SESSION FIVE: GENERATION OF BUSINESS IDEAS

The starting point of a business is a viable business idea. A business idea is a concept which can be
converted into a tangible product or service or enterprise for commercial purposes. An entrepreneur
should have the ability to generate viable business ideas.

Ways of Generating Business Ideas

1. Identify, Analyze and Find Solutions to problems.
Problems gives rise to opportunities
Once you have recognized and defined problems, you need to search for possible solutions and
finally choose the best solution which can be translated to a business idea.
 Listen to what people talk about or complain about, news in the media
 Look around for Pain points - Problems take the form of pain points which can be frustrations,
annoyances, dissatisfaction. Look for solutions to the pain points
 Traffic jams, Insecurity, Busy lifestyles, Rise of lifestyle diseases, Bad economic conditions
 Analyse products and services in your sphere for pain points- the solution will be business ideas.
Not easy to use product- rough handles- coat with a plastic handle
2. Recognizing and analyzing Market/ Customer Needs and Wants
An entrepreneur has to be alert in identifying the needs and wants of customers and potential
customers. Generate ideas from generic needs by listing the basic needs that most people have,
then analyze and evaluate them, try to find as many ways as possible to satisfy the needs.
Example:
 What do the customers wish for, their dreams, what they want but they cannot get
 What do people want in terms of goods and services but don’t exist
 Things that people want but are too expensive- hire out
 Things that don’t have the required quality- improve on the quality
 Things that people can’t find the exact specifications that they want
3. Personal Analysis
Business ideas can be generated by personal analyses- analyze your characteristics, skills,
personality, passion, hobby, talent, Knowledge, Hobbies, Life purpose and values;
 Tap into your vast experience – work experience, industry where one worked provides a
window into the industry, check for gaps in the industry- inefficient systems, processes.
Personal experiences- frustrations, wishes, day to day activities and needs
4. Available resources
What things do you have? What resources are at your disposal/
 Alter the things you have, Package the things differently, Recycle the things-paper, rugs
  Combine things to come up with a different combination
Local Resources -Still an abundance of local resources, natural attractions that are untapped
and have the potential to become investment opportunities.
5. Improve on an existing product or service
 Improve on the quality, efficiency, effectiveness, appearance, weight, durability, size
 Use different material for the product e.g use of plastic or synthetics instead of tin or wood
 Develop a substitute product, complementary
 Combine several products into one, or increase on their functionality
 Make a fast acting/ fast relief product, user friendly
 Add value, process
 Environmentally friendly product, one with less negative effects on health
6. Diversification on existing products
 Come up with complementary products and services
 School- books, other stationery, transport, food, accommodation, school uniform
 Cake business – Book on cake making, Special diet cakes, Cookery classes, Cake tin hire
Agent for corporate cakes, Cake delivery services, Cake packaging materials, Cake training
videos, Cake making equipments
 IT company- hardware, software, training, maintenance, repair, books, installation, security
7. Recycle business ideas - from another community, region, country etc from overseas trips,
internet, business journals, magazines, success stories of others, friends, relatives abroad
Analyse what is the primary need that the business is trying to meet, do you have the same
need in your locality, and how can you adapt or improve on the idea
8. Active engagement in research
9. New inventions- breakthrough knowledge, discoveries, technology give rise to new business

Sources of Business Ideas

1. Customers- potential entrepreneurs should closely monitor potential customers and customers
to identify their needs, demands and problems
2. Competitors and other Entrepreneurs
3. Existing products and Services – monitor and evaluate the competitive products and services
in the markets. This will give one you an idea of how to improve the existing products, or to
come up with new products
4. Researches – check on research findings of a given industry, what are the problems/ needs in
a given industry, what opportunities are there, new alternative sources of raw material
Patent office presents numerous new product possibilities
5. Market intermediaries/ Distribution channels – These are excellent sources of new ideas
because of their familiarity with the needs of the market
6. News, Media- mass and electronic, industry magazines – gives current trends in various
industries, problems, needs, pain points
7. Exhibitions, trade fairs, conferences – Business ideas, products from which one can come
up with new business ideas
8. Family, friends and personal experiences
9. Reading related books, autobiographies
10. Customer advisory boards, Customer database, information- trends, preferences,
behaviour, past purchases
11. Government- Government policies, regulation, programmes and development strategies,
ministry reports, economic reports, statistics- data on imports and exports
12. Knowledge generating and Research institutions

