Sub enabling Outcome 3

Business Idea Generation

Process and Creativity
Coverage;
• Defining a business idea
• Characteristics of a business idea
• Steps in transforming a business idea into a business plan
• Defining Creativity and what makes an individual creative
• Importance of creativity
• Barries to creativity and the creative process
• Strategies organizations use to achieve competitive
advantage
 Business Idea Generation
Process.
Business Idea
• Generating and evaluating business ideas is an important
step in the business planning and the entire
entrepreneurial process.
• The idea of starting a business normally crosses to people’s
minds at different times.
Business Idea Generation Process
• Whether an individual is entrepreneur, limited company or a
small business;
• The ideas for business, be it about finding the new
opportunity for business OR how to generate a new income;
The process to develop the idea of business remain the
same (Business idea is fundamental, all business enterprises
you see to day they started as ideas )
Business idea generation process…..
• Most businesses regardless of their size start with the
intention to make money.
• However, selling the product and finding the customers is
only one aspect, understanding the business strategy,
business financing, outsourcing product and market research
and the most cost efficient ways of achieving these issues are
the fundamental basics of the business
Business idea
• Idea is a thought or collection of thoughts that generated in the mind. It is
an impression or notion that tries to portray the overarching scope or
outline.

A business ideas is a concept which can be used for commercial purposes

• It typically centers on a commodity or service that can be sold for money.
• It is a concept that can be used to make money.
• Usually it centers on a product or service that can be offered for money.
Characteristics of business Idea
• The business idea must be
Relevant (must fulfill customers’ needs or solve their problems)
Innovative
Unique
Clear focus
Profitable in the long run
Adaptability etc.
There are many characteristics; please take time to read more
about this.
 Business Opportunity
What is 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.
• A business idea is just a conception or thought, without an
actual plan have not been proven, while an opportunity is an
idea with a plan.
Business idea generation steps
Generating business ideas is creative process
Do you remember creative process with five stages..
[Link] germination( problem recognized or opportunity
anticipated)
2. Preparation stage (information are gathered to prove
established ground of the problem or opportunity and see
how others tried to solve it and how you can solve it.
Cont…
3. Incubation stage(Allow the subconscious mind time to
assimilate information, after hardworking on the problem)
4. Illumination stage
This is a stage when the idea resurfaces as a realistic
creation. It can happen wherever you are at that particular
of time)
NB. Document it before you forget
Cont…
5. Idea Verification.
 Coming up with an idea is one thing, but ensuring that it’s any
good is quite another.
 Assessing the usefulness of an idea requires consciously thinking
about it and verifying it, such as by seeing what others have to say
about it.
 Show your idea to friends who can comment on it and add value on
it.
 Question
• Why should we evaluate a business idea?
 Why should we evaluate business
idea cont..
• The first reason is because it forces the entrepreneur to decide
what is important to the entrepreneurial venture. It also enable
the entrepreneur to know What is the goal of the entrepreneur
in pursuing the venture.
• The second reason that idea evaluation is important ,is because
not all ideas are equal. Some ideas that an entrepreneur comes
up with will have better chances of success than others. By
evaluating the strength and weakness of each idea is very
important, since the entrepreneur is forced to identify and
assess the strong and weak points of each idea.
Why should we evaluate business idea cont..
• The next reason of rationale on idea evaluation has to do with the
reality of limited resources. Most entrepreneurs have limited
amounts of money, time, people or other resources to pursue
their entrepreneurial ideas. By evaluating on entrepreneurial ideas,
one can make sure that his/her ideas can best use of those limited
resources.
• Lastly, It has the advantages of minimizing risks and maximizing
returns.
What is risk? It is the uncertainty that surround the decisions and
actions about what will happen. Return on the other hand is the pay
back(financial) or otherwise that the entrepreneur is likely to gain.
 Evaluation of business idea
How can Business ideas be evaluated?
• The personal considerations include issues like readiness, capabilities,
passion for what one is doing, ability to handle ambiguity and uncertainty,
hardworking, realistic picture of the proposed venture potential, continual
analysis and self education of the venture.
• A market consideration factor is also another important element in the
evaluation of the business ideas.
The entrepreneurial idea will have to be competitive and dynamic
marketplace.
The customer is the alpha and Omega of the business; The more market driven
is the venture, the greater the chance of success.
Evaluation of business ideas
• Capital
• knowledge of the Industry
Summary on importance of idea
evaluation
In addition to have an idea for a better mouse trap, you have to
understand it in a business context.
One has to understand:
• The industry,
• The market,
• The competition,
• The necessary technology.
 Steps in transforming a business idea into a
business plan
1. Research the market
Define your target Audience
Define your products and services
Define main competitors
Define Resources
2. Test your idea
Create a functional prototype that you can present to potential
investors and the target audience. Cinduct focus groups to get
feedback on the product or service before bringing it to market.
Cont…
3. Write a business plan
Include all the sections/ components/ elements required in the
business plan. Write the plan according to who will read it. For
instance; it might be the banks, partners, investors etc.

