 3M’s.

Design thinking is the integration of the teaming in a transdisciplinary approach to opportunity. It is a better way of developing and shaping ideas that create value. We can teach people to be intentionally observant to the surroundings and empathetic to the needs of a larger demographic. In Chapter 9, “Navigating Spaces—Tools for Discovery,” Natalie Nixon offers a deep inventory of tools and tactics for this type of probing for discovery. Honed observational and analytical skills enable the innovators to iteratively assess interactions and map the intent and result of the ecosystem being analyzed. By creating this map of understanding, you can observe whether the intended outcomes are achieved and begin to shape better solutions. Opportunity can emerge in a set of changes or in entirely new systems.

Why Design Thinking Is a Strategy for Creating Value

Increasing rates of technological change, rise in globalization, increasing economic pressures, and environmental concerns create shifting cultural norms, as Sarah Rottenberg points out in Chapter 7, “Leveraging Ethnography to Predict Shifting Cultural Norms.” These shifting norms are ripe for disruptive innovation, and design thinking is a unique approach to sense making in this ambiguity and chaos.

The twenty-first century has introduced rates of socioeconomic change that are new to the world. This exponentially increases the need for new and better solutions, which require different approaches. As people increasingly rely on Google and Wikipedia, their engagement creates a valuable digital exhaust.

“Until recently, big data made for interesting anecdotes, but now it has become a major source of new knowledge. Google is better than the Centers for Disease Control at identifying flu outbreaks. Google monitors billions of search terms (“best cough medicine,” for example) and adds location details to track outbreaks. When Walmart analyzed correlations using its customer data and weather, it found that before storms, people buy more flashlights but also more Pop-Tarts, even though marketers can’t establish a causal relationship between weather and toaster pastries. Wikipedia has been proven to be as accurate as, if not more accurate than, the previous standard, Encyclopédia Britannica.

Design thinking is a methodology that is uniquely qualified to navigate through the ambiguity brought by these shifting cultural norms to find new meaning and new opportunity.

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