Essay on Opportunity Recognition

Introduction

Entrepreneurship research has acquired considerable prominence in mainstream management journals, as it has become more theory-driven and has been discussed from different perspectives (Audretsch, 2012). There are multiple definitions of entrepreneurship from different perspectives, for instance, Stevenson and Jarillo (2007) assumed that entrepreneurship is an orientation toward opportunity recognition. According to Shane and Venkataraman (2000), entrepreneurship can be seen as a process including discovering, evaluating, and exploiting opportunities to create future goods and provide services. Moreover, the nature of entrepreneurial thinking and the cognitive process associated with opportunity identification and the decision to undertake entrepreneurial action.

This essay will first identify a key challenge from a personal side that might affect the success of entrepreneurship, and discuss what challenges entrepreneurs need to address through the opportunity recognition and exploitation process. To analyze these challenges, this essay will focus on an entrepreneur who has become fairly famous in recent years, Elon Musk, the co-founder of PayPal, CEO and product architect of Tesla Inc., and CEO and CTO of SpaceX.

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Individual/ Personal side challenge

It is believed that there is a significant connection between entrepreneurial personality and the performance of organizations, Staniewski, Nowacki, and Awruk (2016), for instance, creativity and optimism are two entrepreneurial traits that might positively affect the success of entrepreneurs, (Baron, 2016). Therefore, it is believed that entrepreneurial personality is an important factor for the organization.

According to Xie, Lv, and Xu (2017), the Big Five Personality Model can be seen as one of the most useful frameworks for evaluating the relationship between personality traits and entrepreneurship. The Big Five Model includes neuroticism, extraversion, openness to experience, agreeableness, and conscientiousness, (Zhao and Seibert, 2006). Moreover, Hogan, Curphy, and Hogan (1994) pointed out that the Big Five Model can be described as ‘the bright side of personality’. This section will analyze Elon Musk’s entrepreneurial personality through the Big Five Model, and therefore, identify one key personal challenge of Elon Musk.

Based on Zhao and Seibert's (2006) study, people who score high on these two personalities are likely to be more innovative, creative, persistent, and eager to pursue goal accomplishment.

Indeed, it seems that Musk scores high on Openness to Experience and Conscientiousness. As a child in Africa, he dreams about going to the United States while reading it in comic books. He made a difference and was convinced in college that there would be three areas that might change the future of the world for good: the Internet, sustainable energy, and the ability to live outside our planet. He not only stayed true to these dreams but also created multiple ideas based on these fields, (Calhoun, 2016; Vance, 2015). Therefore, it is not a surprise that he has become one of the most famous entrepreneurs in recent years.

Xie, Lv, and Xu (2017) mentioned that positive personalities such as emotional intelligence, hardiness, entrepreneurial self-efficacy, and warmth are all important factors to entrepreneurs. Entrepreneurs with warmth are mostly cheerful and friendly, under this circumstance, they can motivate employees and have a strong ability for cooperation (Bernritter, Verlegh, and Smit, 2016).

However, Musk is considered a person who is demanding without patience and caring. Musk is incredibly difficult to work for, but it is mostly because he is so passionate. An anonymous former Tesla employee also described his experience working with Musk, saying workers were ‘tossed to the curb like a piece of litter’, (Vance, 2015; Eadicicco, 2015). These personalities and the way of getting work done can be seen as one of the most significant personal challenges for Musk.

Although some personality traits of Musk can negatively affect the success of entrepreneurship, these traits might also be the reasons that he has become a successful entrepreneur.

Opportunity recognition process challenge

To be a successful entrepreneur, it is fairly important to be able to identify a problem or gap and come up with an innovative solution, and this stage can be seen as an opportunity recognition process (Fillis, 2006).

Entrepreneurs can be identified into two groups: prevention-focused and promotion-focused. Prevention-focused entrepreneurs are good at careful planning, accuracy reliability. However, it doesn’t lead to creativity and open-mindedness, which can negatively affect the opportunity recognition process. Promotion-focused entrepreneurs, on the other hand, generate more solutions to identify problems and they can detect opportunities better.

Based on the analysis of Musk’s personality, it is believed that Musk is a promotion-focused entrepreneur, which might help spot opportunities. Moreover, Zhao and Seibert (2006) believed that Openness to Experience may be a significantly important factor in the early stage when the opportunity recognition process is a critical task. Therefore, as Musk is high on openness to experience, he is more likely to be successful through this process. Based on Shane and Venkataraman’s (2000) study, the opportunity recognition process is a stage when individuals discover potential opportunities to develop new businesses, ventures, markets, and technology.

These definitions can be proved by the fact that Musk’s opportunity recognition process is to develop new technology in a highly uncertain business environment. Although it is more likely that Musk can detect opportunities better, there is a variety of challenges during the opportunity recognition process.

