The Gut Feel: How intuition can lead you to success in business

Chapter Two: Intuition and finding opportunities

Chapter Two

This chapter looks at the characteristics of opportunity and the role intuition plays in finding and developing them. Our personal aspirations influence the types of opportunities we see. There are basically four types of opportunities; those that are imitative of other businesses, those that rely on consumer markets and established supply chains, those that are entrepreneurially novel, and those that come from some form of breakthrough technology. The concept of mindfulness is introduced which helps us see opportunities at various depths or levels. Finally the chapter shows how to construct an opportunity using the method called concept extraction.

Intuition and Finding Opportunities

The central aspect of opportunity is being able to see it in the first place and act upon it before others. This relies upon how we see the world and process information. The resulting vision, insight, discovery, or creation is an idea that upon evaluation may become an opportunity. This ability is not evenly distributed among people as people have different orientations towards the world around us, as figure 2.1. shows.

Figure 2.1. Peoples’ different orientations towards the world.

Most ideas have their basis in some old idea, something seen or experienced within the past, so from this point of view most opportunities are not truly novel. For example, an old type of business can be given a new business model and professionalism like McDonalds did for burgers and Holiday Inn did for motels. New technologies can be applied to old products and processes like desktop publishing and email and domestic business models can be expanded internationally like Coca Cola and Pizza Hut.

Many people mistake their personal aspirations for opportunity. For example people put their money and efforts into a boutique, restaurant or spa for the wrong reasons because they like fashion and shopping, food and cooking, or aromatherapy and massage, only to close down a few months later because there was no real opportunity. In SME’s the values of the founder and the firm are the same in many cases. The way we look for business opportunity is to a great degree influenced by a hierarchy of personal and family aspirations and concerns that cannot easily be separated from business goals. This can be dangerous if one is unaware of their influence upon thinking. This hierarchy of personal, family, and business aspirations are depicted in figure 2.2.

Figure 2.2. This hierarchy of personal, family, and business aspirations

Different types of opportunities in various market environments display different types of characteristics. Imitative businesses like milk bars, flower shops, newsagents, and automobile mechanics require a very low level of analysis and intuition to see these opportunities. Formal strategy and tactical moves are also much less important for these types of businesses because they tend to rely on passing trade and offer similar products to their competitors. The only question requiring an intuitive answer that an entrepreneur will ask here is; if he or she opens a business in a particular location, will there be enough business coming in to make it viable?

Opportunities in established markets served by medium to large companies like in the grocery or hardware trade may require more analysis to identify opportunities with little use of intuition. For example, one will analyse the market for unfulfilled gaps and seek to fill them with new products, or move to new markets with existing products. Formal strategy plays a much more important role in this arena, although tactical moves tend to be low. The important intuitive question here is; whether there is enough demand for the new product?

Opportunities that are based on the discovery of new markets due to changing industry structures or demographics for example, require high intuition to find them, using a low level of analysis. For example although a growing aged population can be observed very easy, new opportunities will tend to be intuitive rather than analytically based, i.e., this segment likes 50s classic music, so will new businesses based on this idea be successful? The answers can only be found out through trial and error. Entrepreneurs tend to carve out their product and market niches using tactical moves rather than utilizing formal strategy.

Finally in markets where real technology breakthroughs occur, require high analysis and also high levels of intuition are to identify opportunities. New products come from intuitive ideas from what the technology can do. For example when Texas Instruments developed LED, the researchers developed as many products they could that could utilize the technology like calculators and watches, etc. New products come as ideas rather than from any market analysis. Formal strategy is very important but a fair degree of trial and error is also required. You saw that how tactical moves were important when plasma TVs and 3G mobile phones were launched, and we are also seeing this with the advent of iPads and internet TV.

Figure 2.3. The various characteristics of different types of opportunities.

Opportunity construction primarily relies on a person’s intuitive thinking to tap into a person’s creativity and imagination. How any idea will be developed will depend upon what information a person knows, their life experiences, and how they connect all the pieces of information together.

Curiosity and interest are two very important ingredients that help drive a person’s opportunity awareness. Without these two ingredients important bits of information from the environment may be missed or glossed over. Usually specific opportunities are spotted by people who work within a particular industry or have related hobbies or interests. For example, Nike was formed by track coach Bill Bowerman and middle distance runner Phil Knight who both had a passion for their sport. They were able to see opportunities that others outside the running fraternity may have not been able to see.

However occasionally people within an industry may become complacent and so accustomed to the ways things are done that it becomes difficult for them to see any other ways of doing things. Time and time again industry outsiders are able to spot these points of complacency and become industry leaders within a very short time. The most famous story of recent times are the young upstarts Steve Jobs and Steve Wozniak who started Apple Computer and changed the whole structure of the computer industry under IBM’s nose, which was focused on the large commercial users. Likewise Kemmons Wilson saw that motels in America lacked quality and consistency and formed Holiday Inn to provide the quality and consistency he felt they wanted.