4. Develop a financial plan and forecast

A financial plan lays the steps you plan to take to generate
future income and cover future expenses while a financial
forecast is an estimate or projection of future outcomes such as
revenue, income and expenses.
 Feasibility Study
• In the process of transforming a business idea into a business plan; an
individual is adviced to carry out a feasibility study.

Feasibility study is a detailed analysis that considers all of the critical

aspects of a proposed project in order to determine the likelihood of it
succeeding.

Simply, it is desined to determine whether if a project/plan is feasible.

Or An assessment that determines the likelihood of a proposed project
being successful such as a new product line…
Feasibility study
Feasibility study covers a lot of territory.
It takes a significant amount of time, efforts and energy to
prepare it.
However, it is not your potential future success worthy an
investment of time, efforts and energy?
If feasibility study is done effectively, it can make the work of
preparing and writing the business plan a whole lot easier.
 Feasibility study
• This is the structured and systematic analysis of the various
aspects of the proposed entrepreneurial venture designed
to determine its workability.
• A well prepared feasibility study can be an effective
evaluation tool to determine whether an entrepreneurial
idea is a potentially successful one.
• Moreover feasibility study can serve as a basis for the all
important business plan.
Feasibility study cont…
• What does feasibility study include?
[Link]
History, background ,description of product or service.
[Link] description of proposed entrepreneurial venture
2. Brief History of the industry
3. Information about the economy and important trends
4. Current status of the product or service
5. How you intend to produce the product or service
Cont….

[Link] list of goods or services to be provided

[Link] and weakness of the business
[Link] of entry into the industry, including the competitors
analysis
B. ACCOUNTING CONSIDERATIONS
[Link] balance sheet
2. Proforma profit and loss statement
3. Projected cash flow analysis
C. MANAGEMENT CONSIDERATIONS
1. Personal expertise
2. Proposed organization design
3. Potential staffing requirement
4. Inventory management methods
5. Production and Operations management issues
6. Equipment needs
D. MARKETING CONSIDERATIONS
1. Detailed product description
2. Identify the target market ( who, where, how many)
3. Describe place product will be distributed(location, traffic,
size, channels etc)
4. Price determination(competition, price lists, etc)
5. Promotion plans ( role of personal selling, advertising, sales
promotion)
E. FINANCIAL CONSIDERATIONS
[Link] ups costs
2. Loans- Amounts, type, conditions
3. Breakeven Analysis
[Link]
5. Credit references
6. Equipment and building financing-costs and methods
F. LEGAL CONSIDERATIONS
1. Proposed business structure

a. Type
b. Conditions, terms, liability, personal etc
c. Insurance needs: property, liability, personal etc
d. Buy out , succession issues

2. Contracts, licenses and other legal documents

G. TAX CONSIDERATIONS
1. Sales, property employee
2. Federal, state and local

H. ENVIRONMENTAL CONSIDERATIONS
1. Building Permits
2. Environmental conservation
3. Renewable sources of energy
4. Recycle waste and disposal of waste
Importance of feasibility studies
1. Evaluates current and needed resources and
technology
2. Enhances the success or failure rate of the projects by
assessing all variables
3. Estimates the return on investment
4. Provides useful information for the next steps after the
study (Planning)
5. Improves the focus of the project team
 Nature of the creative process
• Creativity can be defined as, the ability to create, bring into
existence, to invent into a new form, to produce through
imaginative skill, to make something new.

