Merlin Kolk - Tallinna Tehnika¼likool
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TALLINN UNIVERSITY OF TECHNOLOGY Faculty of Science Institute of Clinical Medicine ENHANCING TECHNOLOGY-BASED OPPORTUNITY RECOGNITION CAPABILITY IN HEALTHCARE TECHNOLOGY COMPANIES Master´s Thesis Merlin Kolk Supervisor: Peeter Ross, Associate Professor Chair of Health Care Technology Health Care Technology 2013
Transcript of Merlin Kolk - Tallinna Tehnika¼likool
TALLINN UNIVERSITY OF TECHNOLOGY
Faculty of Science
Institute of Clinical Medicine
ENHANCING TECHNOLOGY-BASED OPPORTUNITY
RECOGNITION CAPABILITY
IN HEALTHCARE TECHNOLOGY COMPANIES
Master´s Thesis
Merlin Kolk
Supervisor: Peeter Ross, Associate Professor
Chair of Health Care Technology
Health Care Technology
2013
TALLINNA TEHNIKAÜLIKOOL
Matemaatika-loodusteaduskond
Kliinilise Meditsiini Instituut
TEHNOLOOGIAL PÕHINEVATE
ÄRIVÕIMALUSTE IDENTIFITSEERIMISE VÕIMEKUSE
EDENDAMINE TERVISHOIUTEHNOLOOGIA ETTEVÕTETES
Magistritöö
Merlin Kolk
Juhendaja: Peeter Ross, dotsent
Tervishoiutehnoloogia õppetool
Tervishoiutehnoloogia
2013
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Contents
INTRODUCTION ....................................................................................................... 4
ABBREVIATIONS ..................................................................................................... 7
1. THEORETICAL FOUNDATIONS ......................................................................... 8
1.1. Opportunity recognition concepts and process ................................................. 8
1.2. Technology-based opportunity recognition ..................................................... 22
1.3. Opportunity recognition in healthcare ............................................................. 28
2. RESEARCH METHODOLOGY ........................................................................... 39
2.1. Research strategy ............................................................................................. 39
2.2. Research methods ............................................................................................ 40
2.3. Research data ................................................................................................... 43
2.4. Limitations and implications for future research............................................. 45
3. CASE DESCRIPTION AND RESULTS .............................................................. 47
3.1. Overview of case companies ........................................................................... 47
3.2. Research results ............................................................................................... 50
3.3. A model to enhance technology-based opportunity recognition capability in
healthcare technology companies ........................................................................... 60
CONCLUSION .......................................................................................................... 64
REFERENCES ........................................................................................................... 67
ACKNOWLEDGEMENTS ....................................................................................... 73
RESÜMEE ................................................................................................................. 74
APPENDIXES. APPENDIX 1. Effective trends to curb costs in healthcare ............ 76
APPENDIX 2. Interview sample ............................................................................... 77
APPENDIX 3. Questionnaire for the interviews ....................................................... 78
INTRODUCTION
This master’s thesis is dedicated to enhance technology-based opportunity
recognition capability in healthcare technology companies.
Discovering of business opportunities is the cornerstone of entrepreneurship.
Opportunity recognition and introducing the innovations are the top priorities for
executives in almost every industry, not just for realizing efficiencies, but because it
is seen as integral to growth (Lazarus et al. 2011). Technology-based opportunity
recognition and introducing innovations is unavoidable for firms which want to
develop and maintain a competitive advantage or gain entry in to new markets
(Becheikh et al. 2006). Irrespective of the dimensions of technological innovations,
companies intend to achieve either cost effective, quality improved, improved
versions of existing products, or altogether new products (Subrahmanya 2010).
Unfortunately companies are not always able to follow all the technological
opportunities available for them and it has been found that technology-based
enterprises seldom have clear strategies for dealing with what they see as non-core
technologies (Parhankangas et al. 2003).
At the same time there are thoughtful changes and challenges ahead in the
healthcare industry. As countries and organizations aim for ways to control
healthcare spending, address the growing needs of an aging population, and respond
to a more informed and empowered consumers, the opportunities for innovation have
increased significantly (Varkey et al. 2008). It has been found that introducing
technology–based innovations can be one of the options to make healthcare better
and cheaper. New drugs, diagnostic methods, drug delivery systems, and medical
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devices offer the hope of better treatment and of care that is less costly, disruptive,
and painful (Herzlinger 2006).
Thus, the need for discovering technology-based opportunities in healthcare has
increased substantially and this is the main reason for selecting the current master´s
thesis topic by the author. The second reasons for choosing this subject is that author,
as a representative of Tallinn University of Technology, is participating in a project
of Enterprise Estonia regarding introducing new space technologies and satellite
applications for the different Estonian target groups. It is important that Estonia
would participate in strategic European Union space projects like Copernicus and
Galileo by creating opportunities both for public and private sector. One of the
objectives of this project is to enhance entrepreneurs’ capabilities to exploit and
create space technology based applications in healthcare.
