Chapter 3: Opportunity Recognition in Technology

1. Identifying Unmet Needs and Gaps in the Market

Opportunity recognition involves identifying problems,

inefficiencies, or unmet needs that can be addressed through
innovative technology solutions. This process is crucial for
entrepreneurs looking to create products or services that fill gaps
in the market.

 Key Concepts:

 Market Gaps-Areas where existing solutions are

inadequate or nonexistent, providing space for innovation.
 Customer irritants-Specific customer frustrations or
inefficiencies in existing processes that signal opportunities
for improvement.
 Consumer shifts-Technological advancements and
evolving consumer behaviors that create new business
possibilities
 Competitive benchmarking-Studying the strengths and
weaknesses of competitors to identify missing features,
untapped markets, or potential areas for differentiation.

 Approaches to Identifying Opportunities:

 Customer Feedback & Surveys-Direct input from target

users helps uncover common problems and desires that
have not been adequately addressed.
 Field research/behavioral analysis-Studying customer
behaviors and experiences in real-world settings to detect
inefficiencies and potential solutions.
 Strategic market analysis/market analytics-
Leveraging market research, industry trends, and
consumer analytics to understand demand and future
opportunities.
  Brainstorming & Ideation Techniques - Using
structured creative thinking exercises to generate
innovative ideas based on identified gaps.

2. Tools for Market Analysis and Opportunity Assessment

 Market Analysis Tools:

A. SWOT Analysis (Strengths, Weaknesses, Opportunities,

Threats) - it helps the company understand the internal and
external factors that can affect their success and make informed
decisions.

1. Strengths
2. Weaknesses
3. Opportunities
4. Threats

How it Works:

1. Identify the factors: list the company's strengths,

weaknesses, opportunities, and threats.
2. Analyze the results: analyze how the strengths can be
leveraged, how weaknesses can be improved or minimized, how
opportunities can be seized, and how threats can be mitigated.
3. Strategic planning: The information gathered in the SWOT
analysis helps create action plans.

B. PESTLE Analysis (Political, Economic, Social,

Technological, Legal, Environmental) -framework used to
analyze external factors influencing market.

Breakdown of PESTLE Factors:

1. Political: This refers to government policies, political stability,

regulations, and any other factors related to the political
environment.
2. Economic: Economic factors impact how businesses operate
and make decisions.
3. Social: Social factors involve changes in demographics,
lifestyles, culture, and consumer preferences.
4. Technological: This factor focuses on how technological
innovations and advancements affect the industry or market..

5. Legal: Legal factors include laws and regulations that affect

business operations.
6. Environmental: Environmental factors focus on the physical
environment, including sustainability issues, climate change, and
environmental regulations.

How PESTLE Analysis Works:

PESTLE analysis helps businesses assess how external factors

(outside of their control) can impact their operations, strategies,
and market opportunities.

1. Political
2. Economic
3. Social
4. Technological
5. Legal
6. Environmental

C. Porter’s Five Forces

1. Industry competition-refers to the rivalry among industry

players or competing entities.

Factors that influence competition:

1.1 the number of industry players –

 high rivalry-when companies offer similar products/services
 low rivalry-when there ate few firms that dominate the
industry

1.2 market growth dynamics

 fast-growing industries-less rivalry, focus on capturing new
customers rather than fighting over existing ones
  slow-growing industries – more rivalry, need to run
off/sneak customer

1.3 Brand distinction

 If products are unique-less rivalry, because companies

attract different customer segments
 If products are similar-more rivalry leading to price wars
and aggressive marketing

1.4 Substitution costs/loyalty lock-in factors

 high costs-lower rivalry, customer may find it expensive to
change brands
 low costs-high rivalry, customers can easily switch brands

1.5 operational wind-down costs/shutdown barriers

 High cost, more rivalry, companies stay in the market and

compete aggressively to survive
 Low cost, less rivalry, companies can easily exit

2. Supplier power/bargaining power of suppliers-refers to

the influence of suppliers have over companies in an industry.

2.1 number of supplier

 high power-when few suppliers
 Low power-when many suppliers exist

2.2 supplier differentiation/product exclusivity

 High power-suppliers provide specialized product or service
or hard to replace product/service
 Low power-when the product/service is common, widely
available or easy to switch

3. Buyer influence (Customer)/bargaining power of

buyers, -the ability of individual consumers or businesses to
influence pricing, quality, and terms of products or services.
  High power-buyer can demand lower prices, higher quality
or better service

 Low-power-businesses have more control over pricing and

terms

Factors that influence the power:

3.1 number of buyers vs. number of sellers

 High power when few buyers control a large portion of
sales, they can demand lower prices
 Low power-many buyers exist

3.2 product differentiation-means what makes a product/service

stand out from competitors by offering unique features, qualities
or branding that appeal to customers

 High power-when products are similar, buyers can switch

easily
 Low power-when products are unique or highly branded
buyers have fewer choices

Types of product differentiation:

1. physical/product features-unique design, features

2. service differentiation = exceptional customer service,
after-sales support
3. brand differentiation-strong brand identity, reputation or
emotional connection with customers
4. pricing differentiation-budget friendly pricing strategies
5. technological differentiation - using technology to stand
out
6. distribution differentiation-making products available
exclusive distribution channels

3.3 substitution costs/loyalty lock-in factors

 High power if switching is cheap or easy

  Low power-if switching is expensive or inconvenient

3.4 buyer's price sensitivity

 High power - if buyers are price-sensitive, they will

negotiate for discounts
 Low power-buyers are willing to pay a premium, companies
can charge more.

3.5 self-supply strategy/internal sourcing-make their own product

 High power-buyers can produce the product themselves

 Low power-buyers can't produce their own, they depend on
suppliers

4. Threat of substitute-refers to risk that alternative

products/services could replace a company's offerings, reducing
demand and profitability.

Factors affecting:

4.1 availability of alternatives

 High threat many substitute products exist

 Low threat-no real substitutes exist

4.2 switching costs for customers

 High threat-if switching is cheap

 Low threat-switching is costly where substitutes can
become less attractive

4.3 Affordability vs. Quality Comparison/price-performance

comparison

 High threat when substitutes offer similar benefits with

lower cost
 Low threat when primary product offers unique value
4.4 brand attachment or buyer retention

 High threat when buyers are not brand loyal and are willing
to try alternatives

 Low threat-when customers prefer a brand even if

alternatives exist

5. Potential market entrants/threat of new entrants-new

companies that may enter an industry and compete with existing
ones. They pose threat by introducing new products, lowering
prices

Factors affecting the threat of new entrants

5.1 barriers to entry

 High barriers-fewer entrants

 Low barriers more competition

5.2 capital requirements

 High investment discourages new entrants

 Low-cost businesses attract more entrants

5.3 brand loyalty and customer switching cost

 Strong brands harder for new entrants to attract customer

 If switching costs are low, new entrants can easily gain
customers.

5.4 access to distribution channels

Established companies control supply chain making it more

difficult for new entrants to compete
5.5 government regulations and other statutory requirements-
compliance with licenses make entry harder

5.6 economies of scale-refer to the cost advantages that

businesses experience as they increase production

Large firm can produce at lower costs giving them a pricing

advantage

New entrants must invest heavily