Entrepreneurial opportunity: Is it an illusion?

Few of us realise that the concept of time is actually not required in fundamental physics. Much as we feel (and regret!), as physical beings, the passing of time, the concept itself is not actually required to explain the existence of the universe. Therefore, theoretical physicists struggle to come to grips with the concept, and the best they can do is to infer time from an increase in entropy. This makes time a derivative and not a fundamental concept in physics.

The concept of an ‘entrepreneurial opportunity’ is central for the study and theory of entrepreneurship. Entrepreneurs are individuals who pursue entrepreneurial opportunities. Without entrepreneurial opportunities, therefore, there will be no ‘entrepreneurship’, conceptually speaking.

But is the concept of an ‘entrepreneurial opportunity’ an illusion, like time in physics? Can entrepreneurial opportunities actually be said to exist? That is, can we talk about ‘entrepreneurial opportunities’ as existing out there, independent of what we do?

Entrepreneurial opportunities are usually defined as situations where products and services can be sold at a price greater than the cost of their production. An ‘entrepreneurial opportunity’, thus, is a situation where entrepreneurs can take action to make a profit. Profit-making situations obviously exist: there are lots of businesses making money, or as economists put it, exploiting market imperfections. But the problem with the notion of entrepreneurial opportunities is that entrepreneurship is future-oriented action. The question then becomes: how can we know that an opportunity exists to make money before we try it?

This is where things turn problematic: there is no way of knowing for certain that we can sell products and services with profit before we try and sell those products and services. If we do make money, an entrepreneurial opportunity can be said to have existed: we took action and made a profit. But if we make a loss, was just because of us screwing up, or was the opportunity ever there in the first place?

Why is this problematic? Management theories should meaningfully guide managerial and entrepreneurial action. In its current form, the theory of entrepreneurial opportunity informs us that if we want to become entrepreneurs, we should go find an opportunity. This advice seems nonsensical if there is no way of telling beforehand (or ex ante, as academics put it) that an opportunity really exists. If we cannot tell that an entrepreneurial opportunity exists ex ante (i.e., before we try it), a theory of entrepreneurship based on the concept of an entrepreneurial opportunity advices us to act randomly. Such a theory seems of little value.

Two solutions are usually suggested to resolve this dilemma. First, while opportunities can be said to exist in some abstract sense, they only become real when combined with the qualities of the entrepreneur. That is, there are ‘opportunities for someone’ and ‘opportunities for me’. A given ‘opportunity’ out there may be a real opportunity for me if I possess the right qualities to make a profit pursuing it. But this does not really solve the dilemma, since there is no way of telling for sure what qualities are needed and whether I actually possess them. I still need to try it before I know it.

The other proposed solution is to focus on opportunity creation rather than opportunity discovery. You can discover something that already exists. So, perhaps we should talk about entrepreneurs creating opportunities rather than discovering them?

Unfortunately, also the opportunity creation approach fails to resolve the tautology inherent in the ‘entrepreneurial opportunity’ concept. What if I try to create an opportunity and fail? Am I then not entrepreneurial? Before Facebook, there was MySpace. Facebook founders are billionaires. MySpace founders are not. The opportunity creation school suffers from exactly the same tautology as does the opportunity discovery school: because of its focus on opportunity, all it does (from a managerial perspective) is to incite us to act randomly.

So, if the concept of an entrepreneurial opportunity fails to provide meaningful guidance for entrepreneurial action, what should we do instead? The discussion above helps understand why there has been so much interest in the concept of Lean Entrepreneurship recently. Remember how entrepreneurship used to be taught until only a few years ago (a whole lot of people still do!). It was all about writing business plans. The idea was that before you launch your business, you need to plan carefully, study the market and make sure that the opportunity is there before you launch your business. Given the above, this is not likely to be a very effective approach. This also explains why many business plan writing projects tend to become paper-based exercises, the results of which are quickly discarded once the venture comes into contact with the messy reality.

The Lean Entrepreneurship approach seeks to do away with this linear planning approach. Instead of trying to pin down a mirage, you experiment. The emphasis is on action, not on planning. You iterate. If one approach does not work, you pivot. Start with an idea. Work together with potential customers to co-evolve an outcome that offers value for all. You still end up with profit (provided you find an outcome that befits all) without having to worry about an ‘opportunity’. Put less emphasis on planning (within reasonable limits of course!). Put more emphasis on action. Instead of chasing ‘opportunities’ in some abstract ‘market’, get close to the skin of your potential customers and work with them to make your venture become a reality.

Time to put ‘entrepreneurial opportunity’ in its place.