Categories
Opportunities

How to spot business opportunities?

There are many ways to spot business opportunities. For example by copying ideas used in your own field or those found in completely different areas. Or by absorbing more information through traveling, reading, and listening to people talking about their lives.

While business opportunities are mostly discovered and then exploited, they can also be created and then exploited1. Opportunity creation involves much more uncertainty than opportunity discovery and requires visionary skills that allow for developing ideas people haven’t even thought about.

Either way, the question for entrepreneurs is the same:
how to actually realize that something is a business opportunity?

The short answer and the topic of this article is:
by viewing everything as a problem.
Where there are problems there are opportunities.

Spotting a business opportunity comes after spotting a problem.

Spotting a problem

The world is full of problems. One could say that (almost) everything is a problem. Or at least you can view it in that way.

Imagine the following situations.

You MUST wake up at 6:00am next morning and go to work. But how can you make sure you will wake up at 6:00am? You don’t know when you are going to wake up, right? But you have to wake up so that you make it to work in time. If you don’t wake up at 6:00am, you will be late from work, and that might get you embarrassed, or even fired.

After waking up you probably want to wash yourself. You might want to wash your body, hair, and teeth. If you don’t wash them, you will smell bad and look like you are not taking care of yourself, which could lead to people trying to avoid you. You probably wouldn’t feel comfortable either, so you wouldn’t be very confident about yourself. But what do you need for washing, water? Something else? What else, where can you do it, and how?

Now you’re hungry after the night and need to get something to eat before you go to work. If you don’t have breakfast, you will start feeling low-energized, tired, maybe get a headache and an uncomfortable stomach pain.

Before you leave for work though, you might want to leave some of your belongings in the place where you slept. Otherwise you would have to carry all your stuff on the streets and take it to work. But where can you leave it so that nobody will steal it from you? Where did you get all that stuff anyway? And where did you sleep?

You now need something to cover your body, because you don’t want to be running around naked or catch a cold. It would also be great to have something for your feet to be able to walk faster without them hurting. And then you need to figure out how to get to work. You could walk but it’s 5 miles…

During the rest of the day you will have multiple other problems. You will have to eat again to keep yourself energized. You would like to know if your mom is fine as you know she was sick last time you visited her. On your way to the office you have to open a locked door to get in. But actually you don’t like your job that much. You’d like to get a new one. Or maybe you don’t want to work for anyone but become a company yourself.

The world is full of problems

These problems represent only a small fracture of all the problems we have every day. Seriously, there are so many more, but I’m sure you get the idea. Our lives are full of problems.

The above-mentioned problems are only quite basic human needs. A great way to understand human needs in general is to take a look at the graph below. Almost 80 years ago, Abraham Maslow presented the famous hierarchy of needs alongside his proposed theory of human motivation.

Maslow hierarchy of needs

Another way to think about problems is to categorize them by the level of uncertainty involved in the decision making. The Cynefin Framework (cynefin=Welsh for habitat), developed by Dave Snowden at IBM, includes four types of problems. They are 1) simple or obvious problems where it is clear what causes the problem and how to solve it, 2) complicated problems, 3) complex problems, and 4) chaotic problems where we don’t know what exactly causes what and how to solve it.

We could also just say there are solvable problems and (nearly) unsolvable problems. The latter are often also called wicked problems2. Current examples of such problems include climate change, poverty, and terrorism.

Climate change is a wicked problem. Photography by Sonalini Khetrapal. Source

Yet, problems of lower importance can also be wicked. For example, every design problem is basically wicked, because they don’t have a definitive formulation, they lack a stopping rule that clearly indicates the problem has been solved, and their solutions are not right or wrong, only good or bad.

From problems to business opportunities

All problems are based on people’s needs and wants. These needs and wants are the foundation of business opportunities. Because, what do entrepreneurs do?

Entrepreneurs satisfy people’s needs by solving problems.

Now, we know that our world is full of problems, and that these problems are based on people’s needs. In order to move from “problem-thinking” to “opportunity-thinking”, you have to consider two important factors.

First, what solutions are available? Most of our problems already have several solutions. But how good are the solutions? Could they be better? Do they miss crucial features? Do they have too many unnecessary features? Is the price reasonable? Could it be lower? Should it be lower? Can the solutions be easily reached? Are they customizable? If we look at opportunities based on the existence of problems and solutions, we can nicely place them in a two-by-two matrix.

Problem-solution opportunity matrix

Second, what do different groups of people want? People are different. So are their needs. The Chinese may not love potatoes, but the Germans do. Many guys don’t wear pink, but many girls do. Most of us can’t afford a Ferrari, but others can. Grouping people doesn’t only help you spot the best opportunities but it also helps you focus on solving the exact problem of the chosen group of people and make them happy.

Such groupings, or market segmentation, can be based on many factors. Most commonly used ones are demographics (age, gender, income, education, location, marital status etc.), lifestyle (activities, interests, opinions), and behavior (purchase frequency, loyalty, adopter status etc.).

How to spot business opportunities

By viewing everything as a problem and considering the availability of solutions and the needs of different groups of people (or companies), you start spotting opportunities everywhere. It is worth mentioning however that spotting problems is easy, but spotting opportunities requires at least some level of knowledge and research.

The deeper your research, the better your understanding of the opportunities will be.

Conclusion

Training your brain to spot problems and realizing that there are business opportunities everywhere takes some time. Yet, it is very easy to start right now. I am sure you can name one hundred problems you or your friends and family have right now (and I’m not even referring to the pandemic!).

If there is a problem somewhere and no solution available, it doesn’t always mean that there is a great business opportunity. Maybe there’s no solution because the problem is too complex. Maybe someone is developing a solution but it is not on the market yet. Maybe there have been several solutions in the past but the business itself is not profitable.

Two happy smiling men working together on a new business project at a workplace

For entrepreneurs who spot opportunities and would like to act upon them, one of the important next steps is to think about how to make living out of solving someone’s problem.

That, of course, refers to the development of a business model.


References

1Alvarez, S. & Barney, J. 2007. Discovery and creation: Alternative theories of entrepreneurial action. Strategic Entrepreneurship Journal, 1: 11-26.
2Rittel, H. W. J. & Webber, M. M. 1973. Dilemmas in a general theory of planning. Policy Sciences, 4: 155-169.

1 reply on “How to spot business opportunities?”

Leave a comment