Opportunity Assessment Framework Task: Based on desk research and possible interviews with knowledgeable people, develop an Opportunity Assessment Framework that can be used to validate a venture idea/concept suitable for a specific end user. This may be developed specifically for a technology or industry sector, a venture capitalist, an angel investor, a social venture funder […]
Choosing and identifying a suitable opportunity for a new business is a crucial investment in a profitable venture. Furthermore, it is the most imperative capability of a successful entrepreneur. Various factors assist in the process of opportunity recognition, which results in the formation of business. For this reason, an entrepreneur should be creative, able to form connections and social network, and alert to opportunities (Zichu, 2019:1141). The ability to move from the stage of an idea to a business opportunity is one of the vital dynamics in the process of business creation. The entrepreneur should have the right design and should be assertive in exploring new opportunities.
An idea denotes conceiving a new plan while an innovative business opportunity refers to introducing something original to the market that did not exist earlier. The two concepts rely on each other. An idea is, therefore, finding solutions or a form of expression (Rahul, 2015:11). To be innovative, an entrepreneur should be able to act on a proposed idea. In contrast, the commercialization of innovation implies several threats, especially if the objective is to present a product with unique features of performance. High uncertainties are inherent in the business model, technology, and markets. For this reason, the commercialization of innovation contains many risks. Innovative services or products require thorough commercialization preparation in the course of research.
The business opportunity, in this case, entails the assessment of AI cleaning robot technology as a potential business to meet the needs of customers. Being an excellent business opportunity means that the venture in question should create changes and solve problems. A principal concern that all entrepreneurs face is determining the business opportunity that is right for them. The entrepreneurs developing the AI cleaning robot technology can achieve this end by utilizing various methodologies, including the outside-in/inside-out analysis model, SWOT analysis, Bygrave and Zacharakis’s model, and the Quick Screen model.
The Outside-In/Inside-Out Analysis Model
One methodology that can help to define the business opportunity for the AI cleaning robot technology is the outside-in/inside-out model. The method focuses on external versus internal capabilities and resources as sources of competitive advantage (Kickul & Lyons, 2016:240). The internal factors consist of the skills of employees and managers, proficiency, and resources of the firm advancing the AI cleaning robot technology. Conversely, the external dynamics comprise the general environment that includes competition, technological, global, social, political/legal, and economic aspects. While existing organizations implement this model in their day-to-day work, it can also be applied to assess the validity of new venture opportunities (Beugré, 2016: 22). It can offer valuable information through the evaluation of the impact of the immediate external and global environment on the opportunity.
In analyzing a new venture opportunity, the organization can apply the outside-in/inside-out model to determine the potential of the business to add value to the experience of the consumers. The methodology is also essential in determining whether the entrepreneur has the resources needed to exploit the opportunity (Beugré, 2016:24). The focus of the inside-out orientation lies on how a particular business attains superior performance by deploying, developing, capitalizing on, and possessing strategic firm-specific resources that are non-substitutable, perfect, valuable, and scarce. In the case of the AI cleaning technology venture, the organization can utilize the base of internal resources to neutralize threats that transpire in the external environment and exploit available opportunities. The internal resources have the form of tacit knowledge and are often idiosyncratic within the social fabric of the company.
In contrast, through the outside-in orientation, the AI cleaning technology venture will be able to attain a competitive advantage by engaging in market requirements ahead of its competitors. As a result, the proposed business will create a lasting association with consumers and other stakeholders. With the outside-in orientation, the new commerce will also generate knowledge concerning the products, strategies, and capabilities of competitors, as well as latent and expressed customer needs. The company will further be able to focus on the provision of superior value to consumers, the direct position relationships with future returns, and the significance of the market position of the end-product (Saeed et al., 2015:125). The inside-out orientation is essential in analyzing the market in which the proposed business will compete. In essence, this is possible because the approach impacts the performance of a company through ensuring quality, the loyalty of the customers, and innovation performance (Saeed et al., 2015:125). The method provides a comprehensive understanding of the marketplace, which will enable the proposed business to accurately and quickly respond to changes in the market.
Organizations commonly use SWOT analysis in marketing and strategic management to evaluate the weaknesses and strengths of their business as well as the threats and opportunities arising from the external setting. However, the approach can be utilized in entrepreneurship to analyze the soundness of market opportunities (Beugré, 2016:26). The technique can, therefore, extend to the assessment of social venture opportunities. The focus of SWOT analysis in the venture of choice will be to assess the weaknesses and strengths of the social opening. The strategy will assist the entrepreneur in answering questions concerning the threats and opportunities in the external environment, evaluating the company’s resources, the venture’s sustainability over time, and the scalability of the idea (Beugré, 2016:26). The strategy will also shed light on whether it is worth pursuing the opportunity.
