The Opportunity Clinic- 28 Tactics for Managing your Business in a Recession Part 10 of 28 "First Impressions” trap

The deadly entrepreneurial  “First Impressions” trap

New ventures often do not correctly anticipate real market opportunities or the best strategies of addressing them, so they are forced to adapt and modify their approach over time. This is critical in a recession /depression and is illustrated by a classic 1985 quote by Peter Drucker.

 “When a new venture does succeed, more often than not it is in a market other than the one it was originally intended to serve, with products and services not quite those with which it had set out, bought in large part by customers it did not even think of when it started, and used for a host of purposes besides the ones for which the products were first designed.”--Source: Drucker, P. (1985). Innovation and Entrepreneurship: Practice and Principles. New York: Harper & Row. ( p. 189)

So how do companies stay out of the dangerous “First Impressions” trap? One tactic is to use “real options reasoning” to mitigate risks, taking step-by-step approaches into an opportunity space instead of jumping in with both feet and committing yourself totally with no back-out options.

A second is to have a backup plan B and plan C if plan A fails, especially in a recessionary period when customer buying assumptions that were perfectly valid in an upswing period of the economy, now reverse or collapse.

Management approaches for novel initiatives include a combination of trial-and-error learning (i.e., flexible redefinition of the new venture business model as new information emerges) and selectionism  (i.e., running multiple parallel trials (plan B or plan C) and choosing the best performing approach ex post).

The Opportunity Clinic offers a database of over 300 opportunity scenario templates that can be selected to explore opportunities for Plan B or C, depending where a firm is in its growth cycle and in the business cycle

Walter Derzko, Smart Economy, Toronto

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.