Not all opportunities are the same: A look at the four types of
University Malaysia Perlis
human activity is directed at some perceived possible future. Our life is
dominated by the channelling of our efforts towards creating the future we
anticipate for ourselves. The future is a journey for which we are not certain,
relying upon our imagination to picture what this future would be like, whether
it is just in five minutes or five years time. We can only be certain about this
future when we get there
. The heart of seeing opportunity is about seeing the future, a process
that doesn’t occur through formal analysis, forecasting or strategic planning
process. Rather, opportunity is about seeing the future for what it could be
through our aspirations and imagination in ways that other people don’t see.
There is a passionate, visionary, and exciting side to opportunity that formal
systems and theory does not capture adequately. Opportunities create a path
where various levels of enthusiasm, skill, resources, rigidity and commitment,
and a devised strategy are pursued by individuals and firms. This journey begins
with the identification of an opportunity upon which we are inspired and
motivated enough to pursue, not always knowing where we will end up. Our actions
test what we are anticipating, inferring that pursuing opportunities is about
Opportunity cannot be explained by environmental forces or individual factors
alone as they are both very much interrelated.
The phenomenon of opportunity spans across the disciplines of micro-economics,
psychology and cognitive science, strategic management, resource based and
contingency theories that are patched together, synchronized and added to form
new information in the form of ideas. Opportunity is a situational phenomenon
that is developed from incomplete information
relies on an individual recognizing, discovering or constructing patterns and
concepts that can be formed into ideas. Opportunity is a poorly defined concept
where theories are good at explaining creation after the event, but been very
poor in predicting creation. Theories are limited in their explanations and can
only point to what capabilities exist when the individual is developing
opportunities. Opportunity models that have been developed by strategy and
marketing researchers have difficulty in being applied to entrepreneurial
start-ups. Pre-1970s it would have been totally inconceivable to predict that a
group of young entrepreneurs who dropped out of university were able to move
into the computer industry and be so successful exploiting opportunities that
incumbent Fortune 500 firms like IBM couldn’t
The central aspect of opportunity is being able to see it in the first place and
acting upon it before others. This is a function of how we perceive the world
and process information. The resulting intuition, vision, insight, discovery, or
creation is an idea which may upon evaluation become an opportunity. This
ability is not uniformly distributed throughout the community,
as people have different orientations towards time and space.. Thus the
opportunity gestalt is not a uniform or regular phenomenon that any
theory can provide a general explanation.
Opportunity is a dynamic construct that ebbs and flows according to a
continually changing environment. This also occurs in what were once called
traditionally “stable industries” like broadcasting, entertainment,
chemicals, pharmaceuticals, automotive, and aviation. Customer trends,
resource costs, government regulations, changing trade conditions, competitive
products, merging industries, and other types of pressures and shocks like
rising petroleum prices continuously shift the panorama of the environment and
thus change is the prime generator of opportunity. The financial crisis of 2008
coupled with international monetary shifts, changing exchange rates and the
movement of manufacturing and jobs from Western countries to China are phenomena
that change national economies and the balance of world markets, bringing
massive structural shifts and potential opportunities. As we saw in 2008 this
process can be extremely rapid and appear to occur with little warning just like
the ‘peoples’ revolutions’ in Tunisia, Egypt, Jordan, Yemen, Bahrain, and
Libya during 2011. One of the many affects of these changes has been the
dramatic shift of firms to manufacture in China.
Over the last forty years we have witnessed the creation of many new
multi-billion dollar industries like modern biotechnology, discount retail,
mutual funds, cellular telephones, personal computers, satellite television, and
the internet. Industries that were important to the growth of the US during the
larger part of the twentieth century like steel have massively declined, leading
to the demise of giant Fortune 500 companies like Bethlehem Steel.
Companies like Intel, National Semiconductor, Microsoft, Apple, Nokia, Amazon,
eBay, and Wal-Mart have risen to dominance in their industries, each in their
own way transforming the way a particular industry works. The changeover of
industry dominance has been so rapid that 40% of the Fortune 500
companies that existed in 1975 were no longer operational two decades later
. Today 33% of
the most successful firms profits are generated from products launched within
the last five years .
In some industries like the mobile phone, television manufacture, white goods
and automobiles, etc this figure is much closer to 100%.
