A Matrix-Driven Approach to Understanding Success Factors

The collision of the circumstances and situations of the real world and the ideas and efforts of an entrepreneur can lead to a variety of outcomes.

A framework that can be used to understand and analyse the outcomes can be termed the “Entrepreneurial Opportunity Model,” eluding that entrepreneurship arises from the intersection of a market need and an entrepreneur’s ability to identify and capitalise on that need.

This principle, first introduced by Scott Shane in his book “The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By” (2008) represented as a two-dimensional matrix, with market needs on one axis and entrepreneurial ability hopefully will elaborate.

By mapping market needs and entrepreneurial ability onto a two-dimensional matrix, different types of opportunities can be identified and analysed. These types include “Discovery-Driven,” “Creation-Driven,” “Effort-Driven,” and “Luck-Driven.”

In this matrix, different quadrants represent different types of opportunities:

“Discovery-Driven” Opportunities: These are opportunities that have a high market need and low entrepreneurial ability. These opportunities are typically found in established markets and can be pursued by entrepreneurs who can identify unmet needs and create solutions to meet them. Examples include the rise of companies like Google and Facebook, which identified the need for search and social networking respectively. As the name suggests these are out there waiting to be uncovered.

“Creation-Driven” Opportunities: These have a low market need and require high entrepreneurial ability. These opportunities are typically found in new or emerging markets and can be pursued by entrepreneurs who can create new markets or industries through innovation and disruption. Examples include the rise of companies like Uber and Airbnb, which created new markets for ride-sharing and home-sharing respectively. Some of these may require huge sunk costs as often industry paradigms need a shift. They certainly are game-changing.

“Effort-Driven” Opportunities: These have a low market need and low entrepreneurial ability. These opportunities are typically discovered in crowded markets or industries with a high degree of competition. Examples include companies that have a great product but poor marketing or management practices which often lead to their demise. These can be termed as the ones that might have stayed a pivot or two short.

• Kodak, invented the digital camera but failed due to a lack of foresight and poor management.

• Blockbuster, the video rental chain was overtaken by the streaming services of Netflix due to poor strategic decisions and an inability to adapt to changes in the market.

• Blackberry, was the pioneer in the smartphone market but failed to adapt to the rise of touchscreen smartphones and lost market share to competitors — Apple and Samsung.

“Luck-Driven” Opportunities: These have a high market need and high entrepreneurial ability. These opportunities arise out of serendipity, such as ideas that are ahead of their time and do not gain traction until later on.

• Penicillin, the first antibiotic, was discovered by Alexander Fleming in 1928. He noticed that a mould called Penicillium notatum had contaminated one of his petri dishes, and observed that bacteria in the dish had been killed. In contrast, bacteria around the mould remained unharmed.

• The Slinky, a popular toy made of a helical spring, was invented by Richard James in 1943 when he accidentally knocked a spring off a shelf and watched it “walk” down.

• The microwave oven, Percy Spencer an engineer at Raytheon discovered the microwave oven in 1945 while working on a radar-related project. He noticed that a candy bar in his pocket had melted and this led to the discovery of microwave ovens

Understanding which quadrant you fit into can help you identify areas for improvement and determine which strategies will be most effective for exploiting opportunities.

If you fit into the “Discovery-Driven” quadrant, you may need to focus on identifying untapped market opportunities and developing your ability to identify new ideas and trends.

If you fit into the “Creation-Driven” quadrant, you may need to focus on developing your innovative and disruptive abilities to create new markets or industries.

If you fit into the “Effort-Driven” quadrant, you may need to focus on improving your marketing and management practices to overcome competition in crowded markets and increase your effort towards identifying and exploiting opportunities.

This certainly is a cool and valuable tool for anyone looking to start a business or improve their entrepreneurial success. Once you figure out your own entrepreneurial style and the opportunities available to you can be better prepared for success.

References:

Shane, S. (2008). The illusions of entrepreneurship: The costly myths that entrepreneurs, investors, and policy makers live by. Yale University Press.

Stevenson, H. H. (1985). New business ventures and the entrepreneur. Irwin.

Osterwalder, A., & Pigneur, Y. (2010). Business model generation: A handbook for visionaries, game changers, and challengers. John Wiley & Sons.

© Sameer Babbar

sbabbar@sameerbabbar.com

Disclaimer: This is for information only. It does not take into account your objectives, financial situation or needs. The author, his company his associates, his directors, his staff, his consultants, and his advisors do not accept liability for any loss or damage, including without limitation, any loss, which may arise directly or indirectly from the use of or reliance on the information provided.