The main task of the thesis is to add some new findings to the theoretical
constructions of opportunity recognition, technology-based opportunity recognition
and specific opportunity recognition patterns in healthcare, but also to complement
the previous findings by focusing the research on technology-based opportunity
recognition in healthcare technology companies.
The following subtasks are established by the author:
1) To give an overview of opportunity recognition concepts and processes,
including technology-based opportunity recognition;
2) To describe specifics of healthcare industry in order to understand the
needs and limitations of an opportunity recognition in the sector;
3) To investigate different healthcare technology companies with the
objective to understand their tools for effective opportunity recognition
process;
4) To find out how healthcare technology companies identify new
technologies outside of their core competence (non-core technologies);
5) To design a model to enhance technology-based opportunity recognition
capability in healthcare technology companies, based on the results of all
previously described tasks.
The master’s thesis is divided into three parts. The first part involves the
theoretical foundations of opportunity recognition concepts and processes, including
technology-based opportunity recognition specifics. An overview of opportunity
recognition in healthcare industry follows to describe the particular needs and
limitations in the sector.
The second part of the thesis describes research methodology. This chapter brings
out the research problem and objectives of the thesis. The research question and the
expected outcome of the study are also established in the chapter. In addition, the
author describes the research strategy, including methods, data analysis and research
data. Limitations of the study and implications for further research are presented in
this part of the thesis.
The third part includes the case descriptions. This chapter starts with brief
descriptions of case companies. Subsequently the research results are presented. This
part is based on the synthesis from case companies research and literature review.
As a final point, author of the thesis presents a model how to enhance technology-
based opportunity recognition in healthcare companies. The model is relevant for
newly created ventures as well for existing organisations.
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ABBREVIATIONS
CEO - Chief Executive Officer
CTO - Chief Technical Officer
GBD - global burden of disease
GDP - gross domestic product
ICT - Information and Communications Technologies (technologies that
deliver access to information through telecommunications)
IT - Information Technologies (everything linked to computing
technology)
LTC - long term conditions
NCD - non-communicable diseases
R&D - research and development
SME - small and medium-sized enterprises
1. THEORETICAL FOUNDATIONS
1.1. Opportunity recognition concepts and process
“This defines entrepreneur and entrepreneurship - the entrepreneur always searches
for change, responds to it, and exploits it as an opportunity” Drucker (2007, 25) said.
Without opportunities there is no entrepreneurship (Alsos et al. 2006). Opportunity
recognition and innovation are the top priorities for enterprises in almost every
industry, not just for realizing efficiencies, but because it is seen as basic to growth
(Lazarus et al. 2011). In 2005, during PricewaterhouseCoopers’ “Trendsetter
Barometer” survey, CEOs from America’s fastest-growing private companies were
interviewed and it was found that innovation is an organization-wide priority which
has positive impact on their businesses. For the companies, the success of
introducing innovations in a company was measured by overall revenue growth
(78%), customer satisfaction (76%), growth in revenue from new products or
services (74%), increased productivity (71%) and earnings or profit margins (68%)
(Fast-Growth Companies..., 2005).
It is important to search for new opportunities throughout the entire lifetime of
any enterprise. To stay ahead and on top of the market, firms must constantly
recognise opportunity as they continue to grow. For example, Steve Jobs is the
quintessential opportunity recogniser of our era; his iterations of Apple have
successfully exploited on opportunity after opportunity (Klemm 2013).
Importance of entrepreneurial opportunity recognition has resulted in many
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discussions and researches about values of opportunity recognition for companies, as
well as about key factors of successful opportunity recognition and effective process.
Definitions
It all starts with an idea. According to www.businessdictionary.com, idea is a thought
or collection of thoughts that generate in the mind. An idea is usually generated with
intent, but can also be created unintentionally. Finding a good idea is the first step in
the task of converting an entrepreneur’s creativity into an opportunity and
innovation. Timmons (1999) said that a good idea is like a tool in the hands of an
entrepreneur. Business opportunities are created, or built, using ideas and
entrepreneurial creativity. Ardichvili’s (2003) point of view is similar to that saying:
„Opportunities develop as individuals shape elemental ideas into business plans”.
Opportunity is an aspect of the environment viewed from a certain perspective.
Entrepreneurs can pursue opportunities in any industry at any time (Shane et al.
2003). An opportunity is a favourable set of circumstances that creates a need for a
new product, service or business (Barringer et al. 2008). Timmons (1999) stressed
the market point of view – opportunity is something that is valuable to customers. He
added that the most successful entrepreneurs, venture capitalists, and private
investors are opportunity-focused; that is, they start with what customers and the
marketplace want and do not lose sight of this.