• Creativity is also an attitude, the ability to accept change and

newness, a willingness to play with ideas and possibilities.

• Creativity is the ability to generate new ideas by combining,

changing or reapplying existing ideas.
 Creative Thinking
• Creative thinking is the art of generating solution to problems
by the force of imagination and reasoning.

• It is an activity of the mind seeking to find answer to some

life’s question. In a dynamic and changing world, the
challenges of man are also not static.

• Every idea is a product of thinking and every product is the

appearance of idea in a thinker’s mind.
 The Nature of the Creative Process
Two important aspects of creativity exist: process and people.
The process is goal oriented; it is designed to attain a solution
to a problem.
The people are the resources that determine the solution.
The process remains the same, but the approach that the
people use will vary. For instance, sometimes they will adapt a
solution and other times they will formulate a highly innovative
solution
 Cont…
• Creativity is a process that can be developed and improved.
Everyone is creative to some degree. However as is the case
with many abilities and talents (athletic, artistic, etc.).
• Many people incorrectly believe that only a genius can be
creative; however this is a “killer phrase” a barrier to creative
thinking.
Eg; “I don’t see anything wrong with the way we’re doing it
now” or “that’s the dumbest thing I’ve ever heard” or “its not in
the budget” or we already tried that yeas ago”
 The four phases or steps to
creative process (the critical
thinking process)
Phase 1: Background or Knowledge accumulation
Successful creations are generally preceded by
investigation and information gathering. This usually
involves extensive reading, conversation with others
working in the field, attendance at professional meetings
and workshops, and a general absorption of information
relative to the problem or issue under study.
Phase 2: The incubation process
The incubation process often occurs while they are
engaged in activities totally unrelated to the subject or
problem. It happens even when they are sleeping.
Getting away from a problem and letting the subconscious
mind work on it allows creativity to spring forth.
Some of the helpful steps to induce incubation are 1)
engage in routine activities; 2) exercise regularly 3) play
games 4) think about the project before falling asleep 5)
meditate and relax
Phase 3: The idea experience
This phase of the creative process is often the most
exciting, because it is when the idea or solution the
individual is seeking is discovered. It is sometimes referred
to as “eureka factor”.
At this phase, the idea might appear out of the blue. The
person begins to formulate the solution.
NB; it is often difficult to determine when the incubation
process ends and the idea experience phase begins, many
people are unaware of moving from phase 2 to phase 3.
Phase 4: Evaluation and Implementation
It is the most difficult step of a creativity and requires a great
deal of courage, self discipline and perseverance.
Successful entrepreneurs can identify ideas that are workable
and that they have the skills to implement. That’s important is
to not give up when they run temporary obstacles.
Often they will fail several times before they successfully
develop their best ideas. In some cases, entrepreneurs will
take the idea in an entirely different direction or will discover
a new and more workable idea while struggling to implement
the original one.
Importance of creativity
1. Creativity boosts business reputation
2. Creativity source of business survival
3. Creating new ideas for competitive advantage
4. Creativity for solving problems
5. Improving the business
6. Producing quality products and services
 Barriers to creativity and the
creative Process
1. Time consuming
2. Fear of failure
3. Lack of resources
4. Leadership and management barriers
5. Imitating competitors
6. Lacking freedom
7. Use of killer phrases
8. Not thinking proactively
Strategies organizations use to achieve competitive advantage

Competitive Advantage- Is an attritube that allows an organization to

outperform its competitors.
1. Cost leadership strategy- Businesses that follow this strategy sell
products at the lowest prices in the industry
2. Differentiation strategy- Businesses with unique identity in the
market follow the strategy. (Delivering high quality to customers
because they are willing to pay more to receive the benefits)
3. Cost focus strategy- Like cost leadership strategy but the difference is
that it focuses on a specific market segment
4. Focus strategy- Businesses aim at a few target markets rather than
trying to target everyone.