Characteristics that tend to make some people better at recognizing opportunities than others.
1. Prior Industry Experience
- Several studies have shown that prior experience in an industry helps an entrepreneur recognize business opportunities.
- By working in an industry, an individual may spot a market niche that is underserved.
- It is also possible that by working in an industry, an individual builds a network of social contacts who provide insights that lead to recognizing new opportunities.
2. Cognitive Factors
- Studies have shown that opportunity recognition may be an innate skill or cognitive process.
- Some people believe that entrepreneurs have a “sixth sense” that allows them to see opportunities that others miss.
- This “sixth sense” is called entrepreneurial alertness, which is formally defined as the ability to notice things without engaging in deliberate search.
3. Social Networks
- The extent and depth of an individual’s social network affects opportunity recognition.
- People who build a substantial network of social and professional contacts will be exposed to more opportunities and ideas than people with sparse networks.
- Research results suggest that between 40% and 50% of people who start a business got their idea via a social contact.
- Creativity is the process of generating a novel or useful idea.
- Opportunity recognition may be, at least in part, a creative process.
- For an individual, the creative process can be broken down into five stages, as shown below.