Module 2: The Entrepreneurial Process

Specific Objectives:-
Students will be able to:-
1. Describe the steps in the entrepreneurial process.
2. Discuss the methods of generating ideas: brainstorming,
3. Assess the screening ideas and selecting from among competing ideas:
4. How ideas are linked to opportunity
5. Distinguish features between an idea and opportunity.

In module one, you learned that an entrepreneur is a calculated risk taker who is willing to try
new things. The key entrepreneurs use in initiating a successful venture is to identify a unique
product or service that people need and are willing to buy.

This module is concerned with describing a model of the entrepreneurial process by which
entrepreneurs create new wealth. It suggests that an entrepreneur, in first stance, has a desire for
change. Therefore, with his or her desire to change, he or she brings together key elements of
opportunity, resources, and the firm in an innovative way.
Once a business venture is started, there must be systems in place to ensure the sustainability of
the venture. These concepts will be elaborated in further detail in this module. As in the case
with many things in life, even business ventures come to an end.

The Entrepreneurial Process

The process of pursuing a new venture, whether it is new products into existing markets, existing
products into new markets, and/or the creation of a new organization.
The entrepreneurial process entails a series of steps to be taken by the entrepreneur to
conceptualize, plan, launch, and manage a venture or enterprise.

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Steps in the Entrepreneurial Process include

Idea Generation
The process of creating, developing and
communicating ideas which are abstract, concrete or
visual

Opportunity Identification
According to Markman and Baron (2003) opportunity
identification includes scanning the environment and
being able to capture, recognize and make use of the
information

Developing a Business Concept

An idea for a business that includes basic information
such as the service or product, target demographic
and unique selling proposition that gives a company an
advantage over competitors

Resource Acquisition
This focuses on defining needs for the venture and
getting the right resources (financial and non-
financial)

Implementation and Management of the Business

Implementation would require issues such as
establishing the organizational goals and the action
plan for achieving the goals, designing functions
example accounting, operations or production and
marketing; managing will entail ensuring that the
venture is operating smoothly and performance
monitoring

Harvesting the Business Venture

A harvest strategy is a plan in which there is a
reduction or a termination of investments in a
product, product line or line of business, so that
entities involved can reap the maximum profits.
The entrepreneur must consider whether to end the
venture and follow other goals, if necessary.

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Generating Ideas / Idea Generation
Entrepreneurs see opportunity where others see risk, but not every would-be entrepreneur
necessarily has an idea of the type of business he or she would like to go into. For those gifted
or fortunate enough to have that knowledge, they are not saddled with the burden of uncertainty.

The following table evaluates the methods of generating ideas

Method Description Advantages Disadvantages
/Technique
Brainstorming  This is the  Used where no  The process
process in which clear opportunity can be chaotic
a small group has been and it may be
comes together identified. necessary to
and ‘spit out’ a  One person’s lay ground
large number of idea can rules.
ideas, in a stimulate other  There is no
relatively short ideas real structure
period.  Results in an
 There is a group array of ideas
leader who states
the problem or
objective.
 Encouraging as
many options or
alternatives as
possible
 All ideas that
‘come to mind’
should be
recorded whether
they are feasible,
crazy and no
criticisms of the
alternatives or
ideas are
permitted
 All ideas are
recorded for
further
discussion and
analysis
 Involves finding
creative ways of

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 gathering data
and problem
solving, arriving
at various and
unique solutions
by using groups
comprising both
subject experts
and novices
Focus Group  A structured  Provides a good  One person
grouping. way to screen can dominate
 Preferably ideas (screening discussion if
potential or tool). the facilitator
existing  More structured is not
consumers, who than experienced in
are invited to brainstorming handling
participate in an  Facilitator can group
in-depth encourage participation.
discussion on participation  May not be
ways to improve  Group the ideal
the interaction can technique in
organization’s generate more dealing with
offerings or ideas and sensitive
processes related discussion issues
to those offerings  Ensure that no
 It can also be one person
used for a new dominates the
invention discussion
 Provide
information
about personal
likes, dislikes,
perceptions,
beliefs or
attitudes as they
relate to the
subject
 The setting is
quite interactive
 A controlled
group interview

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 of a target
audience often
led by a
facilitator. A set
of series of
questions are
covered, and the
results are used
as a guide.

