International WorkshopSkills Development for SMEs and

Entrepreneurship

Development of opportunities - Basic skill for entrepreneurs

Research Director Markku VirtanenAalto University School of Business Small Business Center

Contents

• Entity of Business and Business Know-how • Perspectives on new business development • Identification of opportunities • Development of opportunities• Summary and implications

2012 © Markku Virtanen

Regional development and business know-how• Basis for regional development: successful businesses

are essential• Successful businesses posses high level of business

know-how• Fostering regional development requires acquisition

and/or development of business know-how• What do we mean by business know-how and where

from do we get it?

2012 © Markku Virtanen

Business Know-How

• Business Management Skills:– Management

– Leadership

• Operative Business Skills

= Business Know-How Mastery of Business Entity =Governance of business know-how in

relation to risks involved in the business

BusinessKnow-How

Business Management

Skills

OperativeBusiness

Skills

Success

Risk Management

• Tolerance of risks one entrepreneurial characteristic • Risk attitude

– Risk averse– Risk neutral– Risk lover – Entrepreneur / Business Manager

Successful entrepreneurs keep the risks under their controlCalculated risk taking

Where do you get business know-how?

• Research time span?!• Education time span?!• Experience • Learning by doing

Where do you get business know-how?

ExperienceContinuingEducationCourses

Education: Degree

Programs

AppliedResearchBasic

Research

Where do we need and use business know-how?

New business/venture development – entrepreneurial and organisational perspective

• Entrepreneurial perspective on new business development – Schumpeter (1936; 1943): innovations, creative destruction

• Organisational perspective on new business development and entrepreneurial behaviour– Opportunity identification and development (Ardichvili et. al.,

2003; Baron 2006; Shane and Venkataraman 2000; Sarashvathy 2003)

2012 © Markku Virtanen

How to identify opportunity / problem or need of a customer (Sarasvathy et. al. 2003) ?

a) opportunity recognition: identification of an opportunity is matching of market demand and supply

b) opportunity discovery: search for information about characteristics of market especially potential customers and competitors is essential

c) opportunity creation: both demand and supply are unknown (test your idea)

2012 © Markku Virtanen

CHARACTERISTICS OF OPPORTUNITY(Timmons 1999)

• OPPORTUNITY HAS THE QUALITIES OF BEING– ATTRACTIVE: MARKET AND GROWTH LARGE ENOUGH

– DURABLE: LONG TERM BUSINESS

– TIMELY: OPPORTUNITY WINDOW OPEN FOR LONG TIME ENOUGH

• IS ANCHORED IN A PRODUCT OR SERVICE WHICH CREATES OR ADDS VALUE FOR ITS BUYER AND/OR END USER

• MARKET AND CUSTOMER FOCUS– SOLVES CUSTOMER’S PROBLEM AND OFFERS THE SOLUTION TO THE

CUSTOMER

• THE MANAGEMENT TEAM CAPABLE FOR SEIZING IT

2012 © Markku Virtanen

QUESTIONS IN DEFINING THE OPPORTUNITY(Virtanen 2004)

1. TO WHOM? WHO IS THE CUSTOMER? WHERE IS THE MARKET? (Listen to the customers!)

2. WHAT AND WHY? WHAT IS THE PROBLEM OF THE CUSTOMER? HOW DO WE SOLVE IT? (PRODUCTS /SERVICES)

3. WHEN? WHAT IS THE TIMING OF DIFFERENT ACTIONS? (OPPORTUNITY WINDOW!)

4. WITH WHICH MEANS? HOW DO WE DO THAT?5. WHO? IS THE CAPABILITY OF THE TEAM

APPROPRIATE?6. WHAT IS THE VALUE? HOW DOES THIS

OPPORTUNITY ADD VALUE TO THE VENTURE / TO THE INVESTORS/TO THE CUSTOMERS?

2012 © Markku Virtanen

Domains of opportunity(Mullins 2006)

Market Industry

Marketattractiveness

IndustryattractivenessMacro

level

Microlevel

Benefits and AttractivenessOf the target segment

Sustainablecompetitive advantage

Team

Mission ObjectivesRisk atti-tudes

ConnectednessUp and down inThe value chain

Ability to execute CSF

2012 © Markku Virtanen

Opportunity development (Ardichvili et. al. 2003)

VALUE CREATION CAPABILITY OF OPPORTUNITY UNDERUTILISED RESOURCES OR UNEMPLOYED SERVICES

BUSINESS CONCEPTMARKET NEEDS DEFINED IN TERMS OF BENEFITS,

VALUE SOUGHT AND RESOURCES MORE PRECISELY

BUSINESS MODELMATURE BUSINESS CONCEPT WHERE INFORMATION OF COMPETI-

TORS, PRICING AND PROFIT-GENERATION MODEL IS INCLUDED

BUSINESS PLANTHE MOST ELABORATED FORM OF OPPORTUNITY INCLUDESBUSINESS CONCEPT AND BUSINESS AND FINANCIAL MODEL

2012 © Markku Virtanen

Basic skill of entrepreneur to create and develop opportunities

(Puhakka 2002, 2007)

• Collect a team – people are the most important, ability to execute CSFs

• Define together mission and values• Recognize, identify or create opportunity• Analyse your value creation capability and define

business concept and business model• Mobilize the other necessary resources to pursuit the

opportunity

2012 © Markku Virtanen

Summary• Business know-how is essential for fostering regional

development• Entrepreneurial and organizational perspective

overlapping • Opportunity identification = identifying of customer’s

needs and solving customer’s problems or creation of opportunities listen to your customers

• Development of opportunities from value creation capability via business concept and business model to business plan

• Mobilize resources for successful commercialisation

2012 © Markku Virtanen

Implications• Regional development – fastest way to acquire business

know-how is to recruit experienced business managers• Policy makers should pay attention to the development of

opportunities in addition to / instead of promotion of innovation inputs – Resources should be allocated more to encourage contacting and

meeting the customers and sales efforts– Emphasize creativity and encourage to be different www.mindspace.fi– Encourage modernising and diversification in existing firms– Pay attention to succession processes and their novice entrepreneurs

• Allocation of resources in business degree education = you have to be patient

2012 © Markku Virtanen

THANK YOU!