Introduction

Lumpkin, Hills and Shrader present an opportunity recognition model with the following stages:

• Preparation
  Preparation refers to the knowledge base an entrepreneur brings to the OR process. This knowledge may come from one's personal background, training or work experience. It is often neither systematic nor deliberate but rather a part of life experience. Research indicates more than 50% of start-up ideas develop from an individual's prior work experience.
• Incubation
  This stage is described as the "simmering of the pre-recognition stew over time." It is the period during which ideas intermingle and "new combinations" emerge.
• Insight
  Insight is referred to as the "Aha" moment or the " Eureka" experience. This is the moment the entrepreneur realizes that the idea he/she has been mulling over may truly be an entrepreneurial opportunity. This does not necessarily mean that the potential entrepreneur is ready to move on to the next stage. Rather, it may mean stepping back to the preparation or incubation stage.
• Evaluation
  This stage is described as the most challenging since it requires brutal honesty to determine if "what seems to be a good entrepreneurial idea is, in fact, a bona fide business opportunity." This evaluation should take the process beyond the individual for review and feedback from experts and the marketplace. Neglecting to evaluate or conduct a feasibility study is one of the frequently identified reasons for the failure of new ventures.
• Elaboration
  When a business idea has survived the evaluation stage and is still considered viable, elaboration is the next stage. This is the stage when many of the details are worked out, the opportunity is refined and much is learned through trial and error.

The authors point out that while not every incident of OR go through all five stages, all stages are needed to explain the potential paths to Opportunity Recognition (Missouribusiness.net 1).

O’Connor presents phases of innovation which are similar to some of the stages above:

• Discovery (Conceptualization)
  Creation, recognition, elaboration, articulation of opportunities. It involves basic research, internal hunting and external hunting (license, purchase and invest).
• Incubation (Experimentation)
  Evolving the opportunity into a business proposition. It involves technical work, market learning, market creation and strategic domains.
• Acceleration (Commercialization)
  Ramping up the business to stand on its own. It involves focused efforts, ability to respond and investing activities.

Our Framework

If we map Preparation, Incubation and Insight from Lumpkin’s model to Discovery; and Evaluation and Elaboration to Incubation; we arrive at the following:

• Discovery
• Creation, recognition, articulation of opportunities. It involves basic research, internal hunting and external hunting (license, purchase and invest).
• Evaluation
• Is this a bona fide business opportunity? This involves getting company “buy in” to allocate resources such as seed money and people so that a particular idea can be pursued. It is during this stage that the value proposition is defined and a business model is developed.
• Elaboration
• Once the business model has been established and the organization has made a commitment to allocate resources, the new venture team begins to work out many of the details. Activities revolve around market learning, feasibility studies, technical work and market creation. This is the stage when the opportunity is refined and much is learned through trial and error.
• Acceleration
• This generally involves major firm commitment to take this idea into the market place. Often the project is transitioned from a new venture team to a business unit team that will ramp up the business to stand on its own. It involves focused efforts, ability to respond and investing activities.

One can look at the above phases/stages as value adding activities that take place when attempting to commercialize an idea/invention. These value adding activities form the basis for the Innovation Value Chain. Michael Porter proposed that in any value chain the main activities are facilitated by support activities. These activities are depicted as rectangles in Figure 4.

Figure 4 - The Innovation Value Chain

• Human Resource Management
• How human capital is managed and acquired. Do the employees come from existing business units, or are they brought in from the outside. What type of skill sets are needed to commercialize the invention.
• Innovation Infrastructure
• What is the organizational structure that surrounds the innovation activities within a firm? Is there a separate new ventures group that reports directly to the CEO? How is innovation handled within the existing business units?
• Technology Development
• What technology is deployed to assist with the activities? Is idea generation software deployed? What does the IT infrastructure look like?

We will examine what management approach each author recommends and how it relates to the innovation value chain.

1 http://www.missouribusiness.net/bridg/fff_opportunity_recognition.asp

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