Check List  This is a list of  Can be used in  Proper record

Methods ‘thought collaboration keeping is
provoking’ with necessary
questions that are brainstorming  Can be closed
centred around:  Helpful when ended
(a)finding information there are existing
under a particular theme criteria to guide
concerning existing the process
products, services, and 
processes
(b)eliciting ideas with Comprehensivel
the aim of improving a y deals with the
business’s products, issue through a
services, and processes. series of
questions
 Using a series of
related questions
and or statements
to aid in the
development of a
new idea or ideas
Problem  Similar to focus  Useful in testing  The idea
Inventory group. New a new product generated may
Analysis ideas and idea not reflect and
solutions are  The group may entrepreneuria
obtained by be able to l opportunities
presenting generate new
customers with ideas based on
the problems existing products
affecting a given and problems
product or item from its
 A method of customers

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 arriving at new
ideas by focusing
on problems
 The results are
then gathered
and carefully
evaluated to
ensure that they
reflect specific
related issues.
 It is organized in  Provides  Some
Scenario the form of a alternative views scenarios may
Thinking/ workshop, where of the future lack scope
Scenario a group of  Can be creative  Scenario
Planning/ experts, industry yet structured planners
Scenario leaders and high-  Encourages should be well
Analysis level managers knowledge experienced
try to develop exchange in
scenarios as to understanding
what might occur the future
and the impact it
may have on the
business or the
industry.
 The purpose of
this method is to
bring a wide
range of
perspectives ‘to
the table’ in
order to develop
scenarios other
than the widely
accepted
predictions about
the industry.
 A strategic
planning tool for
making long
term plans
The Note  A statement for a  All members can  Time

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Book Method/ problem is participate consuming
Collective written down in  Can be adapted  Can lead to
Notebook several small for use on a too many
Method notebooks. computer ideas to assess
 Each participant  Team members
is given a build on each
notebook and is other’s ideas
asked to make a  Careful tracking
daily record of can lead to
ideas and identification of
possible opportunities
solutions, one to that might
three times daily otherwise be
 By the end of the overlooked.
week many ideas
and solutions
would have been
gathered, after
which a
coordinator is
expected to
collect and
arrange ideas in
the order of
frequency.

Reverse  This procedure is  Analyzing the  Should not be

Brainstorming similar to the problem has used if
brainstorming often lead to new individuals are
method entrepreneurial not able to
 Identify what is opportunities conceptually
wrong with an  Generates ways reverse the
idea to overcome problem
 Brainstorming potential
using a group problems
that focuses on through
the negative for discussion
example finding  Extend the use of
problems or brainstorming to
faults with a bring out more
particular ideas
suggestion or

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 idea
Delphi  Method used to  Used to move  Difficulty in
Methodology explore an issue the group toward developing an
with a group of consensus accurate
people, usually  This is questionnaire
experts on a commonly used to initiate the
subject matter or by established process
field to arrive at organizations to
the outcome answer major
strategic
questions
Gordon  New ideas are  Can result in  Dependent on
Method developed many new ideas the
without the being presented competencies
participants of the group
having
knowledge of the
problem
 The general
concept is
presented and the
group responds
with a number of
ideas
Free  By writing down  Useful with other  Needs proper
Association words or phrases methods such as management
associated with brainstorming, to avoid being
the problem, a this can generate time
thought process, new ideas but consuming or
a chain of word may also be used lacking in
association is at any stage. focus
created with
ultimately
culminates in the
development of
new ideas

Force Field  A basic tool used  Provides a visual  Requires

Analysis in identifying the summary every group
root cause and  Helps to identify member to
then taking obstacles so that participate

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 action; lie ahead so that  Lack of full
 Based on the planning can participation
assumption that a take place to would result
situation is the strengthen forces in and
result of forces for and reduce incomplete
acting for and forces against; picture of the
against the  Assist group in forces for and
present state of developing a against;
equilibrium common  May lead to
 By countering understanding of conflict in the
the forces against the issue group between
and or increasing those who
forces will help support the
bring about change and
change those who do
not
Rapid  Strategy used  Creates product  May lack
Prototyping throughout the simulations for accuracy if the
product testing and actual function
development validation of the product
process  Multiple relies greatly
 3-dimensional versions can be on the
prototypes of generated in a accuracy of
product or short period parts.
feature are based on  Added costs
created and feedback due to
tested  Gain customer technology
feedback without used and
expending faster
resources turnaround
 Reduces the risk  May be
of final product expensive
failure  Requires
skilled labour
that is
technical
expertise
 Some features
may be
overlooked as
they cannot be
prototyped

