Businesss Practice
BUSINESS PRACTICE I
(BNP110C)
Chapter 3: The identification
and development of business
ideas
Chapter 3
Chapter 3: The identification and development of business ideas
Learning outcomes:
i. identify the stages of setting up a business
ii. Define creativity
iii. Determine your own level of creativity
iv. Improve the creativity of a team by using various creativity techniques
v. Creatively generate business ideas using structured methods/techniques
vi. Distinguish between non-feasible and feasible ideas
vii. Develop and refine a business idea.
Introduction
continued….
• Only one of the ideas that you have generated can
be converted into an enterprise.
• You must therefore be familiar with the methods you
can use to develop and evaluate your business idea.
• We will explain how you can use a bow-tie diagram
to develop your idea, and a feasibility study to
evaluate your idea.
• We will also explain the difference between a
feasibility study and a viability study.
Introduction
• Chapter 3 deals with the idea stage, the first stage in the creation of an
enterprise.
• The idea stage focuses on identifying, developing and evaluating feasible
business ideas.
• As a prospective entrepreneur, you have probably already thought of possible
business ideas, or you may still be looking for a good idea.
• In this chapter you will get the opportunity to identify and develop various
ideas.
• Since identifying business ideas is a creative process, you must be able to
assume a creative attitude.
• We will introduce you to different techniques to help you to cultivate a creative
attitude.
• We will also discuss the different approaches that you can use to generate
business ideas.
The three stages in creating an
enterprise
The creation of an enterprise can be divided
into three main stages:
• The identification of a feasible business idea (the
idea sage)
• The drawing up of a viability and business plan
(planning stage)
• Implementation of the business plan
(implementation stage)
• The exploitation of profitable opportunities
Introduction: Importance of
Entrepreneurship
1. Employment Creation
2. Local Resources
3. Decentralization and Diversification Of Business
4. Promotion of Technology
5. Capital Formation
6. Promotion of an Entrepreneurial Culture
Cultivating a creative attitude
• In chapter 1 we mentioned that creativity is one of the
personal characteristics of an entrepreneur.
• An innovative business idea can be very satisfying, but it can
also become a huge headache.
• You must convince people that there is a need for your
product or service and therefore you should try to provide
specialised or exceptional products or services to distinguish
your enterprise from other competitive enterprises.
• To be able to do this, you must act creatively.
Cultivating a creative attitude continued…
What is creativity?
• Creativity is the ability to consider a topic in various ways and come
up with something new or identify new ideas.
• We could also define creativity by saying that it is seeing the same
thing as everybody else but thinking of something different. You
must be able to generate new possibilities or alternatives.
• Creative thinking can be divided into divergent and convergent
thinking
- Divergent thinking= Intellectual ability to think of many original, diverse
and elaborate ideas (thinks outside the box)
- Convergent thinking= Intellectual ability to logically evaluate, critique and
choose the best ideas from a selection of ideas (focuses on 1 idea)
Cultivating a creative attitude continued…
Methods of cultivating a creative attitude
We sometimes wonder if creativity is a given.
Are you born with creativity or is it possible to
develop and improve your creative abilities?
• Cultivating a creative attitude continued…
You can cultivate a creative attitude using the following
methods
• actively seeking ideas
• writing your ideas down
• viewing a topic from another person’s perspective
• breaking your routine (test your idea)
• exploring grey areas
Generating business ideas
• An entrepreneur deliberately looks and thinks creatively to generate ideas that
can potentially be converted into a business
• A few techniques can be used to generate ideas:
Generating business ideas continued…
• The generation of ideas from the entrepreneur’s skills,
expertise and aptitude
• Skills refer to manual work and can be learned. Skills can be gained
through training and formal studies.
• Expertise is based on knowledge acquired by experience.
• Aptitudes refer to born talents
• In addition to those consider the following:
- Formal training
- Work experience
- Skills developed through hobbies or other non-career activities
The relationship between Entrepreneurship
and
small business management
Generating business ideas continued…
The generation of ideas from
common needs
• Try to satisfy a need among various
people for the same product, by
grouping people with the same need
together.
• Everyone needs something but not
everyone needs the same thing
• Your idea must satisfy a range of
peoples needs
• Individuals with common needs can
be grouped together
• Organisations with common needs can
be grouped together
Generating business ideas continued…
The generation of
ideas from existing
problems
Solving problems that
already exist
Make a list of your
problems, or a list of
problems that other
people experience.
Generating business ideas continued…
The generation of ideas from everyday activities
• You can identify ideas by being aware of the activities that
we perform everyday
• Use the following methods:
- Use print or electronic media
- Look in other places
- Explore your surroundings
- Observe other cultures
- Talk to other people
- At work
- Go shopping
-In each of the above methods you must ask yourself:
- What are the problems?
- How can the product be improved?
- Is there a better way for the product to be packaged?
- Can a new product be added?
- Can the product be aimed at another market?
