A Process Model of Entrepreneurial Venture Creation: How entrepreneurs recognize opportunities
The journey of creating a new risky business, an entrepreneurial venture, is a complex, iterative, and feedback-driven process. At its heart lies opportunity recognition, the crucial first step where the very idea for a business takes root and begins to form. Mahesh P. Bhave's process model of entrepreneurial venture creation, developed through interviews with entrepreneurs across various industries in upstate New York, offers a profound insight into this initial stage. Figure 1 of the referenced article, "Opportunity recognition sequences in entrepreneurial venture creation,"provides a road map for understanding the two distinct paths entrepreneurs typically take when identifying and pursuing business opportunities.
This model is particularly valuable for branding studios and prospective entrepreneurs alike, as it illuminates the diverse origins of business concepts and the strategic implications tied to each.
An Overview of the Two Pathways to Opportunity
The figure illustrates two primary routes through which entrepreneurial opportunities are recognized: Externally Stimulated Opportunity Recognition and Internally Stimulated Opportunity Recognition. Both pathways ultimately lead to a commitment to physical creation, but they differ significantly in their initiation and the preceding sequence of events.
Pathway A: Externally Stimulated Opportunity Recognition
This route describes situations where the decision to start a venture precedes the recognition of a specific opportunity for committed pursuit. Entrepreneurs embarking on this path are often driven by personal or environmental circumstances, rather than a particular business idea. These circumstances can vary widely, from reaching a certain age, experiencing career stagnation, an employer's relocation, or simply a deep-seated desire to cease working for others.
The process unfolds as follows:
• Decision to Start: The entrepreneur makes a conscious choice to establish a business.
• Opportunities Recognized: Following this decision, the entrepreneur actively searches for and recognizes a multitude of potential opportunities. However, the challenge here is often avoiding distractions due to the sheer volume of possibilities.
• Opportunity Filtration: A critical step where the entrepreneur aligns their existing knowledge, experience, skills, and other resources with identified market needs. This involves eliminating inappropriate opportunities until only one or a few are chosen for committed pursuit.
• Chosen Opportunity: The selected opportunity, deemed suitable for the entrepreneur, is now ready for further development.
• Opportunity Refinement: The chosen opportunity undergoes a "massaging," elaboration, or refinement process. This transforms the raw idea into a clear and articulable business concept, highlighting its unique features and competitive advantages.
Over half (59%) of the businesses studied for the model originated through this "opportunistic search".
Pathway B: Internally Stimulated Opportunity Recognition
In contrast, the internally stimulated route begins with the recognition of an opportunity that precedes the decision to start a venture. Prospective entrepreneurs typically trigger this pathway when they encounter unmet needs that existing vendors or solutions cannot easily satisfy.
The sequence of events for this route includes:
• Need Recognized: An entrepreneur identifies a specific problem or need.
• Need Fulfilled: The entrepreneur then attempts to find solutions to satisfy this need, often for themselves or a close acquaintance. Initially, they may not even realize the broader business potential of their solution, operating in what is termed the "meta-opportunity stage".
• Business Opportunity Recognized: Once a solution is found and proves effective, the business possibilities become apparent and attractive, leading to the decision to formalize the venture.
• Opportunity Refinement: Like the externally stimulated path, the identified opportunity undergoes refinement to establish a clear definition of the business concept.
About 41% of the businesses in the study originated from this "problemistic search". Examples include an individual repairing violins because they couldn't find a reliable repairer, which then evolved into a business, or an electronics researcher developing a medical instrument for a friend's unmet need.
The Bridge to Realization: Commitment to Physical Creation
Both paths, whether externally or internally stimulated, converge at the Commitment to Physical Creation. This stage marks a significant transition point, as it involves the decision to seek and invest external resources to transform the refined business concept into a tangible, marketable product. Up until this point, much of the entrepreneurial effort is intangible and relies on personal resources like time.
Why This Model Matters for Branding
For a branding studio, understanding these distinct pathways to venture creation is invaluable:
• Informing Brand Storytelling: The origin story of a venture—whether born from a calculated market search or the deeply personal drive to solve an unmet need—is a powerful element of its brand narrative. Knowing this foundation allows for the creation of authentic and resonant brand stories.
• Defining the Business Concept: The "Opportunity Refinement" stage is where the business concept takes shape, articulating the venture's unique positioning. A branding studio can help entrepreneurs further clarify these distinguishing features, especially when faced with high-novelty concepts that require customer education.
• Strategic Positioning and Messaging: If a business concept is highly novel, as some in the study were, it may require significant "missionary work" and customer education, essentially creating a market. Branding efforts in such cases would focus on education and building trust. For businesses with low novelty concepts, the branding challenge might be differentiation within an existing market.
• Identifying "Entrepreneurial Content": The model highlights that entrepreneurs introduce varying degrees of novelty at the core variables (business concept, production technology, product), which qualitatively distinguishes one kind of entrepreneurship from another. A branding studio can help articulate and celebrate this unique "entrepreneurial content" and the resistance overcome by introducing such novelty.
In conclusion, Bhave's process model, particularly Figure 1, provides a robust framework for comprehending the nuanced beginnings of entrepreneurial ventures. By recognizing the distinct sequences of opportunity identification, Iglu Studio can partner with entrepreneurs to craft identities and strategies that are not only compelling but also deeply aligned with the very genesis of their businesses. This foundational understanding empowers both entrepreneurs and Iglu Studio to navigate the journey from idea to market with greater clarity and purpose.
Source Metadata
• Title: A Process Model of Entrepreneurial Venture Creation
• Author: Mahesh P. Bhave
• Journal: Journal of Bus iness Venturing
• Publication Year: 1994
• Volume and Issue: Volume 9, Issue 3
• Pages: 223–242
• Publisher: Elsevier Science Inc.
• ISSN: 0883-9026
• DOI: 10.1016/0883-9026(94)90031-0