Examining such aspects will assist the entrepreneur to evaluate the viability of the opportunity of the AI cleaning technology in the market. SWOT analysis is an approach that will enable the entrepreneur to determine its potential weaknesses (Beugré, 2016:27). As a result, the business will be able to decide how to resolve such vulnerabilities. A SWOT analysis provides the entrepreneur with tools to assess the execution of the idea by weaknesses and strengths internal to the functioning of the company and by opportunities and threats in the external environment of the venture.
The weaknesses and strengths may include dynamics, such as available physical and financial resources, the skill set of the leader and the team, and organizational structure. Listing the strengths and weaknesses will assist the entrepreneur in implementing the venture of choice and ensuring that every concept has been considered. Likewise, a list of future opportunities and potential threats from the analysis can be relatively diverse and may include shifts in the market, regulatory and policy alterations, changes in the political landscape, transformations in the economy, and changes in the industry (Kickul & Lyons, 2016:241). Considering the mentioned forces, the entrepreneur will need to account for these contingencies when implementing the AI cleaning technology venture to guarantee that the proposed organization will survive the contextual shift.
Four scenarios will become apparent after the evaluation of the opportunities for an AI cleaning technology venture using a SWOT analysis. In the first case, the internal strengths will complement external opportunities (Sudrajat et al., 2016:69). The concept is an ideal match as it signifies the suitability of the resources of the organization and competitive opportunities in the external environment (Blockeel et al., 2016:492; Gupta & Mishra, 2016:133). In the case of the AI cleaning technology, the approach would be to safeguard these internal strengths by either increasing these resources to extend an already-established competitive advantage or find the unique amalgamation of resources required to attain a new competitive advantage. The second scenario is the consideration of internal weakness relative to external opportunities. It entails selecting the optimal tradeoff between dropping the opportunity to the competitors and capitalizing on turning the gaps into strengths essential to exploit the opportunity.
The third case involves matching internal strengths with external threats. One strategic option that can be attained through SWOT analysis is converting the external risks into opportunities by reconfiguring the competitive position of the resources of the company (Fleisher & Bensoussan, 2015:45). The last aspect is to consider the internal weaknesses relative to external threats. A proactive strategy may be the only option if the survival of the proposed business is at stake. However, a comprehensive SWOT analysis must not end with merely listing the threats, weaknesses, opportunities, and strengths (Dogan, 2015:1290). It must further assess interactions and determine the way a particular advantage can be utilized to leverage an emerging opportunity or thwart an impending threat. In this respect, the idea of the AI cleaning technology venture will be an opportunity if it holds up to this scrutiny and continuously looks viable.
Bygrave and Zacharakis’s Model
The Bygrave and Zacharakis’s model consists of seven major evaluation areas that can be used to determine the attractiveness of the AI cleaning technology venture as a business opportunity. The first one is the industry and markets. The business will have the lowest potential when it experiences only incremental improvement. Nonetheless, it will have the highest potential when it transforms the way people work and live (Leffel et al., 2016:501). The second aspect is economics. The business herein will have the lowest potential if the internal rate of return potential is less than 15% per year (Beugré 2016). It will also be the case if the capital requirement is very high, ROI potential is less than 15% to 20%, and the time to break even is more than four years (Beugré, 2016:32). Equally, the commerce will have the utmost prospective if it has an internal rate of the profit potential of 25% or more annually and a low to reasonable assets requirement (Beugré, 2016:32). It will further attain this if the annual ROI potential is 25% or more, and the time to break even is roughly one and a half years to two years (Beugré, 2016:32). Therefore, this model is a vital consideration for the proposed AI cleaning technology venture.
The third aspect is the harvest issues. Based on this notion, the venture will have the lowest potential if the capital market content is unfavorable. It will also be unsuccessful if the business has an undefined exit strategy and mechanisms, and if the value-added potential of the organization is of little strategic value. In contrast, it will have the highest opportunity if the capital market content has realizable liquidity, available capital, timing, and favorable valuation. The value-added potential also has to be of high strategic value, and it should have an envisioned option or present exit strategy or mechanism (Beugré, 2016:33).
The fourth model entails competitive advantage issues. In this respect, the proposed business will have the lowest potential if it has weak control over distribution, prices, and costs, and if it has the highest variable and fixed costs. On the other hand, if it has moderate to robust control over distribution, prices, and expenses, the venture will strive. This will as well be the situation if its variable and fixed costs are lowest, but have high operating leverage.
Further, the fifth model entails the management team. The proposed business will have the lowest opportunity if its integrity is questionable, if it has underdeveloped technical and industry experience, and if it has a solo or weak entrepreneur. Conversely, the opportunity will be high if the team has the highest standards of integrity, if it has a super track record or top of the field technical and industry experience. Moreover, the entrepreneurial team must consist of free highly qualified agents (Kickul & Lyons, 2016:53).
The sixth concept is personal criteria. Here, the venture will have the lowest potential if the entrepreneur cannot operate under pressure and is risk-averse. The venture will also not succeed if the business is merely pursuing big money. However, the company will have the highest opportunity if the entrepreneur thrives under pressure, calculates risk, and his business acumen matches his lifestyle.
