Being an entrepreneur seems to be in vogue of late. This trend started during the Internet boom era of the 90s which led to a whole new breed of entrepreneurs and start-ups mushrooming across the world.
It is not surprising that since then, the Internet has shaped the expectations and perceptions of an entire generation of potential entrepreneurs. It also made the world of venture capital more common place and accessible.
As much as the Internet marketplace is saturated with entrepreneurs, we have not stopped hearing stories of individuals who leave their high-paying positions and comfortable corporate lives to start their own businesses.
This is more so with the emerging trend of Generation-Ys who are into start-ups, creating a whole new breed of “wannabe” entrepreneurs.
What does it mean to be an entrepreneur?
The word “entrepreneur” comes from a French word meaning “to undertake”. In the business world, this term applies to someone who wants to start a business or enterprise.
Principles of management define “entrepreneurship” as recognising opportunities (needs, wants, problems and challenges) and creating resources to implement innovative ideas for new, thoughtfully planned ventures.
Webster’s dictionary defines an entrepreneur as “the organiser of an economic venture; especially one who organises, owns, manages and assumes the risks of a business.”
An entrepreneur identifies opportunities when connecting new ideas with new markets.
Connecting the dots
So how exactly do entrepreneurs identify opportunities for new business ventures? An article in the Academy of Management Perspectives journal highlights several traits of entrepreneurs.
Entrepreneurs actively search for opportunities and not rely on them knocking at their door, nor depend on traditional sources of information to keep themselves updated.
Second, entrepreneurs are particularly alert to opportunities, observing changes in the environment or previously overlooked possibilities.
Scott Shane’s research on Prior Knowledge and the Discovery of Entrepreneurial Opportunities confirms that having prior industry or market experience greatly aids entrepreneurs in being able to create innovative new solutions.
Research in human cognition shows that these three factors – active search, alertness and prior experience – combine to help entrepreneurs connect the dots and see the potential in seemingly unrelated events or trends (Academy of Management Perspectives).
There are many characteristics that make a successful entrepreneur. I would like to zoom in on the ability to connect the dots and spot opportunities, as entrepreneurship and the pursuit of success in one’s own business require a number of unique personal traits and skills that many corporate executives consider to be “out of the box”.
Practical implication of a “connect the dots” perspective
There is widespread agreement that entrepreneurs play a major role in fostering economic growth and job creation in their communities.
If so, it is worthwhile to understand the nature of opportunity recognition and ask: What does a “connect the dots” perspective offer in this respect?
Here are some questions worth exploring:
1. Why are some better at recognising opportunities?
The first question refers to how some individuals are able to recognise links and connections between events more readily than the masses who are also exposed to the same events or trends.
For instance, how “cronuts” – a hybrid of doughnuts and croissants – was invented and rapidly became so popular that it was named one of TIME magazine’s “Best inventions of 2013”.
Millions of people had eaten the two pastries separately, yet few recognised the opportunity of producing and selling a hybrid of both. Today the cronut has spread all over the world including Australia, China and Japan.
So, why do so many people “miss” opportunities that are staring them in the face, while a few recognise them?
Individuals may recognise specific opportunities that others overlook because they possess existing prototypes and paradigms (i.e. cognitive frameworks) needed to perceive patterns among seemingly unrelated trends or events.
Consider Chester Carlson, the individual who invented the modern day photocopy machine. There were many attempts to create an effective functional machine. However, Carlson led the way to a long line of successful Xerox copiers which are used till today.
Carlson had a strong law and technical degree. So on the one hand, he understood the strong need for an improved way of making copies, and on the other, Carlson had the strong technical skill to complement the process of finding an effective way to make dry permanent copies.
He possessed the cognitive frameworks to combine various technological advances and changes in the nature of business which resulted in a product that revolutionalised offices, education and other fields.
It is worthwhile to consider that each individual’s life experiences are unique with different persons possessing different prototypes.