Baron (2004) concluded while many definitions of the entrepreneurial opportunity
have been proposed most include reference to three central characteristics:
- potential economic value (i.e., the potential to generate profit);
- newness (i.e., some product, service, technology, etc. that did not exist
previously);
- perceived desirability (e.g., moral and legal acceptability of the new
product or service in society).
Opportunity recognition is the discovery of an idea to create new businesses and
the search of information regarding market and technological possibilities.
Recognising an entrepreneurial opportunity is perceived as a possibility to introduce
innovations (goods or services) to a marketplace through founding and formation of
a new venture, or significant improvement of an existing venture (Renko 2008).
Opportunity recognition is defined by many authors as a process, not like one
time occurrence. According to Baron (2004), opportunity recognition can be viewed
as the cognitive process through which entrepreneurs conclude that they have
identified an opportunity. It is only a first step in a continuing process, and is distinct
both from detailed feasibility evaluations of opportunities and from steps to actually
develop them.
Opportunity recognition is both a rational and an intuitive search for information
and both social and cognitive interpretation of information in order to recognise
market gaps and to create strategic business concepts, which link the gap and the
concept in order to create new value. Opportunity recognition behaviour is divided
into knowledge acquisition, competitive scanning, proactive searching, innovative
behaviour and collective action (Puhakka, 2002). In the context of this thesis
opportunity recognition, business opportunity recognition and entrepreneurial
opportunity recognition are used as synonyms.
Innovation is the introduction of a new or significantly improved product (good or
service), process, new marketing method or a new organisational method in business
practices, workplace organisation or external relations (Oslo Manual 2005).
Basically, introduction of innovation is a next phase after successful opportunity
recognition process.
Opportunity recognition types
Rae (2007) found that there are seven different types of opportunity and it is
important for the entrepreneur to be aware of the nature of the opportunity and its
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characteristics. Each type of opportunity involves actual or potential market demand.
Some opportunities can be combinations of two or possible more types. However,
one type is normally dominant, and the combination may make them more complex
to manage and potentially more innovative and rewarding. The opportunity types
suggested by Rae (2007) are:
- Knowledge opportunities exist where specialist information, know-how or expertise
can be applied to create value. The “knowledge economy” arises from knowledge
opportunity and can be based on scientific, medical, market or other research,
specialized skill or ability. Universities, research institutes, consultancy practices,
publishers and many others are players in the knowledge economy (Ibid.).
- Technology-based opportunities apply a technology to solve a problem, meet a
need or create a new product or process. The technology may be physical, such as an
engineering or manufacturing process or product, or a chemical, biological or
information-based technology. Biotechnology, physical, material and earth science,
organic and inorganic chemistry and computer programming are all examples of
technology-based opportunity. Whilst there are links and overlaps between the
technology and the knowledge associated with it, in this case it is the application of
technology through innovation which provides the opportunity. Technology-based
opportunity is usually high skill and resource intensive, requiring significant research
and development support and budgets (Ibid.).
- Product opportunities are where existing products can be used to meet market
demand as they are or can be adapted by incremental innovation where new markets
can be found. This means that significant product innovation may not be needed, but
market development is needed to research, prepare the market and promote the
product (Ibid.).
- Service opportunities exist where there is actual or potential demand for a service
by business or public organizations, individuals or groups. Services can include, for
example, health, child and social care, office services, telecommunication, education
and training. A service is intangible, there is no physical product. A service
opportunity can include “new business model” which provides a service more
effectively or at less costs then competitors (Rae 2007).
- Lifestyle opportunity (sub-set of service sector) is where customers are provided
with an experience which makes their life easier or pleasanter. The fields where such
opportunities arise include leisure, tourism, culture, health, entertainment.
Advantages of lifestyle opportunities are that in a growing economy demand
increases and people have additional money to spend, although a downturn will
reduce consumer spending. Good examples are widely downloaded different
applications for smartphones (Ibid.).
- Physical resource opportunities include the exploitation of land, water or naturally
occurring resources. This includes extracting basic resources, such as oil, gas and
minerals. It also includes land use such as agricultural production, and land, property
and real estate development. The created value is based on a natural or physical
resource, either renewable (such as wind power and agriculture) or finite (such as
minerals). The rapid growth in the production and consumption of bottled drinking
water is an example of physical resource-based opportunity (Ibid.).
- Trading and commodity opportunities are based on buying and selling in relation to
market conditions of supply and demand. They encompass a wide range of trading
opportunities, including wholesale and retail, energy (gas, oil, and electricity),
chemicals, raw materials, semi-manufactured items, food and agricultural produce,
and any commodity which can be bought, traded or sold. For example, online trading
has revolutionized and expanded trading opportunities (Ibid.).
