Contrary to popular belief, entrepreneurship is not grounded in random acts of inspiration.
Entrepreneurship is process-based. Certainly, there is often a “light bulb” moment of blinding insight that kick-starts an individual’s journey into entrepreneurship, but the path always follows the same, 6-step process:
Step 1. Identify an opportunity
As highlighted by Tenet #4, opportunities are abundant. Importantly, the ability to “spot” opportunities is a learnable skill – the more you practice it, the easier it gets.
How do you identify an opportunity? The easiest method is to look for “pain” – inconvenience, unnecessary expense, market “friction” etc. – and solve it.
How do you spot “pain”? Here are some things to look for:
* Market gaps – Gaps arise where there is an unmet need/demand for a product or service. Some entrepreneurs specialise in introducing new products/services into one country that are considered common place in another.
* Unfilled demand – A related approach is to look for demand that is not being adequately met due, say, to a supply shortage, and create or import products/services to meet the demand.
* Build a better mousetrap – Many entrepreneurs have made their fortunes perfecting imperfect products/services. Ray Kroc didn’t invent hamburgers but he, in conjunction with the McDonalds brothers, perfected – and franchised – the hamburger business. Howard Schultz by no means invented coffee, but he, through StarBucks, revolutionised how people consume it.
* Make it cheaper – You may not be able to improve a product/service, but perhaps you can deliver it cheaper, faster or more conveniently. Michael Dell didn’t invent the PC, but his direct-to-customer business model re-invented how PCs are sold. Herb Kelleher, a lawyer with no aviation background, saved SouthWest Airlines by completely revamping the way it did business.
* Cross-pollinate – Ideas or solutions long considered “old hat” in one market sector may totally revolutionise another. The pizza industry changed virtually overnight when Dominos adopted the policy of guaranteeing the delivery of its pizzas within 30 minutes after studying the techniques of other time-sensitive businesses, such as FedEx.
* Follow the trends – Few societal changes happen without warning. Futurists, trend forecasters/analysts and social researchers (such as anthropologists) produce a wealth of research/opinion that can be used as a “map” to potential future scenarios.
Step 2. Evaluate the opportunity
This is probably the key step in the process. Failing to correctly evaluate an opportunity could see you discard potentially lucrative opportunities or (in some ways, worse) invest time/money/effort in dead-end “opportunities”.
Opportunity evaluation requires the consideration of a range of issues/criteria, such as:
- How well does the opportunity “fit” with your specific skills and experience?
- What potential does the opportunity represent?
- How risky would the venture be?
- What sort of resources (money, time, manpower, office space, equipment etc.) would be required?
- Is the risk v. reward ratio agreeable?
- Are there any competitors?
- If so, how would they react to your venture?
The foremost consideration is, of course, whether there is a market demand (or need – not the same thing) for the product and, if so, how large the demand/market is and how you will reach that market.
Determining answers to these issues can require considerable time and research, but it doesn’t pay to cut corners.
The initial research can be done sitting in front of your PC. Data such as market size, annual revenues, primary competitors, market trends, regulatory requirements etc. are readily available from public and private sources. Use Search Engines to locate Web sites offering competing products to determine their pricing, quality and other features.
However, you do need to do some ‘field’ work. You need to literally ‘touch’ your market: identify your target market (i.e. customers) and talk to it. If you plan to sell your product to, say, truck drivers, be sure to interview a number of truck drivers to ascertain the level of interest in the product. Listen very carefully to any feedback you’re given on what features/benefits the consumer is looking for in such a product. Speak to other market participants – competitor or otherwise – to get the ‘big picture’ of the issues at play within the market.
Step 3. Innovate to fulfil the opportunity
Once you’ve identified the opportunity and researched/documented its potential, the next step is to develop the product/service required to take advantage of the opportunity.
You don’t have to do all the work yourself – or any, for that matter.
You can retain contract designers/manufacturers, hire or partner with one or more individuals with the skills/knowledge the venture requires, outsource product design/manufacture etc.
Step 4. Marshall suitable resources – time, money, people, plant, equipment.
This probably constitutes an entrepreneur’s core “skill” – being able to marshall resources additional to those within the entrepreneur’s immediate control. It is also arguably the most testing and arduous part of the entire process.
Only a lucky few entrepreneurs have the necessary money, time or skills to fulfil identified opportunities. The rest need to develop plans for obtaining required resources.
This could range from borrowing a modest sum of money from friends and family etc. to structuring a joint-venture arrangement with several parties willing to contribute resources, and managing the often conflicting demands/interests of the various parties involved.
Step 5. Assume necessary risks – financial, psychological, social.
Entrepreneurship is not without risks. As we will see in the next segment on Tenet #3, entrepreneurs are not – despite popular belief – risk takers. Entrepreneurs are risk managers.
Skillful entrepreneurs analyse every facet of their planned venture and carefully develop risk-minimisation strategies.
Step 6. Reap rewards – independence, personal satisfaction and wealth.
Central to entrepreneurship is wealth creation, and through wealth comes independence (financial and otherwise). Importantly, in pursuing entrepreneurial opportunities, individuals also generate “external” wealth, through the economic stimulation the venture creates.