In comparing an individual who has worked for years in a given industry with well-developed prototypes and paradigms relevant to the industry with another who has worked in a different industry, each might be less likely to “connect the dots” and recognise opportunities in the industry of the other.
Having an existing framework or prototype from the relevant background helps individuals recognise opportunities derived from changes in technology, which enables them to better spot risks and business opportunities.
2. Can the “connect the dots” mindset be cultivated?
To develop the next generation of leaders, understanding if current and aspiring entrepreneurs can learn how to be more successful and proficient at identifying opportunities is important.
First, the “connect the dots” perspective suggests that anyone can be trained not merely to be alert to opportunities or to search actively for them, but rather, to search in the best places and best ways.
Specifically, focus your efforts on identifying changes in technology, demographics, markets and other pertinent factors that play an important role in the success of any organisation.
Secondly, while engaging in such searches, focus on identifying ways in which these trends and changes are linked or connected. In other words, search for emergent patterns (International Journal of Business Management).
Research on pattern recognition and entrepreneurship suggests that this can be learnt and it is often a key initial step in the process of identifying new business opportunities.
When individuals pay attention to pertinent factors and try to find ways to understand how these factors are interrelated, there is a high likelihood that they will learn to recognise trends and patterns that have emerged from changes in the external world.
This, in turn, also indicates that entrepreneurs will improve their ability to recognise opportunities in certain domains (industries, markets, etc.) when they are trained to focus on the most relevant factors and find connections between these variables or changes.
Consider an entrepreneur with a strong interest in the restaurant business – this individual would focus on factors such as changing technology (e.g. technology that minimises food preparation time or increases food storage lifespan), changing demographics (emerging healthy eating trends or serving specific food that caters to an untapped demographic) and working policies concerning environment, health and safety (environmentally friendly and zero-waste approach to running restaurants).
An aspiring entrepreneur would pay careful attention to these and relevant sources of information, which might not be readily discernible, but once spotted, he or she would be able to create a niche market that would cater to an emerging trend.
A pattern recognition perspective also suggests that opportunity recognition can be enhanced by providing potential entrepreneurs with a broad range of experiences.
The broader this experience, the richer will be the reservoir of prototypes and paradigms we can draw from.
Hence, the more likely the entrepreneurs will be able to make connections between seemingly unrelated events or trends – especially connections that are not immediately apparent to the ordinary observer.
Lastly, exposing individuals to a wide range of business opportunities that vary greatly in quality may prove beneficial as well. The richer the storage of paradigms individuals have in memory, the more effective they may be in comparing newly encountered events or stimuli and, hence, in identifying emergent opportunities.
We can all be entrepreneurs
All in all, a “connect the dots” perspective seems to paint an optimistic picture – suggesting that we can all learn, through appropriate training, to be more competent and adept entrepreneurs.
Current or prospective entrepreneurs can benefit from effective training and business education. Being better equipped with the necessary entrepreneurial skills and knowledge would help them recognise emerging opportunities.
In practice, entrepreneurs can benefit from focusing their attention on the task of searching for patterns in events and changes in order to find potential business opportunities.
There is also potential value in being exposed to a wide range of paradigms – both good and bad ones – which serve as a foundation for successful new ventures while still being aware of potential reasons for less-than-positive results.
It is no wonder that training programmes such as the Blue Ocean Strategy and Innovation are in high demand as they are relevant not only to entrepreneurs but also to those working in large organisations.
Anyone can have the mindset and attitude of an entrepreneur and translate that into action even while working for a big corporation, embracing the risk-taking and innovative traits by turning an idea into a profitable business opportunity.
Many entrepreneurs seek to convert their ideas and visions into reality – providing services and products that help improve and enhance the lives of others.
Since the ability to “connect the dots” and to identify new opportunities is often a prerequisite at the starting point of this journey, it seems crucial for us to understand the process and how it can be enhanced.
In this case, we all have the potential to be entrepreneurs and with the right environment, skills, knowledge and training to foster the right mindset, we are that much closer to reaching our dreams and turning our entrepreneurial ventures into reality.