There are 4 types of opportunities suggested by Ardichvili et al. (2003), based on
their origin and degree of development (Figure 1.1.). Market needs or value sought
may be known or unknown. Value creation capability may be defined or undefined.
Defined value creation capability includes general specifications of intellectual,
human, financial and/or physical resources. In this matrix the value sought represents
problems and value creation capability represents solutions. The upper left cell where
the problems and solutions are both unknown may represent the kind of creativity
that is associated with ‘‘dreamers,’’ some designers, and inventors interested in
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moving knowledge in a new direction or pushing technology past its current limits.
The upper right cell where the problems are known but solutions are not, describes
situations in which structured problem solving, including information search, occur.
The goal of opportunity development in this situation is usually design of a specific
product or service to address an expressed market need. The lower left cell where
problems are unknown but solutions are available includes what we usually identify
as ‘‘technology transfer’’ challenges, for example capabilities in search of an
application. Opportunity development here stresses search for applications more than
product or service development. In the lower right cell where both problems and
solutions are known opportunity development involves matching known resources
and needs to form businesses that can create and deliver value (Ardichvili et al.
2003).
Figure 1.1. Types of opportunities. Source: Author, adapted from Ardichvili et al.
(2003)
Unknown Known
Undefined
Defined
“Dreams”
Technology
Transfer
Problem
solving
Business
Formation
VALUE SOUGHT
VALUE
CREATION
CAPABILITY
Opportunity recognition process
Norhashim et al. (2007) found that business opportunity identification can be a
passive activity where the entrepreneur is presented with fortune by being at the right
time in the right place. From that aspect, the entrepreneur only has to improve his or
her skill of perception. On the other hand, the creation of a business opportunity may
need more active participation by the entrepreneur. Events can be influenced and
encouraged to move along certain routes (Norhashim et al. 2007).
Bhave (1994) found that there are two different ways in the opportunity
recognition process:
1) Externally stimulated opportunity recognition
The decision to start a project precedes opportunity recognition. The decision can be
influenced by the entrepreneurs’ personal and environmental circumstances. For
example, entrepreneur decides to begin at particular stage in his or her persona1 life.
2) Internally stimulated opportunity recognition
Opportunity recognition comes before the decision to start the project. The
entrepreneurs experience the needs that are not fulfilled through available vendors or
offers. They try to find solutions to satisfy the needs (Bhave 1994).
Singh et al. (1999) studied how entrepreneurs turned their ideas into opportunities
and the results were:
- Sought out information or feedback from business associates (52.0%);
- Contacted potential customers (50.0%);
- Discussed idea with friends or family (46.5%);
- Gathered information on competitors (33.6%);
- None, just knew idea was an opportunity (33.2%);
- Prepared financial statements (25.0%).
Many researchers have found that entrepreneurs do not find future opportunities,
they rather build them. According to Barringer et al. (2008), there are three general
approaches entrepreneurs use to identify an opportunity: observing trends, solving a
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problem and finding gaps in the marketplace. The first approach is to observe trends
and study how they create opportunities for entrepreneurs to pursue (Figure 1.2.).
Figure 1.2. Environmental Trends Suggesting Business or Product Opportunity Gap.
Source: Barringer et al. (2008)
According to Barringer et al. (2008) environmental trends like economic factors,
social factors, technological advances, political action and regulatory statutes are
most important to follow. These factors may in themselves create opportunities and
will either positively or adversely affect the ability to exploit the opportunity. The
second approach to identify opportunities is to recognise problems and find ways to
solve them. These problems can be recognised by observing the challenges that
people encounter in their daily lives. Every problem can be turned into opportunity.
The third approach to identify opportunities is to recognise a need that customers
have that is not being satisfied – by either large, established firms or entrepreneurial
ventures. For example, large retailers compete primarily on price by serving a large
group of customers with similar needs. They offer most popular items to mainstream
consumers. At the same time it leaves gaps in the marketplace – for small clothing
boutiques.
Ardichvili et al. (2003) found that opportunities develop as individuals shape
essential ideas into business concepts. They suggest that opportunity recognition
includes three different processes:
1) Perception (sensing or perceiving market needs and/or underemployed
resources);
2) Discovery (recognising a ‘‘fit’’ between market needs and available
resources);
3) Creation (creating a business concept).
These sub-processes are accompanied by a continuous evaluation in which the
entrepreneur questions and evaluates the opportunity in different stages of the
process (Figure 1.3.).
Figure 1.3. Processes of opportunity recognition. Source: Author, based on
Ardichvili et al. (2003)
According to Ardichvili et al. (2003) perception is the recognition of the presence of
unsatisfied market needs or under-employed resources that can be distributed more
efficiently. Discovery is the stage in which the entrepreneur analyses the existing
supply in terms of resources-product/service-market to investigate the possibility of
new fits either generated more efficiently or that provide added value to the market.