Techniques of Business Idea Generation

1. Observation- data is gathered by observing and recording the respondent’s actions in activity.
2. Experiments- experiments or product sampling is another option.
3. Survey : Interviews- field research covers interviews with customers, suppliers, competitors,
and industry experts.- interviews conducted in two ways
 Scanning The Business Environment -The business environment should be analysed in terms
of :- ~demographics ~local resources ~new government policies and regulations ~data on
import and export ~industrial linkage ~development projects by public and private sectors
~technological breakthrough ~sources from mass media and electronic media
4. Focus Groups - A moderator leads a group of 8 to 14 participants through an open, in-depth
discussion in a directive or nondirective manner.
5. Problem Inventory Analysis - Consumers are provided with a list of problems and are asked to
identify products that have those problems.
Results must be carefully evaluated as they may not actually reflect a new business opportunity.
6. Creative thinking involves a large amount of inventiveness and ingenuity that needs to be
organised and focused using certain processes in order to channel it towards a practical solution.
These processes seek to produce a variety of conceivable solutions and apply numerous
techniques that inspire people to think outside the box.
7. Brainstorming
The most common way to explore ideas is to talk about them with other people. Every individual
has a unique perspective on the issue and its consequences. This technique is particularly beneficial
when people wish to break out of conventional thinking styles, so they can look at a problem from
a new perspective.
Brainstorming allows equal opportunity for all participants to give out their ideas. In contrast,
brainstorming is an authority-free environment where everyone is encouraged to participate.
While group brainstorming is most effective, one can brainstorm on their own too. The benefit of
this would be you are free from any inhibitions, allowing you to come up with much more ideas
individually.
8. Daydreaming
Heavily frowned upon especially in classes, being considered whimsical and unproductive and
generally disregarded by all, daydreaming is in fact one of the most basic methods to generate good
ideas. It allows a person to connect with their issue emotionally, which is valuable to generate a
good idea. With a vivid imagination, manipulation of ideas is quick and effective for predicting and
overcoming obstacles. Productive daydreaming focuses towards a specific goal.
It does not matter if it appears like an impossible task. Many famous inventors have done so in the
past and have sparked off ideas that led to life-changing inventions, most notably, the airplane.
“Daydreaming is the quintessence of invention. If the Wright brothers did not fantasize about
flight, we would probably still be using the ferry.”
9. Forced Relationships
It is a simple method of combining to unrelated ideas to come up with something new. While it is
not a strictly unique solution, it often results in a variety of combinations that are often useful in
society. Currently there are a vast amount of products born out of forced relationships, for example
a digital watch which includes a calculator or an mp3 player, The Swiss army knife, birthday cards
with musical tunes etc.
Majority of these ideas will not be groundbreaking discoveries; however, they are still beneficial
products and generally have a potential market in society.
10. Attribute Listing and Morphological Analysis
This is an analytical approach to identify new combinations of inventions, services or structures by
identifying methods of improvement. To improve a product the physical attributes of each
component within the product is noted down, every function of the component is described and
examined to check if changing it will improve or damage the product.
Morphological analysis is similar to forced relationships, allowing combinations not just with the
individual components of the product, but with other components from different products. These
techniques have been particularly successful in creating new technologies.

Several other techniques are available for idea generation, such as visualization, which involves
think of problems visually in order to better understand the issue. The incubation & illumination
process, where you take a break from a problem you are stuck on, focusing on something
completely different while your mind continues to work on the idea subconsciously. This develops
into a period of illumination where you suddenly get a variety of solutions and you quickly write
them down, developing new parallel lines of thought.
Question your assumptions and knowledge and beliefs

OPPORTUNITIES
Contrary to what many aspiring entrepreneurs believe, the key to a successful startup does not rest
entirely upon having a unique, one-of-a-kind idea. What is important is the ability to execute the
idea and turn it into a profitable business. That's why so many startups fail year after year.
Not all business ideas represent authentic business opportunities.

Opportunities are ideas that will result in a successful business. An opportunity is a favourable set
of circumstances that create the need for a new product, service or business
while an idea is a thought, notion or concept which may or may not meet the criteria of an
opportunity. It consists of four integrated elements that should be considered and are a need, the
means to fulfil it, a method to be applied to the means to fulfil the need and a method to benefit
from it.

