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Many companies experience rapid growth at some stage of their life cycle. For some, this may happen soon after they are launched. Others have multiple spurts, followed by a levelling-off period or even a decline. A consistent characteristic of the growth stage is that demands exceed existing resources. Consequently, business owners must be creative in acquiring and managing the resources needed to seize growth opportunities.
Successful entrepreneurs are astute at, firstly, identifying opportunities and, second, taking action to pursue those opportunities. The idea behind starting a business may have been spontaneous. It may come from prior experience or personal preference. It may have resulted from loss of employment. Although bankers, investors, and educators often emphasize the need for planning in advance of opening an enterprise, the evidence is that most venture creators did not prepare a business plan before they started. For a small or medium-size enterprise (SME) that has been operating for some time, however, a planning process is essential to any assessment of whether to take up a growth opportunity.
Identification of opportunities
Opportunity recognition is at the core of an entrepreneurial venture. The founder of a company with growth potential will identify and seek to satisfy unmet customer needs. Creativity, new technologies, and new marketing approaches are all characteristics of growing enterprises. A key word in this stage is flexibility. The leaders of the company are finding new markets, sometimes on the international scene. Growth may come not only from sales of products and services, but also through acquisition. The growing firm gains recognition for its brand name and builds customer loyalty.
Robert Ronstadt coined the term "corridor principle" to explain how small and medium business owners identify opportunities that a prospective entrepreneur does not recognize. At the time an individual opens his or her first enterprise, it is as if the budding entrepreneur is inside a room consisting of his or her life experiences and observations. Starting the business is the equivalent of opening a door, stepping out, and discovering a corridor. Up and down the corridor are other doors, each representing a new opportunity. If the first door—i.e., starting the business—is not opened, none of the other doors will be seen. Launching the business allows the owner to enter new networks, obtain access to information, and otherwise make discoveries that would never have happened without going into business.
From the strategic management literature, we learn about "environmental scanning" as a technique for being alert to new events, trends, and changes that may result from legislation and regulation, competitor initiatives and reactions, customer tastes, technological developments, and many other occurrences. Some business executives look at environmental disruptions as threats, but those disruptions are invariably viewed as opportunities for entrepreneurial small and medium business owners. Rita McGrath and Ian MacMillan proposed formalizing the scanning procedure by devising a register in which opportunities could be categorized as one or other of the following:
• redesign of products or services
• redifferentiation of products or services
• resegmenting of the market
• reconfiguring of the market
• development of breakthrough competencies
Assessment of opportunities
Enterprises that have been functioning for a period of time have strategies that were either formulated or which emerged.
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