Essentially, entrepreneurs recognize an opportunity and turn it into a success- ful business.1 An opportunity is a favorable set of circumstances that creates a need for a new product, service, or business. Most entrepreneurial ventures are started in one of two ways. Some ventures are externally stimulated. In this instance, an entrepreneur decides to launch a firm, searches for and recognizes an opportunity, and then starts a business, as Jeff Bezos did when he created Amazon.com. In 1994, Bezos quit his lucrative job at a New York City invest- ment firm and headed for Seattle with a plan to find an attractive opportunity and launch an e-commerce company. Other firms are internally stimulated, like iCracked. An entrepreneur recognizes a problem or an opportunity gap and creates a business to address the problem or fill the identified gap.
Regardless of which of these two ways an entrepreneur starts a new busi- ness, opportunities are tough to spot. Identifying a product, service, or busi- ness opportunity that isn’t merely a different version of something already available is difficult. A common mistake entrepreneurs make in the oppor- tunity recognition process is picking a currently available product or service that they like or are passionate about and then trying to build a business around a slightly better version of it. Although this approach seems sensible, such is usually not the case. The key to opportunity recognition is to identify a product or service that people need and are willing to buy, not one that an entrepreneur wants to make and sell.
As shown in Figure 2.1, an opportunity has four essential qualities: It is (1) attractive, (2) timely, (3) durable, and (4) anchored in a product, service, or business that creates or adds value for its buyer or end-user. For an en- trepreneur to capitalize on an opportunity, its window of opportunity must be open. The term window of opportunity is a metaphor describing the time period in which a firm can realistically enter a new market. Once the mar- ket for a new product is established, its window of opportunity opens. As the market grows, firms enter and try to establish a profitable position. At some point, the market matures, and the window of opportunity closes. This is the case with Internet search engines. Yahoo, the first search engine, appeared in 1995, and the market grew quickly, with the addition of Lycos, Excite, and several others. Google entered the market in 1998, sporting advanced search technology. Since then, the search engine market has matured, and the win- dow of opportunity is less prominent. Today, it would be very difficult for a new start-up search engine firm to be successful unless it offered compelling advantages over already established competitors or targeted a niche market in an exemplary manner. Bing, Microsoft’s search engine, is gaining ground with approximately 18 percent market share (compared to 67 percent for Google), but only after Microsoft has exerted an enormous amount of effort in head-to- head competition with Google.2
It is important to understand that there is a difference between an op- portunity and an idea. An idea is a thought, an impression, or a notion. An idea may or may not meet the criteria of an opportunity. This is a critical point because many entrepreneurial ventures fail not because the entrepreneurs that launched them didn’t work hard, but rather because there was no real opportunity to begin with. Before getting excited about a business idea, it is crucial to understand whether the idea fills a need and meets the criteria for an opportunity.
Source: Barringer Bruce R, Ireland R Duane (2015), Entrepreneurship: successfully launching new ventures, Pearson; 5th edition.