A Business Opportunity requires both an attraction and the possibility of being sustainable. It
corresponds to a need and it reaches the market in a promising moment. It also covers a product or
service, and therefore represents an additional value for the consumer. The discovery of a business
opportunity usually arises from one or several substantial ideas that can fit into the market reality.

CHARACTERISTICS OF A GOOD BUSINESS OPPORTUNITY

1. Should be customer focused. The opportunity should create and add significant value to the
customer or user by solving a significant problem or meeting a significant need or want and
someone is willing to pay a premium for them. Customers lie at the heart of every good
business opportunity. No matter how cool your idea might sound on paper, unless you can
satisfy a genuine need in the marketplace for which customers are willing to pay, you risk
being a "market of one."
2. They have a robust market, margin and money-making characteristics, large enough, high
growth, high gross margin, high profit potential and attractive reliable returns to investors
3. Should fit in the market structure i.e. the market structure should define the opportunity –
market size, growth potential. The more imperfect the market is the greater the opportunity,
more the rate of change and chaos the greater the opportunity
4. The opportunity should make economic sense – should be able to generate profits, significant
cash flows in a relatively short period of time, faster payback, Should be fundable and have
high strategic value.
5. Should be timely i.e. Timing should be right- timing of the entrepreneurial process is very
important because opportunity is a moving target.
6. Window of opportunity- the time period in which a firm can realistically enter a new market.
Opportunities exist or are created in real time and have a window of opportunity. For an
entrepreneur to seize an opportunity, the window must be open and remain open long enough
to achieve market required returns. As a market matures the window begins to close
The ability therefore to recognise a potential opportunity when it appears and the sense of
timing to seize that opportunity as the window is opening rather than closing is critical
7. It should fit in the abilities, resources and skills of the entrepreneur. The opportunity should be
both desirable and attainable by the entrepreneur
8. The opportunity is closely aligned with the entrepreneur's vision, goals( financial
goals),passion and personal interests
9. The entrepreneur is able to leverage proprietary knowledge or relationships to gain a
competitive advantage over rivals.

Opportunity Recognition
In order to create a successful, profitable, venture, it is necessary to recognise a real business
opportunity. This is something that most new businesspeople do not pay enough attention to. It is a
statistical fact that most businesses fail within the first two years of existence due to the fact that
they are built on an idea rather than on an opportunity. The ability to quickly distinguish between a
business ideas and a business opportunity is the main difference between successful and
unsuccessful business people.

Most successful entrepreneurs are opportunity focused and have the ability to recognise
opportunities. In a free enterprise system, changing circumstances, chaos, confusions,
inconsistencies, lags or leads, knowledge and information gaps and a variety of other vacuums in
an industry or market spawn opportunities

Ways of Recognising an Opportunity

1. Observing trends- changes in the environment
2. Solving problems
3. Finding gaps in the market-place
Observing Trends
One of the ways of recognising opportunities is by observing trends and how they create
opportunities for the entrepreneur to pursue. Trend observation and analysis leads to pattern
recognition which is vital in looking at new venture ideas. Experienced entrepreneurs exhibit an
ability to recognise quickly patterns - an opportunity while it is still taking shape. Pattern
recognition is a creative process that is simply not logical, linear and additive but intuitive and
inductive. It involves creative linking or cross association of two or more in-depth chunks of
experience, knowhow and contacts

Most trends stem from changes in the Environment which could be economic, social, technological
and legal political. The ability to anticipate changes are so critical in entrepreneurship that constant
vigilance for changes is a valuable habit. An entrepreneur with credibility, creativity and
decisiveness can seize an opportunity while others are still studying it

Economic forces affect consumers’ level of disposable income whereas Individual sectors of the
economy have a direct impact on consumer buying patterns.
Get a handle on these forces by:
(i) Studying and observing and
(ii) Purchasing market forecasts/analyses
Examples- emergence of a new economic activity creates demand for new products, services,
technology etc
Change in the economic status of the population gives rise to opportunities for new products and
services
A drop in interest rates typically leads to an increase in new home construction and furniture sales

