opportunity formation, stakeholder management and the role of personal and business networks in...
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Opportunity formation, stakeholder management and the role of personal and business networks in digital entrepreneurship
Mario Morello
Over 110 sources referenced and hundreds more reviewed In-depth interviews and thematic coding
15 digital entrepreneurs from the US, UK, Denmark, Norway and Italy took part in this qualitative study.
vContent
Summary 4-5
Theory 6-7
Methodology 8-9
Findings 10-30
Objective 1: To explore the notion of opportunity formation (creation, discovery and narrative) amongst moderate and extreme digital entrepreneurs.
Objective 2: To gain an insight into the role of networks in opportunity formation amongst moderate and extreme digital entrepreneurs.
Objective 3: To understand how moderate and extreme digital entrepreneurs manage opportunities with stakeholders within their networks.
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Prevalent view: Opportunities come into existence from the recombination of relations and time in a continuum.
Summary
Opportunity formation as a process: identification of problems or unmet needs, which are usually found in traditional industries.
Those problems can evolve into ideas.
The entrepreneur transforms ideas into opportunities through high quality information.
Information can be acquired through strong relations within networks which help digital entrepreneurs to see the environment through different lenses.
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Stakeholders should be managed in an open and transparent manner through special attention, regular communication and a clear strategy.
This is to forge strong relations which favour dynamism and induce a joint effort towards increased opportunity formation.
Effective stakeholder management will ensure an active flow of information from both sides of the relationship.
This will lead to stronger and trustworthy relations which are essential, in line with the shift from know-how to know-who.
Summary
Theory
vTheory
Opportunity formation
Stakeholder management
Network theory
Business
Knowledge
Institutional
Type of opportuniti
es
Classification of
networks
How they occur
Effect on information
Know-how to know-
who
Efficient tie formation
Creation
Discovery
Narrative
Interpretation
Trust
Diversity
Brokerage
Quality
Quantity
Speed
Personal
Business
Density
Centrality
Methodology
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This exploratory research is influenced by an interpretive worldview (Daymon and Holloway 2002). Interpretivism seeks to understand the ‘social world’ using fieldwork to uncover the meanings by which people comprehend their own experiences, behaviours and communication (Denscombe 2007).
Methodology
The subjective input of participants is the key to exploring the reality as this is constructed by human beings interacting with each other and giving meanings to their actions.
This research has used an inductive philosophy in which objectives are researched in order to create general conclusions or theories (Bryman 2008), while keeping an open mind towards end results (Perkmann and Walsh 2009).The adoption of in-depth interviews allowed for adaptation of the interaction between the interviewer and the participant (Mack et al. 2005). This led to the revelation of a greater amount of information (Stacks 2002).
Findings
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Prevalent view: The digitalisation of processes increases the amount of opportunities open to the entrepreneur. This is due to the entrepreneur perceiving a decreased risk in identifying a vast array of opportunities in digital entrepreneurship as opposed to traditional entrepreneurship.
Less risk, more opportunities
Before I identify an opportunity, I see an idea and think about whether I can exploit it.
I know that through digital technology things are cheaper and quicker to produce so I look at the world with different eyes and I am open to more opportunities because the path to failure is not as daunting as in traditional settings.
Prevalent view: Opportunity formation is a three phase process. First, there is a problem, issue, unmet need, pain point or hurdle that is present in the environment. From there, an idea is born which, if reputed viable, creates value and becomes an opportunity.
If it is a problem for me and if it is a problem for my immediate group, there exists a problem, first of all… Once you have a problem you have to think of a possible solution and you think, will other people buy it or would other people be happy to have this solution for an existing problem? If I answer yes to all of those questions, to me that’s an opportunity.
vOpportunity formation: a three phase process
In traditional industries things are complicated, expensive and manual. Digital is an opportunity for me to automate the process, to pick one service and offer it to people who didn't have access to that service previously because of the internet infrastructure that allows me to do that.
Prevalent view: We aim for opportunities which generate profit as well as acquire and expand a knowledge base. The focus is on knowledge opportunities while institutional opportunities are not deemed as valuable.
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Generate profit and expand the knowledge base
Geo-cultural differences were mentioned as factors affecting the identification of the most valuable opportunities.
Knowledge is by far the greatest opportunity which ultimately leads to profit…I am sceptical of institutions just to create institutions. I am much more interested in social structures.