The business concept creation stage relates to the identification and establishment of
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the best solution that satisfies market needs. In addition, evaluation should be present
at each stage of the opportunity recognition process. Evaluation can be either formal
or informal, it can, at any point in the process, lead the entrepreneur either to
develop, implement or reject the business concept (Ardichvili et al. 2003).
The next step after opportunity recognition process is opportunity exploitation,
which can also be called the “Get it done” phase. During this phase it is time to take
advantage of the situation and execute all of the great ideas and projections
ascertained from the three prior phases. The exploitation of an opportunity refers to
those activities committed to the founding and formation of a new venture, or
significant improvement of an existing venture in order to introduce innovative
goods or services to marketplace (Renko 2008).
Key factors in opportunity recognition process
Recognising business opportunities is a challenging task for entrepreneurs.
According to the literature there are two main categories that are both influencing
opportunity recognition: the first is the personal characteristics of entrepreneur and
the second environmental trends.
Starting with personal characteristics of entrepreneur, several studies show that
prior experience or knowledge in an industry helps entrepreneurs to recognise
business opportunities (Shane 2000; Sheperd et al. 2005; Baron 2006; Anis et al.
2012).
Shane (2000) suggested in his study that three major dimensions of prior
knowledge are important in the process of opportunity recognition:
1) knowledge of markets;
2) knowledge of ways to serve markets;
3) knowledge of customer problems.
Sheperd et al. 2005 study results added that knowledge of customer problems
leads to the identification of more opportunities and opportunities that are more
novel. Blank et al. (2012) emphasises the importance of customers in opportunity
recognition. It is said that founders of products or services who get out of the
building to meet customers early and often, will win because there are no facts inside
buildings. It is important to acquire a deep understanding of customer needs and to
use this knowledge during product development. The most often made mistake by
entrepreneurs is that their understanding about their customers, who they are, what
they need and how to sell them, is based on hypotheses only.
Shane’s (2000) found that information about a technology may be complementary
with an individual’s prior information about how particular markets operate; the
discovery of an entrepreneurial opportunity related to a specific technology requires
prior information about markets. Shane’s (2000) in-depth case studies of eight
entrepreneurs showed that in every case prior knowledge of market led entrepreneurs
to see the usefulness of a technology in solving different customer problems.
Marvel et al. (2006) found that prior knowledge of technology is positively
associated with innovation radicalness while prior knowledge of ways to serve
markets is negatively associated with innovation radicalness. It is a counterintuitive
conclusion: the less one knows about ways to serve a particular market, the better the
chance of using technology to create breakthrough innovations within it (Ibid.).
Recognising opportunity is also a cognitive process. There are authors (Ardichvili
et al. 2003; Baron 2006; Tang 2012) who suggested that entrepreneurs have a “sixth
sense” that allows them to see opportunities that others miss. The sixth sense is
called entrepreneurial alertness, which is defined as the ability to notice things
without engaging in deliberate search (Barringer et al. 2008). At the same time it is
said that alertness is largely a learned skill, and people who have more knowledge of
an area tend to be more alert to opportunities in that area than others (Ibid.).
Tang (2012) presented entrepreneurial alertness as three dimensions:
1) Systematically or non-systematically scanning the environment and searching
information (interactions with others, keeping an eye for new business ideas, reading
news regularly, internet searches);
2) Associating together previously unconnected information (“connecting dots”);
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3) Making evaluations about the commercialisation of the idea (can identify
profitable or high-value opportunities).
As a result of the study Tang (2012) found that all these three dimensions
complement each other and have a large positive effect on opportunity recognition.
Many studies showed that the extent and depth of an individual´s social network
affects strongly opportunity recognition (Hills et al. 1997; Singh et al. 1999;
Ardichvili et al. 2003; Anis et al. 2012). The results showed that individuals’ access
to external knowledge through the social network in which they participate is
fundamental for developing the capacity to recognise new business opportunities.
People who build a large network of social and professional contacts will be exposed
to more opportunities and ideas than people with thin networks.
Opportunity recognition may be also a creative process. The creative thinking is
of great value in recognising opportunities, as well as other aspects of
entrepreneurship (Timmons 1999). Hansen et al. (2011) found that multidimensional,
creativity-based approach to develop opportunity recognition can be fragmented into
five stages:
1) Preparation. It is a background, skills and knowledge that an entrepreneur brings
to the opportunity recognition process. Prior work experience is also important.
2) Incubation. It is a stage during which a individual considers an idea or is thinking
about a problem. Sometimes it is unconscious activity.