PayPal, one of the most famous online payment systems in the current business environment, failed with its first PayPal product in 1999. The initial idea of the first PayPal product involved beaming money to users over Palm Pilots, which were the personal digital assistants that were launched in 1997. This product was voted as one of the ten worst business ideas of the year (Baer, 2014). As a co-founder of PayPal, Musk faced the brutal fact that the opportunities he recognized had failed. However, it is no coincidence that PayPal has become a successful company operating a worldwide online payment system. After the failure of the first PayPal product, the PayPal team believed the recognized opportunity was the right direction to work on, and the team was able to reidentify the problem and come up with an appropriate innovative solution. (Wang, Ellinger and Jim Wu, 2013)

Entrepreneurial opportunity recognition is a kind of learning process that utilizes one’s tacit knowledge. Consequently, an entrepreneur’s unique possession of knowledge enables him or her to identify certain opportunities that others neglect.

Some studies have demonstrated that higher self-efficacy leads to better recognition of entrepreneurial opportunities.

Based on the analysis, it is believed that Musk scores high on self-efficacy, and this explains the reason why Musk has recognized multiple entrepreneurial opportunities successfully. Entrepreneurial opportunities can be categorized into three groups: political and regulatory changes, social and demographic changes, and technological changes.

Opportunity exploitation process challenge

According to Choi and Shepherd (2004), opportunity exploitation is an essential step in developing a successful business. Exploiting an opportunity can be explained as a commitment to market entry. It is believed that entrepreneurs must commit to several important factors that are linked to success within the competitive business environment. Moreover, entrepreneurs are more likely to exploit opportunities and achieve competitive advantage if more knowledge of customer demand is perceived, and necessary technologies are developed. Being supported by stakeholders with appropriate managerial capability is another significant factor in the opportunity exploitation process. Furthermore, Shane and Venkataraman (2000) pointed out that the entrepreneurial opportunity exploitation process is also affected by individual differences in optimism and the willingness to bear the risk.

Musk is an optimistic risk-taker, who has perceived knowledge of customer demand and developed new technologies. Musk has been passionate about exploring Mars since he was little. By recognizing the future trends and demands of customers, Musk’s business ideas not only try to improve human quality of life with necessary technologies but are also keen to save humanity from planetary extinction or civilizational collapse (Vance, 2015). Nevertheless, the key challenge of the opportunity exploitation process for Musk is to get support from stakeholders.

Through Musk’s entrepreneurial journey, he was ousted as CEO of Zip2 in 1996 and was ousted from PayPal four years later again. Moreover, Russians refused to sell him rockets to send either mice or plants to Mars twice from 2001 to 2002. Without support from stakeholders, it is more difficult to be successful in the opportunity exploitation process. This is because Musk’s business ideas are mostly identified as radical innovations. According to Elfring and Hulsink (2003), radical innovation requires a change in the business context and the existing economic conditions while incremental innovation is more related to exploitation and competence-enhancing measures, and it enables entrepreneurs to improve existing skills. Moreover, radical innovations in new ventures involve a high level of uncertainty. Therefore, it is unlikely that entrepreneurs can successfully convince stakeholders to adopt a radical innovation rather than an incremental one.

Discussion/ Conclusion

Based on the three key challenges identified above, it is believed entrepreneurial traits, spotting opportunity, and opportunity exploitation processes are all linked with one another.

From a theoretical perspective, personality traits are a significantly important element in the entrepreneurial process, however, entrepreneurial traits are not the only factor that needs to be taken into consideration. Some positive entrepreneurial traits might be helpful to entrepreneurs, however, Musk’s case has demonstrated that all personality traits can guide the entrepreneurial journey in different ways. Although Musk is described as a person who is demanding and impatient, these traits might be the reasons why his way of getting work done is effective and efficient. Through the opportunity recognition process, being promotion-focused tends to come up with more solutions to identify problems. Musk as a promotion-focused entrepreneur failed multiple times, nevertheless, their characteristics enabled him to develop more possible solutions to address the problems, and therefore, create successful businesses. The opportunity exploitation process can be seen as a stage in which more knowledge and specialized abilities are involved. In this case, entrepreneurs should be aware of the demand of the customers with appropriate managerial ability. Moreover, entrepreneurs have to analyze if new technologies should be developed and how to get support from their stakeholders.

From a practical perspective, I believe that most of the business ideas in the initial stages are likely to fail even though opportunity is detected. The opportunity here can be recognized as a chance to make the world a better place by using new technologies and resources. Therefore, being innovative and creative is essential. Moreover, entrepreneurs should be determined and motivated by their self-belief. People believe that Musk is a genius, however, I believe his self-belief and motivation are more important factors than the intelligence through his entrepreneurial journey.