Firms need to continually renewal themselves through taking on new opportunities
by developing and launching new products, services and/or creating new business
models. Companies need to shift their strategies flexibly as the characteristics
of opportunities change and pursue emerging opportunities to remain successful.
There however is a tendency for successful firms to become so focused upon the
internal processes of their organizations that they forgot to scan the
environment and to see where the marketplace is going.
The subjective nature of opportunity makes it impossible to separate the concept
from the individual. Opportunity has a deep basis in a person’s prior knowledge
and experience, personal aspirations, imagination, and fear of uncertainty. As
opportunities are situational, so must be the practice of entrepreneurship and
thus it is very difficult to agree on a common definition. What may be
entrepreneurial in one context may not be entrepreneurial in another time and
place, so entrepreneurship is also a relational concept. As entrepreneurship is
also carried out within a social context, entrepreneurship must also be a
Entrepreneurship can be seen as an individual or collective way of thinking,
constructing an opportunity attached to a vision, which somehow precipitates the
gathering, co-opting, combining and organizing of resources into enactment upon
the opportunity with the goal of activating the vision, utilizing knowledge,
technology, and business tools in a relatively novel way to realize results,
that have the possibility of creating a sustainable organization, where there
are willing followers who share the vision. The concept of novelty is also
situational, relational, contextual, and cultural, and the standards of novelty
– meaning the quality of being new, will be different in say the United
States to what is novel in The Ghana, Nepal, Bangladesh, or Fiji.
Most ideas have their basis in some old idea, something seen or experienced
within the past, so from this point of view most opportunities are not truly
novel. For example, an old type of business can be given a new business model
and professionalism like McDonalds did for burgers and Holiday Inn did for
motels. New technologies can be applied to old products and processes like
desktop publishing and email and domestic business models can be expanded
internationally like Coca Cola and Pizza Hut.
Many people mistake their aspirations for opportunity. For example people put
their money and efforts into a boutique, restaurant or spa for the wrong reasons
because they like fashion and shopping, food and cooking, or aromatherapy and
massage, only to close down a few months later because there was no real
opportunity. In SME’s the values of the founder and the firm are the same in
many cases. Business opportunity is influenced to various degrees by a hierarchy
of personal and family aspirations and concerns that cannot easily be separated
from business goals. This can be dangerous if one is unaware of this influence
Our knowledge and personal goals are embedded within our imagination which is at
the heart of our existence, a cognitive quality that we would not be human
Imagination extends our experiences and thoughts, constructing our view of the
world to lower our uncertainty of it. Just like imagination is a good way for
novelists to create their stories, imagination is needed to create new value
sets to consumers that separate new ideas from others. This requires originality
to create innovation
. Imagination is the essence of marketing opportunity
that conquers image and fantasy to consumers, allowing them to imagine what it
would be like to live at Sanctuary Cove in Northern Queensland, Australia,
receiving a Citibank loan, driving a Mercedes 500 SLK around town, or holidaying
in Bali. Imagination aids our practical reasoning
 and opens up
new avenues of thinking, reflecting, organizing the world, or doing things
differently. Imagination decomposes what already is, replacing it with what
could be, and is the source of all our hope fear, enlightenment, and
There are really very few innovators in the business world as most firms tend to
adapt, emulate, and follow other proven ideas. By emulating and matching other
firm’s ideas and strategies, and adopting the behaviour and actions of others,
just like we did in the school playground, we reduce our personal risk and
uncertainty. By far the majority of businesses follow others that successfully
exploit opportunities, rather than seek their own to exploit.
Each story about a successful (or unsuccessful) entrepreneur is unique and has
its own particular reasons for success (or failure) based upon the type of
opportunity, skills, focus, apt timing, resource configuration, personal
competencies, and a strategy for the situation, which may or may not be right
for the particular opportunity and entrepreneur. Different kinds of
opportunities will lead to different types of strategy and venture form, which
leads to different types of enterprises, business scope, and ways organizations
are run. Any individual case studies only show a limited opportunity set,
resources, skills, and capabilities, source of opportunity, and strategies for a
particular situation. For each and every situation all these factors will be
Some companies rapidly grow after start-up because they have correctly
identified an opportunity, have the right capabilities, networks and resources,
and devised the correct strategies to exploit the opportunity effectively. Other
firms may take a longer time to learn the heart of the opportunity and what is
required to successfully exploit it, or may be under resourced and need to build
their capabilities, so growth is much more modest.
