How entrepreneurs discover opportunity. Entrepreneurial opportunity is the possibility for new profit-potential through situations in which new goods, services, raw materials and organising methods can be introduced and sold at a greater price than it costs to produce them.
This article explores 3 explanations of how entrepreneurs discover opportunity using the Virgin Atlantic story as told by Sir Richard Branson:
He draws inspiration for new business ideas from things that frustrate him – “I know if something is annoying me, then there is usually a problem to solve or a better way of doing something”. It was the reason he started Virgin Atlantic years ago.
He told the story of how his flight was suddenly cancelled. He said “I was sure I wasn’t the only person who was disappointed by the cancelled flight, so I handed over my credit card (hoping it wouldn’t bounce) and hired a plane”.
He then borrowed a whiteboard and scrawled the name Virgin Airlines on it as a joke – advertising $39 fares to the British Virgin Islands on it.
He managed to fill the flight up with all the bumped passengers. The next day he picked up the phone and rang Boeing to find out if they had any 747s for sale – and the idea for Virgin Atlantic was born.
According to him, “We’ve taken what we learned and applied it to multiple sectors and industries”.
How entrepreneurs discover opportunity – the realist explanation
The realist explanation of how entrepreneurs discover opportunity – discovery opportunities or the individual/opportunity explanation.
This approach explains how entrepreneurs discover opportunity from the point of view that opportunities are there for the taking.
However, it exists for only those (entrepreneurs) who possess the qualities necessary both to discover and exploit them.
Thus, entrepreneurs are different from non-entrepreneurs in sense that they possess an accurate view of “reality”.
In essence, it means that opportunity is unobservable and knowledge is fragmented.
Therefore, the ability to discover opportunity is subjective. It depends on being able to integrate and improve existing knowledge.
From the Virgin Atlantic story, Richard Branson possessed the qualities necessary to both discover and exploit an opportunity.
Although the opportunity existed independent of his knowledge of it he was simply alert to the possibility of taking the opportunity to solve a problem he had experienced.
Drawing upon his prior experience and market knowledge. He was able to make judgement about the possibility of starting an airline after his spontaneous experiment with the hired plane.
How entrepreneurs discover opportunity – the constructionist explanation
The constructionist perspective of how entrepreneurs discover opportunity sees knowledge as relative and entrepreneurial opportunity lies in the perception of an entrepreneur.
It explains how entrepreneurs discover opportunity as based on how individuals interpret a phenomenon, raw data, or resources and give it a meaning that is different from the interpretation of others.
Using the same example, although, Richard Branson experienced the same problem as others, he was able to discover an opportunity based on his interpretation of the incident.
He perceived and assigned a meaning to the condition and phenomenon differently from the non-entrepreneurs.
He created something and gave it a name, a self-fulfilling prophecy – he wrote Virgin Atlantic on the whiteboard.
The process started by applying the resources at hand (bricolage) – his knowledge, experience and credit card to a new problem and opportunity.
While others (non-entrepreneurs) only saw a problem, he (an entrepreneur) saw a problem, and looked for an immediate solution that led to a new venture being created.
How entrepreneurs discover opportunity – the evolutionary realist explanation
The evolutionary realist explanation of how entrepreneurs discover opportunity combines the strength of the two previous explanations.
Although there is a reality independent of the individual, this reality imposes constraints on the individual’s actions.
Therefore, knowledge may be constructed by individuals – but it is validated through social cross-validation.
This approach explains that opportunities are created through new combinations of resources by the innovative entrepreneur. That is, new combinations of resources result in a new product which is brought to market.
Creation opportunities to produce and sell new products or services do not exist until entrepreneurs act to create them.
The Virgin Atlantic interpretation from this perspective, therefore, is that no opportunity existed until Richard Branson decided to create one.
That is, he acted first, and it was his action that developed both the opportunity and the market for an airline that cares.
Opportunity cannot be understood until they exist, and they only exist after they are enacted in an iterative process of action and reaction.
As a serial entrepreneur, he simply repeated the enactment process in creating what turns out to be a very different new opportunity.