3) Insight. Insight is the flash of recognition – when the solution to a problem is seen
or idea is born. It is also called a “Eureka!” experience. In a business context this is a
moment an entrepreneur recognises an opportunity.
4) Evaluation. This stage involves investigating the idea to define whether or not it is
viable.
5) Elaboration . This is a stage during which the creative idea is put into a final form
– the details are worked out and the idea is transformed into something of value, such
as a new product, service or business concept (Ibid.).
Findings from other studies added that from personal characteristics of the
entrepreneur higher education level (Shane 2003; Anis et al. 2012) correlates with
the bigger number of opportunities recognised. D´Este (2010) found that academics
who combined multiple bodies of knowledge in their research activities were able to
find associations between their research expertise and business related activities, and
they were better equipped to recognise entrepreneurial opportunities. Shepherd et al.
(2005) added that the higher the potential financial reward, the greater the number of
opportunities identified, although these opportunities are not necessarily more
innovative. St-Jean (2011) found that mentoring may be a good way to support
novice entrepreneurs in the start-up and opportunity recognition process and also in
the development of their enterprises.
Fuduric (2008) stressed the importance of environmental factors. It is important
also to follow economic, political, industrial, demographic and cultural conditions.
Some of the conditions supporting entrepreneurial opportunity discovery and
exploitation are, for example, economic stability with a transparent rule of law as
important aspects of entrepreneurial action. Industry conditions that have a high level
of R&D intensity or are service oriented tend to be breeding grounds for
entrepreneurial activities. Demographic conditions like high population density and
urbanization tend to support resource collection, the availability of diverse
information and knowledge, and larger networks. Cultural conditions with more
acceptance of risk taking behaviour and failure tend to have more entrepreneurs
(Ibid.).
Can opportunity recognition be learned?
The basic question relating to opportunity recognition, and one with important
implications for entrepreneurs is the following: Can individuals be trained to be
more efficient at this task? In other words, can entrepreneurs learn to be more
successful in recognising opportunities? Hills et al. (1997) found that teaching
creativity skills can enhance opportunity recognition by entrepreneurs, and that
experimentation and continuous learning are essential to that process.
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Dutta et al. (2005) saw the opportunity recognition as a learning process. Dutta et
al. (2005) suggested that entrepreneurs are essentially involved in a process of
learning when they engage with entrepreneurial opportunities; as the entrepreneurial
venture evolves through its life cycle, learning transfers across levels – from the
individual entrepreneur to external/internal partners and the entire firm. The business
idea goes through a process where it evolves through interaction with other parties
before actual implementation.
Baron (2006) said that individuals can be trained to be more proficient at
recognising opportunities by teaching them not only to be “alert” to opportunities or
to search actively for them, but rather, to search in the right places and in the best
ways. Specifically, they should focus their efforts on identifying changes in
technology, demographics, markets, and other pertinent factors that play an
important role in the success of almost any industry. Second, while engaging in such
searches, they should also focus on actively seeking to identify ways in which these
trends and changes are linked or connected. Baron (2006) also suggested that
opportunity recognition can be enhanced by providing potential entrepreneurs with a
very broad range of experience. The broader this experience (e.g., the wider the
range of positions held, the greater the number of different industries), the richer the
prototypes and store of exemplars will be, and hence, the more likely the
entrepreneurs will be able to perceive connections between seemingly unrelated
events or trends, especially connections that are not immediately apparent to any
casual observer.
1.2. Technology-based opportunity recognition
Entrepreneurial opportunities grow from the new knowledge and source for this
information is often a technology. Renko (2008) found that entrepreneur recognises
an opportunity based on technology knowledge and his/her creativity (Figure 1.4.).
Figure 1.4. Technology knowledge as a source of entrepreneurial opportunities.
Source: Renko (2008)
Norhashim et al. (2007) found that identifying opportunities that underlies any new
venture is especially challenging when it is technology-based. Very often a leap of
faith is necessary, giving the idea that entrepreneurs are brave and risk loving.
Norhashim et al. (2007) added that technology-based business projects usually
require huge R&D costs and in the end it is hard to be certain of market acceptance.
Even if the market will accept it - the price it is willing to pay may not correspond
with the amount of money poured into R&D.
Technology-based opportunities apply a technology to solve a problem, meet a
need or create a new product or process. As there can be links and overlaps between
technology and knowledge associated with it, in this case it is the application of
technology through innovation which provides the opportunity. Technology-based
opportunity is usually resource intensive, requiring significant research and
development support and budgets (Rae 2007).
Unfortunately technology by itself will not lead to success (Trott 2002). Before
technological change leads to new products or markets, entrepreneurs have to
Technology
knowledge
Entrepreneur s
creativity
Entrepreneurial
opportunity
recognized
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discover the technological opportunities and its application area (Renko 2008).