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  Limited
material range
of prototyping

TRIZ, which stands for the Theory of Inventive Problem Solving, is a systematic methodology
used in entrepreneurship to foster innovation and overcome business challenges. The theory of
inventive problem solving involving the idea that there are universal principles of innovation and
problem solving that could be applied to any field.

Systematic approach for finding solutions to technical problems or issues and innovating
technical systems.

TRIZ (pronounced “trees”) started in Russia. It involves a technique for problem solving created
by observing the commonalities in solutions discovered in the past. Created by Genrich
Altshuller in the former Soviet Union, the Six Sigma technique recognizes that certain patterns
emerge whenever inventions are made.

Advantages

 Encourages organizational problem solving

 Encourages creativity
 Can be used to formulate processes to improve products

Disadvantages

 Difficulties to implement and understand process

 Complex nature of methodology

Screening Ideas and Selecting Among Options or Alternatives

According to the business dictionary, idea screening is ‘a process used to evaluate innovative
product ideas, strategies and marketing trends. Idea screening criteria are used to determine
compatibility with overall business objectives and whether the idea would offer a viable return
on investment.’
It is important to assess whether the ideas will meet one’s aspirations as an entrepreneur. He or
she needs to evaluate whether the goals will be achieved through the option or idea that is
chosen.
Screening ideas is important process for a number of reasons. It is necessary to consider the
following:
1. Will the idea meet the goals that the entrepreneur wants to achieve?
2. Each idea will be screened against its strengths and weaknesses and compared to that of
the other options.
3. Can the idea be realized with the existing level of technology and resources available to
the entrepreneur?
4. Screening the idea helps to reduce the level of risk and uncertainty associated with the
idea.

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 5. Entrepreneurs should consider the return to be gained from that idea
6. Ensure that you record your idea and make sure it is clear and precise
7. Share your ideas with your team and other persons who you can trust and who can add
sensible perspectives.
8. Consider the resources that are needed such as financing, human resources, production,
and marketing and see if the business is able to provide them.
9. Reconsider the needs of the target market and match them against what the idea in
question will offer.
10. Examine the market potential
11. Examine the ideas that ‘do not fit the bill’ and take all the time that is allowed to examine
the ones that are more likely to be chosen. Do not make a hasty decision.

In screening ideas, has the entrepreneur managed to identify the needs of the customer, and is
it an idea which will be readily accepted by the market? Every new idea should result in the
customers benefitting from its introduction and usage but, significantly, the entrepreneur should
determine whether the market will be willing to pay the price for the product. If the idea
involves introducing a product that is new, the entrepreneur must look closely at the resources
that will be required to develop the idea – financial, technical, research and development. If
there are changes made to an existing product, especially one which is made by a competitor,
will be profitable to enter such a market, and what level of marketing would be required to create
a significant impact for the proposed business? Would it be worth the effort?

Evaluating Ideas
The diagram below outlines areas for consideration when evaluating ideas

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 Personal Issues: capabilities, drive, passion,
acceptance of failure, realistic, persistent;
knowledge about financial issues

Market place issues,

Rate ideas for example on a scale 0 potential customers;
to 5 on areas such as personal fit, risk competitive advantage;
level; funding , short term potential; Evaluating Ideas
marketing mix issues,
competition competition

Feasibility study; a structured and

systematic analysis of the idea

After screening the ideas, the entrepreneur can develop a short list of remaining ideas for deeper
evaluation and selection.

How Ideas are linked to Opportunity

Having an idea does not mean that an opportunity exists. An idea is key, but alone it is useless.
Woe to the entrepreneur who embarks on bringing an idea to reality when there is not real
opportunity.
Opportunities are positive external options that a firm can exploit to accomplish its objectives,
mission, or goals. They arise as a result of factors that are beyond the entrepreneur’s control.
According to Coulter (2003), an opportunity is an optimistic possibility or positive trend. It can
also be a change that provides a distinct possibility for value creation. An idea is ‘a plan or
thought formed in the mind.’ Ideas need to be screened and evaluated since not all ideas
generated will be viable.