Social Changes
An understanding of the impact of social forces on trends and how they affect new product,
service, and business ideas is a fundamental piece of the opportunity recognition puzzle.
The persistent proliferation of fast‐food restaurants isn’t due primarily to people s love for fast food
but rather to the fact that people are busy: the number of households with both parents working
remains high of the recent
Social trends that allow for new opportunities are the following:
• Family and work patterns (for example, the number of single parents with two jobs or the number
of double-income households with flexible hours),
 Health issues (for example, people living longer with more active lives)
• The aging of the population
• The increasing diversity of the workforce
• The creation of cell phone is a technological achievement, but was motivated by an increasingly
mobile population
 The globalization of industry
• The increasing focus on health care and fitness

Technological Changes
Technology changes continue to alter the way we conceive opportunities e.g the internet has
created more diverse opportunities in sales and distribution notably ebay, amazon etc, deregulation
of the telecommunication industry lead to the formation of many new firms. Given the rapid pace
of technological change, it is vital for entrepreneurs to remain on top of how new technologies
affect current and future opportunities. Once a technology is created, products emerge to advance
it. E.g. RealNetworks created to add video capabilities to the Internet
Advances in technology frequently dovetail with economic and social changes to create
opportunities.
• The proliferation of computers and the Internet
• The continual increase in the number of cell phone users

Legal- Political changes

Political action and regulatory changes also provide the basis for opportunities. New laws create
opportunities for entrepreneurs to start firms to help companies comply with these laws

These Factors generate opportunities for producing new products that can have an effect on the
way people live their lives at any given moment. The goal is to create products and services by
identifying an emerging trend and to match that trend with the right technology and understanding
of the purchasing dynamics. The window of opportunity is often small—a product that comes out
either too early or too late can fail even if the opportunity existed initially.
Successful new products become necessary once they hit the market. Most customers are not even
aware they need the product because they are immersed in the trend. If the company hits the trend
at the point it is just catching on, the product will become instantly desirable. The length of a trend,
combined with the product‘s attributes of use and usability, determines the lifetime of the product.

2. Solving a Problem
Sometimes identifying opportunities simply involves noticing a problem and finding a way to solve
it. These problems can be pinpointed through
• More simple means (intuition, serendipity, or chance) Some business ideas are clearly gleaned
from the recognition of problems in emerging trends…
… or less deliberate: • individuals may set out to solve a practical problem and realize that the
solution may have broader appeal
• Someone may simply notice a problem that others are having and think that the solution might
represent an opportunity.
• When computers were invaded by hundreds of foreign virus strains and corporate infection was
becoming a serious problem, Symantec’s Norton Group launched Norton anti-virus
• The increase in the price of petroleum and the call for environmental consciousness caused many
automakers to release hybrids in the 2000s.

Finding Gaps in the Marketplace

Opportunities are identified by recognizing a consumer need that is not being satisfied by large
established or entrepreneurial firms. For example, large retailers compete primarily on price by
serving large groups of customers with similar needs. They do this by offering the most popular
items targeted toward mainstream consumers. While this approach allows the large retailers to
achieve economies of scale, it leaves gaps in the marketplace.
That is why small clothing boutiques exist which often sell designer clothes or clothes for hard-to-
fit people, are willing to carry merchandise that does not sell in large quantities.

There are also gaps in the marketplace that represent consumer needs that are not being met at all
by anyone. E.g. People wanted to listen to music on the go. The launch of the Sony Walkman was
rather a breakthrough in imagination than in technology. For the first time headphones allowed all
people to be at two places at once: People could easily listen to music while on the road.

Personal Characteristics Enabling Opportunity Recognition

What are the specific personal characteristics shared by those who excel at recognizing an
opportunity? Some abilities and characteristics tend to make some people better at recognizing
opportunities than others and include: prior experience, cognitive factors, social networks and
creativity

Prior experience helps an entrepreneur recognize business opportunities.

By working in an industry, an individual may spot a market niche that is underserved. It is also
possible that by working in an industry, an individual builds a network of social contacts who
provide insights that lead to recognizing new opportunities
Opportunity recognition may be an innate skill or a cognitive process. Some people believe
that entrepreneurs have a “sixth sense” that allows them see opportunities that others miss. This
“sixth sense” is called “entrepreneurial alertness”, which is formally defined as the ability to
notice things without engaging in deliberate search.