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Capability & Opportunism [Entrepreneurship
Posted on November 25, 2015 @ 06:09:00 AM by Paul Meagher

Floods and Diaper Waste. These are two examples of big problems.

Floods are a big problem because in many areas of the world as much as 80% of property insurance payouts are for flood damage of one sort or another (which can include sewage backup as an instance). If you can provide a solution that would reduce the amount of flood damage payouts, you might have a large and lucrative business. The problem of flooding is predicted to get worse with climate change, especially in coastal areas.

Another big problem is diapers. Most go straight to the landfill and can occupy up to 20% of the waste stream. Some see baby poop as a source of high quality nutrients and see big opportunities for handling diapers differently than just land filling them. Maybe we can use them to grow trees? The problem is the solution.

One way to approach starting a business would be to examine the big problems of society and structure your business around finding a solution or part of the solution to one of these problems. It wouldn't matter whether you have a background in theater, engineering, or business - you would begin the process of starting a business by looking at where the big opportunities lie and then you would proceed to build a business around the most promising opportunity.

Generally we don't start a business with pure opportunism as our objective. We often start from the capabilities we have and formulate the opportunity we want to address based on those capabilities. If we are a theater major, we don't think about starting a construction company even though that might be where the big opportunity lies. Maybe a theater major has some good skills for being the head of a construction company. Stranger things have happened.

Our capabilities are generally regarded as good things but sometimes they limit us in terms of seeing where the big opportunities lie. Things only become opportunities if they appear reachable from our current set of capabilities.

What if startups ignored their capabilities and focused initially on identifying where the big opportunities exist and then enlisted people with the capabilities required to address the best opportunity. Begin your startup in a state of pure opportunism looking for the best industries and niches to be in and then build a business to occupy a growing niche in that opportunity space.

Some theories of what makes a company successful talk about capabilities as being central. That might be true post-startup, but pre-startup perhaps you might do best to throw capabilities out the window and focus on where the best opportunities are. It could be that focusing too much on aligning your startup with your current capabilities means that you won't be addressing where the significant opportunities actually lie.

It is probably unrealistic to think that a startup will ignore their capabilities completely when they come up with a business idea. When it comes to raising investor money for your idea, however, we might see the advantages more clearly of being opportunistic in picking a business idea to pursue. Money wants to go where the big opportunities are, not just where your capabilities may lie.

Investors will not usually invest in a company that only has an idea. Eventually you have to add capabilities if you want to be taken seriously and raise funds. Also, the better the capabilities the lower the risk of the venture. I do not want to downplay the importance of capabilities. I do, however, want to highlight a couple of downsides of capabilities; that they can limit our vision as to where bigger opportunities might be, especially in the initial stages of identifying a market the startup should address. Second, you can be very capable at running a business but capability alone does not determine level of success; that is probably more determined by your share of the market, how much it is growing, and how lucrative it is. These are factors you should look for when starting a business, not just what you can do with your current capabilities. We should get outside of our capability comfort zone when figuring out what business idea is worth investing a good chunk of our life into pursuing.

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