The basis of a new entrepreneurial
venture is coming up with something that others don’t have. Breakthrough or
revolutionary ideas may take some time for consumer acceptance where the speed
of success may depend upon the extent that consumer habits must change, the
convenience of the purchase process, and the familiarity with the channels of
distribution. Sales revenue will be very difficult to predict, if not impossible
and the only confidence an entrepreneur may be able to have in the future
outcome is that their new product or service offers substantially more value
than what is currently in the market. How quickly the product catches on, is
really anybody’s guess
. New start-up firms may only be able to fulfil niche segments due to
the large costs of blanket market distribution. At the other end of the
continuum, products that replicate other competitive products or are only
marginally better are difficult to introduce and gain any deep market
penetration. These products may compete on price, value (more product for the
same price), or other short term market tactics. Success in any competitive
environment may just come down to the hard slog of out pacing the other
competitors which drains profitability for all concerned.
Strategy is the driver of opportunity exploitation. However it must be flexible
in adapting the idea, objectives, organization, product, strategies and tactics,
as they are all paramount for success. Strategy based on opportunity relies on
learning, building capabilities, and making venture choices that are based upon
our subjective preferences. Performance along the opportunity path will be
measured against a person’s own personal vision as a benchmark.
Although entrepreneurs come from all walks of life, backgrounds, and ventures
are vastly different, there is perhaps a common narrative and shared curiosity
that would entail thoughts like ‘why
is this so?’ ‘Is there a better way of doing this?’ ‘Is there a way I can
benefit?’ and ‘How
can I improve upon it?
What is Opportunity
There are a number of definitions of opportunity that provide different glimpses
upon its meaning. One of the most relevant definitions to this book was
developed by Stevenson and Jarillo who saw opportunity as a future situation
that is both desirable and feasible.
Wickham saw opportunity as a gap in the market where the potential exists to do
something better that creates value.
From the Schumpeterian point of view an opportunity is simply a chance to meet a
market need through some creative combination of resources to deliver superior
saw opportunity as a recombination of resources that results in new products,
services, or changes within the value chain.
Stevenson and Gumpert (1985) saw that for an idea to be classified as an
opportunity, it must meet two criteria; Firstly the idea must represent a
desirable future state involving some form of change, and secondly the
individuals involved must believe that it is possible to reach that state.
The implications of the above definitions view opportunity as a perspective
taken about the possible future state of the environment, a potentiality that is
not yet actualized that may or may not be feasible. Opportunity is a juncture
where something favourable can be realized through undertaking certain
activities to realize the identified potential, based on a set of ideas and
beliefs that enable the creation of goods and services that do not yet exist.
For example a computer without an operating system is useless to most users and
be of very little market potential. But the advent of an operating system adds
value to the computer. There are many instances where consumers are not able to
articulate their needs and wants for certain new products until they see them
and are able to recognize or learn about the value the product or service may
Opportunities can be exploited by fulfilling these needs, wants, or creating
trends and fads with goods or services that offer value to consumers. For
example, consumers may not see the need for a toothbrush sterilizer until they
see one on the market and are presented with information about the bacteria
build up on a toothbrush lying around in the bathroom cabinet. Therefore to see
opportunity one must understand the technical aspects of the nature of the
opportunity or have an intimate understanding of the value chain involved.
Opportunity implies some form of action to realize the potential, which infers
entrepreneurship. It is an entrepreneur who develops an idea from some formation
process, develops the goals to pursue the opportunity and has the motivation to
assemble resources, and utilize networks and skills in the pursuit of
The Global Entrepreneurship Monitor (GEM) makes a distinction between necessity
based and opportunity based entrepreneurs. Necessity entrepreneurs take up
self-employment out of a need to earn income as the prime motivation, where very
few other viable economic alternatives exist. Opportunity entrepreneurs take
advantage of perceived business opportunities. Their desire may arise out of
dissatisfaction with their current life situation
or out of awareness about a growing number of opportunities arising out of
economic growth with new optimisms
. It is the author’s view that GEM reports have consistently overstated
opportunistic entrepreneurship and understated necessity entrepreneurship in
developing countries due to interview methodologies and bias as people tend to
put their position in the best light during formal interviews. Personal life
situations have a deep influence upon a person’s willingness to look for
opportunity, what they see, and how they pursue them
Many new technology innovations are pushed into the market and in some cases,
products and services go on to be very successful,
i.e., iPad, iPhone, personal
computer, automobile, airplane, and steam engine.