In Silicon Valley they don’t really think about the money as long as you manage to meet a need. In Europe they typically look at the money.
Prevalent view: Opportunities arise from the combination of endogenous and exogenous shocks. Timing is important in identifying an opportunity as the digital environment is fast moving. Opportunities emerge from the interaction of relational space and durational time.
Opportunities emerge from talking to people who have experience within a specific field and being aware of innovation. I talk with my mom about her experiences, for example. That alone doesn't give me ideas but when I combine that insight with my background from IT and digital and innovation. From that an opportunity might be born.
An opportunity is about time and space. It's about the position in which you are in life. If you are in an environment that doesn't really force you to look at things creatively, you are not going to find the people that may help you and encourage you to push those ideas along.
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Opportunities emerge in a combination of shocks
I think an opportunity always has to be something which is good in terms of revenue …knowledge and education…and creating great work in developing your brand. I would always say that really I aim to have at least 2 of those 3..
Prevalent view: Opportunities are not formed fully-fledged and can be created and discovered through various mechanisms. We tend to apply a pattern when looking for opportunities.
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Applying a pattern to opportunity formation
Minority view: We look for hidden opportunities by scanning the environment at all times.
The process of finding an idea or an opportunity is like groping in the dark. You don’t know what you are looking for…you feel there is something you are curious about.
If there are three obvious good reasons to do something and no obvious bad reasons not to do it then it’s worth putting it in the list of opportunities.
Prevalent view: Information acquisition in the digital economy is easier and faster than ever before.
Social media changed the way I seek information. I don't proactively look for information anymore [it] comes to me from a circle knowledge of people that exposes me to the information I need to know.
In Investment Management they always say cut your losses and let your profits run and I think, similarly, if you abstract enough information as an entrepreneur, you make decisions quickly.
Nowadays I am usually only one click removed from who I want to be speaking to.
Prevalent view: The quality and quantity of information is important to gain insight into the macro and micro environment but the speed with which meaning-making emerges is paramount.
vInformation to gain insight into macro and micro environment
Prevalent view: Peer validation is a significant first step in opportunity formation. However, to make sense of a set of information that is by its nature incomplete, we believe that the entrepreneur’s interpretation is ultimately the key.
It used to be that I would do a lot of research… but that doesn’t work anymore. Today…we have come used to looking at something that isn’t quite done using what it’s there.
Gut feeling is the launching pad to move forward. The difference between an entrepreneur and a business intelligence person is to turn the information you have into action.
vPeer validation as a first step
Prevalent view: Networks exist online and offline and serve different purposes. It is beneficial to be a member of numerous formal and informal networks as they add different value.
Different needs make us belong to different networks. All are essential and have different strengths and it’s important to know which one to use depending on what you want to achieve.
You shouldn't have a coffee with someone just for a chat. You must have a need upfront. You can always meet with people and find opportunities but statistically in most cases you are wasting your time. Those are called party entrepreneurs.
It is about choosing the right parallels, the right proxies.
Minority view: Networks need to be nurtured as long as they serve a foreseeable purpose.
vNetworks in a continuum
Networks vary from: networks of founders; professional associations; interest networks; friends and family; alumni networks; previous employers to former colleagues. Membership of networks is influenced by the entrepreneur’s past experience as much as the present situation.
This is due to the increase in the number of networks available to entrepreneurs which in turn require stronger relations in order to make them relevant and valuable.
I don't see a separation between the two. I am an entrepreneur all day long. If I can leverage my grandmother’s sister’s brother for some kind of information, I'll do that.
vMerging personal and business networks
Prevalent view: Business and personal networks are merging or have already merged.
Prevalent view: Different networks are used at different stages as either a sounding board, a source of information or to maintain focus in opportunity formation.
Family is the critical source to sober you up. Friends tend to cheer you up rather than giving the best advice.
Ideas grow on trees. It’s a matter of what kind of fruit you are going to pick and if you have the time to eat it. It’s not easy. You have to bring it down. You have to collect the ladder, you have to climb, you have to get down, you have to have some kind of approval to do that, you have to access the garden to do that and so on.
You end up testing the water with all of your networks. The first person would be a friend or family, someone very close to you on a personal level regardless of the industry. Then you reach out to your business network.
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Ideas grow on trees: test the water with your networks
Prevalent view: The quality and quantity of relations within a network is important. To build stronger relations, the network should be open and an entrepreneur should always be giving as much as taking. This helps to establish the level of trust necessary to move relationships from weak to strong which in turn enhances the quality and speed of information.