Unfortunately companies are not always able to track all the technological
opportunities available for them within their boundaries (Parhankangas et al. 2003).
The major problem for established firms is advancing technologies toward
commercialization (Rice et al. 2001). Baron et al. (2008) gave an example of
different forms of technology-based entrepreneurial opportunities, see Table 1.1. The
table illustrates that any given technological change can be developed in different
ways: through development of a new product or service, selecting a new market or a
new method of production.
Table 1.1. Different forms of technology-based entrepreneurial opportunities
Technological
change (source
of opportunity)
Form of the
opportunity
Example of a
business idea
Reasoning
Internal
combustion
engine
New product or
service
Automobile The internal combustion engine is
used to power automobiles.
Internet New way of
organising
Online book sales The Internet allows people to sell
products without retail outlets.
Refrigeration New market Refrigerated ship The refrigerated ship allows ranchers
in one country to sell their meat in
another country.
Computer New method or
production
Computer-aided
design
The computer allows designers to
make products without building
physical prototypes.
Source: Baron et al. (2008)
Norhashim et al. 2007 said that when diving into technology-based business
opportunities, it is important to understand what stimulated the opportunity. Was it
market driven where a need has been identified and the venture is all about providing
a solution to the problem? Or is it more technology driven where a new finding or
development has occurred and suitable avenues for commercialization is the primary
focus? It comes to looking for solutions to adopt versus looking for problems to
solve. In either case, technology plays a crucial role in facilitating the process. It
means the technology-based opportunity recognition takes place only when the
entrepreneur is able to identify the market needs and design a product or service to
satisfy these needs using an adequate and potentially available technology within an
organisation possessing the right resources and capabilities (Norhashim et al. 2007).
Becheikh et al. (2006) stated that technology-based opportunity recognition is a
key factor in a firm’s competitiveness. Introducing technological innovations is
unavoidable for firms which want to develop and maintain a competitive advantage
or gain entry into new markets. Subrahmanya (2010) found that irrespective of the
dimensions of technological innovations, companies intend to achieve either cost
effective, improved quality, improved versions of existing products, or altogether
new products. According to this research the major objective of small and medium-
sized enterprises’ technology-based innovation was enhancement of competitiveness
in the form of quality improvement, cost reduction, extension of product range and
replacement of phased out products, apart from penetrating the international market.
Innovative SMEs registered higher growth rates relative to non-innovative SMEs in
terms of not only sales turnover but also employment and investment. The overall
analysis lends substantial credence to the argument that technology-based innovation
contributes to the growth of firms.
The model proposed by Park (2005), Figure 1.5., suggested that technology-based
opportunity recognition in firms is an interaction between three individual
components: the entrepreneur, the experience within the firm and technology. Park
(2005) added that often the focus is on the knowledge of markets and the technical
knowledge and its role in the transforming of developing technical breakthroughs
into real products and processes has been mostly ignored. This model proposes that
technology-based innovation requires a mix of technical, entrepreneurial and
managerial experience to turn a technology into market success.
25
Figure 1.5. Three components of the opportunity recognition process for high-tech
firms. Source: Park (2005)
Organizations cannot afford to just observe what developments might occur and to
only come in when the dominant design emerges. Organisations that use the watch
and wait tactics will not be the first movers and miss out on the opportunity to be
market leaders (Norhashim et al. 2007).
Dealing with new or non-core technologies
Parhankangas et al. 2003 described that non-core technologies are usually not
directly linked to the core businesses of the company or used in the parent
corporation’s current or future products. Although non-core, these technologies may
be marketable and exploitable in other organizations and contexts. It is important to
note that the definition of non-core technology is time and context-dependent. The
INNOVATION
Knowledge
and experience
of the firm
The
entrepreneur
Technology
distinction between core and non-core technologies is made at a certain point of time
based on the current corporate strategy and competitive environment.
Technology-based firms rarely have clear strategies for dealing with what they see
as their non-core technologies. This is acceptable by the contemporary business logic
since, by definition, what is considered non-core technologies by a parent firm is
defined as not contributing to competitive advantage. As such, non-core technology
ventures are often discontinued, regardless of their potential to prosper in
organizational environments that would nurture them (Parhankangas et al. 2003).
Companies usually recognise the importance of leveraging key capabilities and
creating advantage from what the company does best technologically. Rice et al.
(2001) found that development of radical technologies moved the entrepreneurs’ core
technologies into unknown territory, it means stretching the company´s technology
development capabilities.
Rice et al. (2001) found that activating non-core technology-based opportunity
recognition in a company typically starts with technologists who are the generators
of ideas. Du et al. (2013) found that entrepreneurs usually have a tendency to
collaborate with R&D in their core technological fields, but collaborations in firms’
non-core technological fields benefit them the most. At the same time such
collaboration partnerships are hard to establish if the enterprise has little or no
background knowledge in place. Du et al. (2013) suggested that in order to benefit
from collaborations in firms’ non-core technological fields, firms may need to first
gain some background knowledge related non-core technologies.