The last model is strategic differentiation. In this case, the proposed business will have the smallest business opening if it has low flexibility. The opportunity will further decrease if there are many competitors or substitutes, and if the service management is not efficient. Nonetheless, it will have the highest potential if, based on flexibility, the administration can de-commit and commit quickly and adapt (Kickul & Lyons, 2016:54). Moreover, the business should have a groundbreaking technology and excellent service concept. The Bygrave and Zacharakis’s model will help to determine whether the social opportunity for the AI cleaning technology venture is not merely unique but addresses the social issues effectively compared to other social endeavors that handle related problems.
The Quick Screen Model
The Timmons Quick Screen model is another methodology that can be utilized to evaluate the business opportunity for the AI cleaning technology venture. It focuses on the following three criteria: value formation and apprehension issues, competitive advantage, and bazaar and margin associated dynamics. Considering this concept, the opportunities for the proposed business should relate to timely, durable, and attractive services or products that add or create value for end-users or customers (Su et al., 2019:440). An entrepreneur, in this regard, should maintain a keen knowledge of the market and consumers as it may indicate acceptance and the need for truly innovative products. Thus, evaluating market demand requires knowledge of the consumers’ perception of the price-value relationship, client access point, and the target market.
In the Quick Screen model, the profundity of impact determines the scope of an opportunity. Therefore, the size and structure of the market are essential antecedents of high potential opportunities (Yeh et al., 2018:328). There are no vibrant market frontrunners in a fragmented bazaar. As a new entrant to a fragmented market, the AI cleaning technology venture will have considerable opportunity for consolidation. Conversely, there is a likely increase in market demand in an emerging market. In this case, the AI cleaning technology venture will be able to satisfy new requirements, and it will be less challenging to acquire customers than taking business from a real rival.
Additionally, in the Quick Screen model, margin analysis signifies the financial display of an opportunity. The inclination of the bazaar to reward the AI cleaning technology venture must, in the long run, surface in the financials and margins. Higher robustness of the free cash flow, net and gross margins, as well as durability, size, and growth, mean that the opportunity is excellent. Furthermore, the higher the gaps and vacuums in knowledge and information, inconstancies in lag and lead times, quality, and existing services, the higher the opportunity. To attain this end, the key aspects that should be considered when utilizing the Quick Screen model include first value-added. It will have low potential if it is insignificant and high potential if it is significant (Beugré, 2016:37). The second aspect is the social impact. It will have low potential if the impact is difficult to measure and high potential if it is measurable. The third aspect concerns customers. The business will have low potential if they are not reachable or not interested and high potential if they are receptive and reachable. The last consideration is based on social needs. The business will have low potential if the social need is unfocused, but there will be high potential if it is identified.
All in all, the identification of opportunities is a fundamental capability of entrepreneurs. Exploiting the opportunities that others miss is what makes a successful businessperson. The current analysis has explored four methodologies that are efficient for assessing opportunities for commercial ventures. However, as a recommendation, a SWOT analysis should be used in conjunction with the outside-in/inside-out model to evaluate the potential opportunities for the AI cleaning technology venture. The reason for this is that a solid basis for competitive advantage warrants a rational match between weaknesses and strengths of a business as well as the threats and opportunities present in its relevant environments. SWOT analysis is the best approach to reveal the stated integration. The strategy will, therefore, help in judging the feasibility of the idea in question. For the AI cleaning technology venture, a SWOT analysis will enable the team to decide if the set goals are worth pursuing. It will assist the business in recognizing the areas that require improvement and the aspects at which the venture will excel.
While SWOT analysis presents a portrait assessment of current conditions, the outside-in/inside-out model, when integrated with the former, will help identify potential opportunities for the business in the market. The combination of the two models will ensure the finding of business openings that match the entrepreneur as well as the venture in question. The outside-in/inside-out methodology will assist in drawing comprehensively on the SWOT exploration. The blend of the two methods evaluates ideas for potential opportunities by scrutinizing the likely impact of the outside context, referred to as the industry and global environment, on the proposed venture. The compound model further considers the internal capacity of the proposed business to act.
The general environment in the outside-in/inside-out analysis consists of technological, global, macroeconomic, sociocultural, and political/legal factors. The industry environment considers Porter’s five forces, including the buyers’ and suppliers’ influence, rivalry among competitors, the substitution of the product, and new competitors in the sector. All of the mentioned aspects will either negatively or positively impact the ability of the AI cleaning technology venture to be sustainable and attractive. The outside-in/inside-out analysis will also specify how the established opportunity can be shaped. It is essential in the evaluation of capabilities such as core competencies and skills and internal intangible and tangible resources. In the case of the AI cleaning technology venture, the results from the SWOT analysis and that from the outside-in/inside-out analysis can be assessed together and blended.
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Published On: 01-01-1970