. One of the things that I have got very used to is seeing opportunities, and filtering them by three paths in the beginning and then probably 75% of them not being appropriate for me.
What I like to be able to do is to find other people that they might be appropriate for. I would probably say that I action or chase 25% of opportunities I see. I probably pass on 25% to other people and then the other 50% I would probably still classify as being valuable.
vBe open and give as much as you take
Minority view
It’s about giving to the network what they want. Obviously the normal top three, pint, dinner or a drink doesn’t hurt.
Opportunities come from 2nd degree connections. They bring the unexpected and provide more inspiration. First degree you usually pretty much know what to expect. The new usually comes from people I share contacts with. The more you move away from the people you know, the more insight you will get.
vFeed the network
Prevalent view: To build stronger and more valuable relationships, communication is needed in a way that is personalised to the individual. This process is increasingly time-consuming due to the expansion of networks. Social media act as a facilitator when face-to-face conversations are not possible.
It takes diligence and over-communication. It’s about adding value. Rather than spamming.
Lots going on because I have so many networks. It takes a lot of organisation and purpose. Each network has got its own language and delivers particular benefits. It's just a matter of understanding before starting, make a plan with clear objectives, adapt but follow it. It needs continuity.
vCommunication personalised to the individual
Prevalent view: In stakeholder management, there is a need to align stakeholders with the entrepreneur’s vision in order to favour dynamism and induce a joint effort towards increased opportunity formation.
Managing stakeholders is very delicate and you learn over time. The most important thing is aligning them with your vision, objectives, timeline, deadline, roles, what it's involved etc. I give a lot of flexibility to them as I would expect some flexibility from them.
vAlign stakeholders to your vision
Prevalent view: An entrepreneur should aim to manage opportunities with stakeholders in a transparent and open manner, thus making them feel valued and building a higher degree of trust. This is to ensure an effective flow of information from both parties in the relationship which results in stronger relations.
If we keep them updated on what we are working on, because we know it best, it makes it easy for them to present then opportunities to us… It becomes a question of openness because the more I am sharing and forthcoming with information from my side; the easier it is for everybody else to give a quick opinion but also the opportunity to help.
By sharing info with them, you build a high degree of trust which is very important and also, it helps to solve doubts. They help me to stay focused and to stay all on the same page as a team.
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Manage stakeholders in an open and transparent manner
Prevalent view: The depth of information that should be shared varies according to the stakeholder involvement.
It is only right to give the right people the knowledge and the content that they need to know.
It’s strategic. There is a need to know basis…if it’s not in your remit, why would you need to be involved in this? It causes the risk of missed opportunities, I think.
vShare depending on stakeholder involvement
Minority view
I am a bit of a mercenary about stakeholders, they are something you have to live with, you don't decide to live with as opposed to my networks I choose to be involved in. Most of the time, it could be a pain. With my networks, they feed me, with stakeholders I feed them.
[They] are not necessarily important to discover opportunities but for validating and executing. A good network is extremely important and actually totally necessary.
vDifferences between stakeholders and entrepreneurial networks
Prevalent view: Stakeholder networks contribute to opportunities at different stages and in different ways.
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Prevalent view: Stakeholders can contribute to testing ideas and help the entrepreneur to scan the environment.
I discuss ideas, partly to listen to myself, partly to get feedback and then I present them again to get a fresh view. The more hit rate I get, the closer I feel that this is an opportunity.
My strategy now is little and often so very, very concise pieces of information are delivered at high frequency and because of that, it is quite habitual now.
I like to work with them in person. I just think that there is so much room for misinterpretation in digital communications especially in email that is too risky to put the really important dialogue within those relationships into a medium that could be misunderstood.
Prevalent view: Primary stakeholders need special attention and care, regular communication and a clear strategy.
vSpecial attention, regular communication and a clear strategy
It is suggested that the increased importance of efficient stakeholder management is due to the shift from know-how to know-who which was acknowledged by most participants.
There is always someone that can do it better, differently and online opens up this infinite resource. You are not just dealing with people on your doorstep, you are dealing globally. There is a massive network there available to you...even if they are not necessarily involved in your network directly, you can create a new network with them if you have a shared interest.
vThe shift from know-how to know-who
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Mario Morello