Generating business ideas continued…
The generation of ideas from other sources
Lists all
products or Found in magazines
services a such as ‘wealth wise’
business with stories on
provides successful
entrepreneurs
Products not Collaborate
yet available with inventors
can be to produce and
imported/imit market his
ated/adapted product
See the product and Expired
discuss the features patents are
and the potential public
market with the property and
exhibitors can be turned
around
Newspapers and magazines carry advertisements for
business opportunities
Types of Entrepreneurial Businesses
The formal small business: Small and micro business
sector:
[Link] business has 5 or less employees and a
turnover of less than R100000
[Link] small business has between 1 and 10
employees
[Link] business had between 11 and 50
employees
The development and evaluation of
business ideas
• Initial sifting of ideas happens with your
‘gut feel’
• One idea can be chosen and to choose
the correct one, each one must be
evaluated
• Two methods:
• Feasibility study: examine the
potential of the idea to be converted
into a business
• Viability study: in-depth investigation
of the profitability of the idea to be
converted into a business
The development and evaluation of
business ideas continued…
Before you start: Two things must be clear;
- What the main activities will be
- Who the customers will be
*Activities of the business will consist of two
or more of the following:
- Manufacture of a product
- Provision of a service
- Sale of other people’s products or
services
The development and evaluation of
business ideas continued…
Your customers will consist of:
-Individuals and/or organisations
The development of business ideas
continued…
Bow- tie diagram can be used to
develop your business idea in terms of:
- The essence of the idea
- The possible combination of ideas
- The possibility of taking a new
direction with idea
For example: ‘to bake cakes’
The skills, expertise and aptitudes of an
Entrepreneur
Successful entrepreneurs have
skills/expertise/aptitudes that can be applied
profitably in any business
Skills- refers to manual work that can be learned
Expertise- based on knowledge you acquire by studying or
experience
Aptitudes: Each person is born with certain aptitudes and
talents
The feasibility of your business
ideas
How would you define a feasibility study? Can you explain the focus of
this study
• A feasibility study is a general examination of the potential of the idea to be
converted into an enterprise. This means the entrepreneur has to
determine whether it would be practically possible to convert the idea into
an enterprise.
• Focus of a feasibility study
• This study focuses on the ability of the entrepreneur to convert the idea
into an enterprise. This means the entrepreneur has to determine whether
he or she has the skills and expertise to convert the idea into an
enterprise, and whether the idea matches his or her aptitudes.
• To be feasible, it must be practically possible to convert the idea into
an enterprise
The feasibility of your business ideas
continued…
Why do we do a feasibility study?
We do a feasibility study to determine
the
• potential of the idea to be converted
into an enterprise
• ability of the entrepreneur to convert
the idea into an enterprise
The feasibility of your business
ideas
How do we do a feasibility study?
To determine weather your business idea is feasible, you
must answer the following questions:
- Do you want to do what the idea suggests?
- Is there a market for your idea?
- Can you meet the needs of your customer
- Can I get the idea to my consumers?
The difference between feasibility and viability
• Although feasibility and viability are two
different concepts, they are easily confused.
• We have already explained that a feasibility
study entails a general examination of the
potential of the idea to be converted into an
enterprise and that it focuses on the ability of
the entrepreneur to convert the idea into an
enterprise.
The difference between feasibility and viability
How would you define a viability study? Can you explain the
focus of this study?
• A viability study is an in-depth investigation of the market and profit
potential of the idea.
• Focus of a viability study
• This study focuses on the market and profit potential of the idea. This
means the entrepreneur has to determine whether consumers would buy
his or her products and whether the expected market share would be
sufficient. The entrepreneur has to determine a competitive selling price
that covers the cost per unit and would still generate enough profit.
• To be viable, the enterprise has to generate enough cash over the
short term, as well as sustainable profits over the long term.
………………………………..
Actively seek Write ideas Break Different Explore grey
ideas down routine perspectives areas
CULTIVATE A CREATIVE ATTITUDE
Skills Common Existing Everyday Other
Expertise needs problems activites sources
Aptitutes
GENERATE BUSINESS IDEAS
DEVELOP BUSINESS IDEAS
Bow-tie diagram
EVALUATE BUSINESS IDEAS
FEASIBILITY STUDY
Summary
• In this chapter you have learnt the first step in the creation of an
enterprise, namely identifying, developing and evaluating feasible
business ideas.
• We explained the importance of creativity, how to apply creativity
techniques, as well as the approaches to generate business ideas.
• We also paid attention to developing and evaluating the feasibility of
business ideas.
• We hope you have gained the necessary knowledge to do a feasibility
study so that you can evaluate your business ideas.
• It is important to remember that, if your idea turns out not to be
feasible, you cannot continue to the next stage in the creation of an
enterprise.
• You will then have to identify new ideas, develop them and test the
feasibility of these ideas again.
• If your idea is feasible, you can move on to the first part of the
planning stage, the viability study, which we will discuss in chapter 4.
THANK YOU