Any new technology will have a number of potential applications,
and the inventor/entrepreneur or firm must decide which area is most lucrative
one to focus upon. Any new technologies must solve existing problems effectively
and efficiently, and be able to provide consumers with benefits. Every invented
device, process, or service requires an innovation period where the invention is
matched with opportunity, as the new technology is not an opportunity within
itself. This requires a clear understanding of what customers are looking for
and why they buy. Finding this out may be a “hit
and miss” process where
mistakes can be very costly and punished very quickly.
Consequently, the pursuit of new knowledge and technology is an endogenous
phenomenon where technology must be matched to an idea. Thus an opportunity is
created by an entrepreneur or team working with him or her.
Opportunities are generated through the quest for new knowledge. Opportunities
may then be more prevalent in industries where more new knowledge is generated,
i.e., biotechnology and
ICT, etc, than
prevailing in low technology industries
. In this
context some opportunities can only emerge when the technology exists and has
been applied as an idea to something. Thus opportunity streams into the
environment through ideas to apply new technologies when they exist.
Finally it is perhaps worthwhile to distinguish opportunity from speculation.
Because the future is never certain, activity that takes place overtime is to
some degree speculative. Opportunities are based on the belief that value can be
created which will yield future profits and any uncertainties are manageable if
resources are deployed effectively within the control of the entrepreneur. The
profits resulting from entrepreneurial opportunity exploitation are derived from
a deliberate set of actions and the successful creation of value. Speculation
however relates to a bet on an outcome, where a person may think that prices
will either rise or fall in the future and base their actions upon this belief
or speculation. If they believe prices will rise in the future, they will buy,
if they believe prices will fall in the future, they will defer or postpone
buying. This can be applied to anything that can be bought or sold and
speculation tends to be successful in markets that are on a continual rise. The
availability of credit tends to fan speculation. Speculators risk their capital
in the expectation that the price in the market will shift to favour their
position. Speculation unlike opportunity exploitation is usually paper based
that does not create any new value and outcomes are usually outside the control
of the investor unless large sums of capital are utilized and has influence over
market price levels. In these cases speculation becomes distortive and profits
are made through the distortion of the market. Speculation is usually motivated
by the desire for quick gains and relies on the exogenous forces of demand,
speculation to achieve monetary gains, rather than acts of creation.
The Forms of Opportunity
Opportunities manifest themselves in different ways and can be categorized
accordingly. One of the simplest ways of mapping forms of opportunities is by
the locus of change they manifest into the environment. Less innovative forms of
opportunity tend to be passive/reactive imitation or rent seeking activities,
while active/imaginative forms of opportunities tend to require a proactive
intervention into the environment where an entrepreneur seeks to change things.
Allocative opportunities involve finding new market space through passive
analysis of demand and supply and demographics, while the other sector discovery
opportunities involve more active entry into the market place with products
aimed at developing new market space believed to exist where incongruities and
structural change may be taking place. Each form of opportunity is likely but
not exclusively associated with a style of thinking as depicted in figure 1.
Figure 1. The forms of opportunity.
Imitation is the most basic form of opportunity. The imitative continuum
requires little innovation and there is little value creation. Entrepreneurs see
effective business models and utilize the ideas contained within them for their
own benefit. There are usually few changes made to any of these observed
business models and they are usually adopted in whole with minimal modification.
The key for the individual is to select a suitable geographical location or
customer group to target and focus upon. The thinking style and narrative would
tend to be some form of arbitrary reasoning in the manner of “people
need to buy groceries and there is room for a grocery store in this area”,
“people need to buy a cup of coffee, sandwich, and newspaper on their way to
work, outside this railway station”,
residents in this apartment building could do with the convenience of a washing
and ironing service”.
