ENTREPRENEURSHIP AND ITS PREREQUISITES (7)

CHOOSING A PRODUCT AND A MARKET

A prospective entrepreneur needs to come up with a good idea. This will serve as the foundation of the new venture.

Sometimes an entrepreneur sees a market need and—Eureka!—has an idea for a product or service to fill it. Other times an entrepreneur gets an idea for a product or service and tries to find a market for it. A Scottish engineer working at General Electric created putty that bounces but had no use for it. In the hands of a creative entrepreneur, it became a toy, “Silly Putty,” with an enthusiastic market: children.

The idea doesn’t have to be revolutionary. Research, timing, and a little luck transform commonplace ideas into successful businesses. In 1971, Chuck Burkett launched a firm to make an ordinary prod­uct, novelty key chains. But when he got a con­tract with a new venture in Florida—Disney World —he started making Mickey Mouse key chains, and achieved tremendous success.

There are many ways to look for ideas. Read a lot, talk to people, and consider such questions as: What limitations exist in current products and services? What would you like that is not available? Are there other uses for new technology?

What are innovative ways to use or to provide exist­ing products? In Australia in 1996, two entrepre­neurs founded Aussie Pet Mobile Inc. to bring pet bathing and grooming to busy people’s homes. It is now a top U.S. franchise business.

Is society changing? What groups have unfulfilled needs? What about people’s perceptions? Growing demand for healthy snacks created many business opportunities in the United States, for example.

Business ideas usually fit into one of four catego­ries that were described by H. Igor Ansoff in the Harvard Business Review in 1957:

·                     An existing good or service for an existing mar­ket. This is a difficult approach for a start-up operation. It means winning over consumers through merchandising appeal, advertising, etc. Entry costs are high, and profit is uncertain.

·                     A new good or service for a new market. This is the riskiest strategy for a new firm because both the product and the market are unknown. It requires the most research and planning. If successful, however, it has the most potential for new business and can be extremely profitable.

·                     A new good or service for an existing market. (Often this is expanded to include modified goods/services.) For example, entrepreneur­ial greeting-card makers use edgy humor and types of messages not produced by Hallmark or American Greetings—the major greeting-card makers—to compete in an existing market.

·                     An existing good or service for a new market. The new market could be a different country, region, or market niche. Entrepreneurs who provide goods/services at customers’ homes or offices, or who sell them on the Internet, are also targeting a new market—people who don’t like shopping or are too busy to do so.

The last two categories have moderate risk, but product and market research can reduce it. They also offer opportunities for utilizing effective start-up strategies—innovation, differentiation, and market specification.