Many successful ideas are based on intuition and end up changing the way industries operate. Microsoft, Dell, Disneyland, and Jims Mowing here in Australia are all good examples of that.

Mindfulness allows a person see the environment more clearly and become more sensitive as we develop our personal mastery. Recent New York University research has shown that when our mind relaxes part of our brain called the default neural network activates and processes our thoughts unburdened and unencumbered by emotions and other cognitive biases. The closest thing to explaining how this works is when we daydream, or when we are relaxing over dinner or having a shower and suddenly get that ‘aha” thought that solves a problem that we haven’t been able to fix all day. The more mindfulness, the better the perception of opportunities, however other facets such as our experience are still vitally important, which without any individual will not be able to perceive opportunity for new ventures, products, and services. Mindfulness may enhance the ability to perceive and shape new opportunities through five components that have been empirically tested by cognitive scientists;

·       Openness to novelty – the ability to reason with relatively novel forms of stimuli,

·       Alertness to distinction – the ability to distinguish minute differences in the details of an object, action, or environment,

·       Sensitivity to different contexts- tasks and abilities will differ according to the situational context,

·       Awareness of multiple perspectives – the ability to think dialectically – see different perspectives of the same thing (we will discuss later), and

·       Orientation in the present- paying attention to here and now.

One would assume that the degree of mindfulness an individual possesses will also influence the depth of opportunity that can be observed within the environment. The table below shows the different depth of ideas that can be observed and associated forms of thinking involved in seeing and creating them.

Table 2.1. The different depth of Ideas

Concepts can be extracted and synergized from unrelated locations, objects and other business models. For example, a person may secure a particular rental location and wish to create some form of business model that would serve potential customers within that location. Potential young customers around the precinct of a university like to gather at near campus restaurants or coffee lounges for snacks and social gatherings. The general characteristics of a generic fast-food business is that it is cheap, has a good standard of hygiene, good service, fast and efficient, specializing in a particular food, people know what to expect and a meeting place for people. After study of the situation some of the characteristics of a generic fast-food business can be extracted according to what the potential entrepreneur feels are most important to the potential clientele of the potential location and a new concept constructed. A hypothetical result might be a charcoal BBQ Burger Grill which is conveniently located, cheap and

affordable, has good service, a unique and tasty charcoal grill, and is a convenient meeting place with Wi-Fi, etc. This is called concept extraction where the potentially successful elements of a concept are synergized together to create a new idea. This is shown pictorially in Figure 2.4.

Figure 2.4. A constructed concept of a charcoal BBQ Burger Grill.

Remember opportunities aren’t static and continually move. This is a major reason why companies like Blockbuster Video faced financial problems in the US with the move to new multimedia formats, Angus & Robertson faced financial problems here in Australia with the increase of purchases of e-books and through websites like Amazon, and photo kiosks are desperately trying to survive with the digital camera revolution.

Summary

·        Finding opportunities is about being able to see them.

·        The ability to see opportunity is not evenly distributed through the community because people have different time and space orientations.

·        Most new ideas have basis in old ideas.

·        Many people mistake their own aspirations for opportunities.

·        The way we see opportunities is strongly influenced by our personal and family aspirations.

·        Different types of opportunity have different types of characteristics.

·        Constructing new opportunities requires creativity and imagination.

·        Curiosity and interest are important in developing our opportunity awareness.

·        Opportunities are usually spotted by people within that industry.

·        Sometimes people from outside an industry see an opportunity that changes the way things are done in an existing industry.

·        Mindfulness allows you to see the environment more clearly and the more sensitive we are, the deeper the type of opportunity we will see.

·        New opportunities can be created through selecting and synergizing different attributes of other ideas through the method we call concept extraction.

·        Opportunities are always evolving and changing and we must align ourselves with this evolution to survive.

Some More Intuition and Opportunity Tips:

·       Attribution Scanning: Sometimes intuition has to be developed or triggered by what we call attribution scanning. Attribution scanning involves looking at one small area of a market; say a product segment of interest. Select a product, e.g. laundry detergent, and start looking at all the different variations that can be made, i.e., form - liquid, solid, gas (aerosol), variations – odour, formulation type, etc, attribute incorporation – with fabric softener, with stain remover, with bleach, organic, etc., size, channel of distribution, use of products, etc, etc, etc. Some ideas may be discounted because they are just plain silly, while others may have already been taken up by other competitors, but eventually you may find some combination that may look interesting as an opportunity. By focusing during the day on something intensively, when you relax at night further ideas may come to you without conscious thinking. Who knows, one of these thoughts may be an insight that brings you success to the market.

Next Chapter: Intuition and the big picture

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