The diagram below illustrates an example of how an idea is born out of an opportunity.

Opportunity Identification
For example: Social changes where there is an
increase number of women entering the Page | 12
workforce
Differentiate between An Idea and An Opportunity
WHAT IS A BUSINESS IDEA?
A business idea is a concept that can be used to make money. Usually, it centres on a product or
service that can be offered for money. An idea is the first milestone in the process of founding a
business. Every successful business started as someone’s idea.

Although a business idea has the potential to make money, it has no commercial value initially.
In fact, most business ideas exist in abstract form; usually in the mind of its creator or investor
and not all business ideas, no matter how brilliant they may seem, would end up being profitable.
To find out about an idea’s chances in the market and check its innovative content and feasibility,
you need to conduct a plausibility check. A promising business idea must have the following
characteristics:
 Relevant (must fulfil customers’ needs or solve their problems)
 Innovative
 Unique
 Clear focus
 Profitable in the long run

The acceptability and profitability of a business idea hinges largely on how innovative the
idea is. Being innovative means using conventional production or distribution methods that have
rarely been adopted before. In fact, the entire business system could be innovated.

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For example, FedEx revolutionized mail post services through 24-hour operation and very quick
delivery worldwide. The company therefore adopted an innovative system, which eventually
spurred it to becoming one of the world’s leading mail and parcel delivery services.

However, even more important is the benefit that a business idea promises to offer customers.
Such benefits could be passed on to customers in the form of reduced costs. (We all like to buy
quality for less). So, any business idea that, at least, focuses on lowering costs would most likely
be profitable in the long term.

A successful business idea must meet the following three conditions:

1. It must offer benefit to the customer by solving a problem or fulfilling a need.
Customers buy products and services for just one reason; to satisfy a need. So, if your
business idea cannot satisfy customers, it won’t be successful. Every successful business
idea must have a unique selling proposition.

2. It must have a market that is willing to accept it. A promising business idea must offer a
product or service that would be accepted by a large market. It must also have feasible
arrangements for catering to that large market as well as unique values that differentiates it
from the competition.

3. It must have a mechanism for making revenue. A successful business idea must show how
much money can be earned from it and how the money will be earned.

WHAT IS A BUSINESS OPPORTUNITY?

A business opportunity on the other hand is a proven concept that generates on-going income. In
other words, a business opportunity is a business idea that has been researched upon, refined, and
packaged into a promising venture that is ready to launch.
While multiple business ideas may strike you on a daily basis, only few of them will be
profitable in the long run based on market research and feasibility study conducted. These few
are the real business opportunities. An opportunity is regarded as one after it has been found to
meet the following criteria:
 It must have high gross margins.
 It must have the potential to reach break-even cash flow within 12 months – 36 months.
 The startup capital investment must be realistic and within the range of what you can
provide.
 You must have the strength and ability needed to drive the business to success.
 Your level of enthusiasm for the business must be very high.
 It must have the potential to keep on improving with time.
 It must have a low level of liability risk.

Colonel Sanders tried for many years to sell his chicken recipe idea, but no one listened to him
until he repackaged it and KFC (Kentucky Fried Chicken) was born.

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The Clear Difference between a Business Idea and Opportunity
The world is filled with brilliant ideas but the world lacks entrepreneurs who have the
capacity to turn such ideas to profitable business opportunities. It is one thing to develop an idea,
but it is an entirely different ball game to turn an idea into a business opportunity.
So, a major difference between an idea and an opportunity is that you can sell a business
opportunity, but you cannot sell an idea (it is not entirely impossible but it’s difficult).
Colonel Sanders tried for many years to sell his chicken recipe idea but no one listened to him
until he repackaged it and KFC (Kentucky Fried Chicken) was born.
The moral of this lesson is that investors invest in business opportunities and
ventures, not business ideas. Therefore, the question is how do you turn a business idea into
an opportunity? Well, you can turn a business idea into a business opportunity by conducting
market research and feasibility study on your idea, writing a business plan and assembling a
business team that will work with you on your idea. Only then will such idea become an
opportunity that will attract investors and probably get the needed financing.

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