Imitation is reactive upon what a person sees is successful for others, probably
with the prime goal of earning a living. This does not differ too much at the
corporate level where most companies tend to imitate their competitors, as
imitation is perhaps perceived to be a less risky option. Imitation
opportunities are usually most effective in safe unambiguous environments,
although also highly successful against first movers in technology based high
growth markets like what is occurring to the iPad.
It is not too difficult to quantify the size of the opportunity and the key
issues are how much market share a firm can obtain and how much will it cost to
obtain it. The simplest form of imitation is straight out copying, spanning out
into the extension of an idea, and duplication in other markets.
Allocative opportunities occur when there are mismatches in supply and demand,
resources are scarce in certain areas, an individual or firm has a resource
monopoly, or demographic changes require specific products and services to
fulfil emerging needs and wants. Allocative opportunities primarily occur out of
market imperfections or changing demographics which can be identified on the
most part through scanning and analysis of the competitive environment. This
analysis may show where goods and services are absent, prices are inefficient,
and where supply channels and value chains are not effective. Allocative
opportunities represent the demand and supply issues in classical economic
Allocative opportunities can be identified through market observation and
information. Once identified allocative opportunities can be easily seen,
i.e., the shortage of
particular goods and services in the market, or an aging population or baby boom
requiring specific sectional goods and services.
The potential of allocative
opportunities are greatly enhanced for firms that already serve these markets
and have established supply chains and channels of distribution with strong
sales networks. The key to recognising opportunities is through environmental
scanning. A powerful source of ideas is through observing similar markets in
other countries for new products that have not reached the entrepreneur’s market
yet, especially in developing markets. There is more innovation and value
creation in developing allocative opportunities than with imitation
opportunities, but these types of opportunities still remain within a
passive/reactive strategic approach. Like imitation, allocative opportunity
values are not too difficult to forecast in most cases.
Changes in technology, consumer preferences, regulation, and economic conditions
most often lead to opportunity gaps within the competitive environment.
Opportunities are derived from the attributes of the industry independent of an
entrepreneur’s action. These opportunities await discovery by an alert
individual who may or may not decide to exploit them.
If an entrepreneur can understand the attributes and structure of an industry,
then he or she will be able to anticipate the type of opportunities available
within the industry. These discoveries may require the recombination of old and
new knowledge in novel ways to find viable opportunities
specific industry knowledge is very important and an individual through industry
experience may be able to see industry opportunities that people without
specific industry knowledge cannot see
. In addition,
people with specific industry experience may discover opportunities without any
The use of discovery is suitable under conditions of risk and uncertainty where
pre-existing information exists about the nature of opportunities in question.
The discovery process is also good where firm and industry structure requires
change like the need to create economies of scale of lower a firm/industry cost
value of the opportunity is extremely difficult to forecast with discovery
opportunities until sales actually occur within the market. Inductive reasoning
is often used in the discovery process although rational, analytical, and
intuitive thinking can also play an important role in the development of the
Some opportunities do not exist until they are constructed by someone.
tends to be unrelated to present information and created through an emergent
process of trial and error within the competitive environment.
The entrepreneur through experience and interaction with the environment crafts
a new opportunity .
The entrepreneur does not become aware of the opportunity by reconfiguring
information and knowledge in new ways, rather new knowledge is built up through
action creating new information from closely observing the results of the
intervention within the competitive environment and changing the nature of
action according to the results gained.
The final result from an entrepreneur’s efforts will not be known at the
beginning of the opportunity construction process as the future outcome may be
totally different to what was originally conceived and irrelevant to present
A viable opportunity is the eventual result of these actions, resulting from
feedback and further action
Opportunity construction is a path dependent process where an entrepreneur
learns what works and what doesn’t work as the process of developing a venture
progresses (Arthur 1989). The entrepreneur may not immediately discover the most
lucrative aspect of the opportunity first off, he or she may enter into a
business which has been identified as part of an opportunity and as experience
accumulates, learning occurs where the firm rolls into the full potential of the
opportunity by modifying focus, strategies, target customers, etc. For example
an entrepreneur may establish a boutique handmade chocolate business but find
market sales don’t work as well as hi-teas, so the entrepreneur changes focus
and strategy away from the product towards running events. The more novel the
opportunity that is ultimately constructed through this process, the more
learning and new information is required through experimentation
innovative new products and services customer information is of little use
. It is
extremely difficult to forecast the value of construction opportunities as it
takes time for the entrepreneur to develop a stable income earning business
Construction opportunities are an exploratory process where learning through
trial and error is a valuable part of developing the opportunity.
