How does the Entrepreneur identify a competitive advantage?
The first thing that entrepreneurs must do is identify opportunities and possible competitive advantages. Once they’ve done these two tasks, they’re ready to start the venture by researching its feasibility and then planning for its launch.
Identifying Environmental opportunities and competitive advantage:
In 1994, when Jeff Bezos first saw that Internet usage increasing by 2,300 percent a month, he knew that something dramatic was happening. Bezos was determined to be part of it. He quit his successful career as a stock market researcher and hedge fund manager on Wall Street and pursued his vision for online retailing, now the Amazon.com website. What would you have done if you had seen that type of number somewhere? Ignored? Ignored it? Written it off as a fluke? The skyrocketing Internet usage that Bezos observed is a prime example of identifying environmental opportunities.
These trends provide unique and distinct possibilities for innovating and creating value. Entrepreneurs need to be able to pinpoint these pockets of opportunities that a changing context provides.
Peter Drucker, a well known management author identified seven potential sources of opportunity that entrepreneurs might look for in the eternal context. They include the unexpected, the incongruous the process need, industry and market structures, demographics changes in perceptions and new Knowledge. Let’s take closer look:
The unexpected: When situations and events are unanticipated, opportunities can be found. The event might be an unexpected success (positive news) or an unexpected failure (bad news). Either way, the situation can present opportunities for entrepreneurs to pursue. For instance, in the 1990s, Y2K was a huge opportunity for the fledging software industry in India. The millennium bug offered the industry an opportunity to execute large projects with relatively low tech well defined specifications to stiff deadlines. More than the 2 billion dollar revenue earnings, this helped India’s software industry to develop its project management capability and to demonstrate its credibility in the global software industry. A number of Indian companies were able to leverage on the Y2K opportunity to get further application development and maintenance projects from Fortune 500 clients. On the other hand, the rising number of car thefts in India has led to the spawning of many anti-theft devices like car steering locks and gear locks by local manufacturers. These events were unexpected and proved to be opportunities for entrepreneurs.
The incongruous: When something is incongruous, inconsistencies and incompatibilities are present in the way it appears. Things ought to be a certain way but aren’t. When convention all wisdom about the way things should be no longer holds true, for whatever reason, opportunities can be found. Entrepreneurs who are willing to think outside the box – that is, to think beyond the traditional and conventional approaches may find pockets of potential profitability. Ram Chandra a master sculptor from Jaipur realized that artificial limbs of the day were not flexible enough to allow for a normal range of movements, and were not suited to Indian working and lifestyle conditions. Chandra’s recognition of vulcanized rubber as an alternative material for building prosthetic limbs led to the design of what is today known as the Jaipur Foot. The Jaipur Foot is tailor made for the Indian poor, and costs about Rs 1500 compared to Rs 400,000 for a prosthetic foot made in the USA. Another example of how the incongruous can be a potential source of entrepreneurial opportunity is Fred Smith, founder of FedEx, who recognize in the early 1970s the inefficiencies in the delivery of packages and documents. He challenged the accepted doctrine that overnight delivery was impossible. Smith’s recognition of the incongruous led to the creation of FedEx now a multibillion dollar corporation.