Opportunity Recognition as Pattern Recognition: How Entrepreneurs “Connect the Dots” to Identify New Business Opportunities

TLDR

Entrepreneurs identify opportunities by applying cognitive frameworks acquired through experience to connect seemingly unrelated events—such as technological, demographic, market, and policy changes—into patterns that suggest new product or service ideas, a perspective that offers a unifying view of opportunity recognition. The study investigates how entrepreneurs identify opportunities and outlines future research directions and practical implications for entrepreneurship education. The authors describe future research directions on pattern recognition and examine its practical implications for entrepreneurship education. The pattern recognition framework integrates active search, alertness, and prior knowledge, explains their interrelations, accounts for individual differences in opportunity identification, and proposes training methods to enhance entrepreneurs’ recognition skills.

Abstract

Executive Overview How do entrepreneurs identify opportunities for new business ventures? One possibility, suggested by research on human cognition, is that they do so by using cognitive frameworks they have acquired through experience to perceive connections between seemingly unrelated events or trends in the external world. In other words, they use cognitive frameworks they possess to “connect the dots” between changes in technology, demographics, markets, government policies, and other factors. The patterns they then perceive in these events or trends suggest ideas for new products or services—ideas that can potentially serve as the basis for new ventures. This pattern recognition perspective on opportunity identification is useful in several respects. First, it helps integrate into one basic framework three factors that have been found to play an important role in opportunity recognition: engaging in an active search for opportunities; alertness to them; and prior knowledge of an industry or market. In addition, it also helps explain interrelations between these factors (e.g., the fact that active search may not be required when alertness is very high). Second, a pattern recognition perspective helps explain why some persons, but not others, identify specific opportunities. Third, a pattern recognition framework suggests specific ways in which current or would-be entrepreneurs can be trained to be better at recognizing opportunities. Future directions for research on a pattern recognition perspective are described, and its practical implications for entrepreneurship education are examined.