Failure to learn from action will almost certainly result in failure. Successful
opportunity construction may involve many adjustments to action through
reinterpreting the results which may require starting all over again or
abandoning the idea all together
. As the
emergence process continues entrepreneurs may be forced to redefine their
customers, markets, or even industry they are operating within, technologies and
question the original assumptions about the opportunities they are pursuing.
Prior industry knowledge may hinder learning
as the individual maybe locked into pre-existing ideas and knowledge. By
breaking out of this industry ‘conformity’, new ideas, processes, and business
models can be developed and introduced into an industry.
Opportunity construction primarily relies on intuitive thinking to tap a
person’s creativity and imagination. The process of effectuation discussed in
chapter three is very common where an enterprise is built upon what is available
rather than deciding what is needed before start-up. This approach results in
incremental ‘step by step’ growth where resources are acquired as needed,
i.e., a new airline purchases
aircraft as it is able to open and develop new routes.
These types of opportunity are
, within the confines of the culture the entrepreneur is immersed
within. Opportunity construction is powerful where little knowledge is
available, especially where new technologies or new business models are
concerned. Under conditions of uncertainty, learning is probably more useful
Opportunities in this form have fewer precedents to learn from other forms of
opportunity and entrepreneurs will develop their own knowledge structures to
give the information they generate form and meaning.
Constructed opportunities are usually the most disruptive to the competitive
All of these forms of opportunities exist in the real world
. Which form
of opportunity is manifested to the entrepreneur will depend upon the
information available and level of ambiguity, and it may not be uncommon for
entrepreneurs to switch from using one form to another in developing the
opportunities they exploit.
As time goes on more information may exist where the discovery mode may become
the most apt aid in opportunity development. A comparison between the four forms
of opportunity is shown in Table 1.
Table 1. A comparison of the four forms of opportunity.
What is an opportunity?
The possibility of undertaking a known activity in a select geographic
or customer space.
The possibility of gaining market space through finding mismatches of
demand/supply and changing demographics, etc, and employing resources to
exploit these mismatches.
The possibility of taking advantage of potentially identified market
gaps due to technology, social issues, regulation, or economic
The possibilities of creating (new) ends through new means.
What is the focus?
Focus on potential market space and developing exploitive strategies
(i.e., new product development)
Focus on potential market space and developing exploitive strategies
(i.e., new product development)
Emergence through strategies and feedback.
How are opportunities identified?
Opportunities seen by observing other successful businesses and
Opportunities recognized through deductive reasoning.
Opportunities discovered through inductive reasoning.
Opportunities constructed through intuitive and abductive reasoning,
trial & error, experimentation.
Assumptions of entrepreneur
A selected business model and type will work in the selected market
A belief in information and data.
A belief that new market space exists from the incongruity and/or
industry structural changes.
Wide continuum of assumptions by different entrepreneurs, but usually
display strong sets of values.
Uncertainty managed through imitation (what works for others will work
for him or her).
Uncertainty managed through product portfolio diversification.
Uncertainty managed through control of channels, networks, adequate
resources and some experimentation.
Uncertainty managed through effectuation (see cognitive styles chapter
3) and experimentation.
A viable business with a sustainable return.
Success within the selected market space.
The creation of new market space, differentiation from competitors and
avoidance of failure.
A viable new product, service, business model that is differentiated
from competitors and has taken new market space.
Large firms in
markets where the level of ambiguity is low will tend to rely on rational and
analytical approaches to opportunity recognition, often constrained by the
formal strategic planning and management processes they have in-place.
A major part of management literature today focuses upon assisting corporations
shed themselves of their rigidities and tunnel vision to become more innovative
and entrepreneurial. To many SMEs, opportunity is the only strategy that the
entrepreneur has. Opportunity is firmly implanted within the entrepreneur’s mind
and vision, and all efforts and initiatives focus upon exploiting it and
learning through doing, trial and error, making mistakes, feedback from peers
and customers, etc, copying others, solving problems, and general
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