Parhankangas et al. (2003) showed that the strategies of managing non-core
technologies within large corporations are divided into non-systematic and
systematic approaches. Non-systematic approach refers to a process that is not
clearly defined and where non-core technologies are managed case by case.
Corporations applying a more systematic approach have clearly defined procedures
for managing the technology-based assets outside their core. Based on this study, less
than half of the corporations had a clear method for technology development.
27
Parhankangas et al. (2003) described that there are usually three approaches to the
management of non-core technologies in the companies (see Figure 1.6.).
Figure 1.6. Approaches to the management of non-core technologies Source:
Parhankangas et al. (2003)
The „Ad Hoc“ approach reflects that there are no systems established in the
company, in „Lone Ranger“ type some efforts are already made and in case of
„Institutional“ model there are clear strategies and methods established in a company
to deal with non-core technologies.
Parhankangas et al. (2003) suggested that companies seeking to extract the
maximum value from their technology-based assets should review their technology
portfolios on a regular basis. Without systematic and continuous procedures,
companies may have difficulties in identifying new or non-core technologies. While
conducting the technology portfolio review, executives should keep in mind that
sometimes the distinction between a core technology and a non-core technology is
unclear, and many technologies may fall in the grey area, where the future value of a
technology to the parent is extremely difficult to evaluate. The following
recommendations were given to enterprises in order to review the technology
portfolio (Parhankangas et al. 2003):
1) Technology strategy should be aligned with the overall corporate strategy
balancing both the short and long-term objectives and product/technology mix.
2) A patent and idea database should be established to get an understanding of the
emergent technologies possessed by the firm. These databases should be reviewed on
a regular basis to identify potential non-core technologies.
3) The technology-based projects under the threat of termination should be reviewed
in order to identify technologies with potential outside the parent firm.
4) Technologies should be divided into three categories:
- Technologies that form the basis of competitive advantage (core
technologies);
- Technologies that are not needed now or in the future (non-core
technologies);
- Technologies that do not seem to be important right now, but their future
value is still to be defined (potential non-core technologies).
5) Non-core technologies should be considered as business opportunities and
business assets rather than just legal assets.
6) The non-cash value of a non-core technology should be also taken into account,
including the synergies with the company’s current or future core technologies.
1.3. Opportunity recognition in healthcare
Varkey et al. (2008) argues that opportunity recognition has become a critical
capability of all healthcare organizations. The innovation in healthcare can be
described as the successful implementation of a new idea in a way that it is giving a
great value for some or many of the stakeholders. Porter (2010) specified that value
29
for the patient is the central goal in healthcare. In a well-functioning healthcare
system, the creation of value for patients will determine rewards for all system
actors. Omachonu et al. (2010) defined healthcare innovation as the introduction of a
new concept, idea, service, process, or product aimed at improving treatment,
diagnosis, education, outreach, prevention and research, and with long-term goals of
improving quality, safety, outcomes, efficiency and costs. Lazarus et al. (2011)
found that the word innovation is often overused in healthcare, frequently espoused
in well-intended promotional materials lacking in any real substance. True
innovation is a concept with an inherently unique capacity to align people, foster
creativity, and bring significant improvement to existing processes or
transformational change to whole systems and industries.
The last decades have already produced a lot of innovations in the healthcare
industry. Some of these are innovations in the process of care delivery,
pharmaceuticals and surgical interventions (Omachonu et al. 2010). Physicians can
instantly share imaging and test results with colleagues in the same building or across
the country or continent. Patients are able to have immediate access to their own
records and transmit or carry it from one healthcare provider to another (Bessant et
al. 2013).
At the same time there are significant changes and serious challenges ahead in the
healthcare industry. As countries and organizations aim for ways to control
healthcare spending, address the growing needs of an ageing population, and respond
to more informed and empowered consumers, the opportunities for innovation have
increased exponentially (Varkey et al. 2008).
Current problems in healthcare
What are the issues driving opportunity recognition and need for innovations in
healthcare? In many countries around the world healthcare costs are increasing at an
unsustainable rate which considerably exceeds GDP growth. For several major
countries, such as the UK, France, and Germany, healthcare costs consume around
10% of GDP and are increasing at twice the rate of economic growth (Bessant et al.
2013). USA is spending more per capita on healthcare than any other country, 17.9%
of GDP in 2011. An ageing population, improving economy and President Obama’s
healthcare overhaul will push spending on medical services to almost 20 per cent of
USA gross domestic product by 2021, the government has projected (Wayne 2012).
As global population is expanding, the healthcare sector is coming under
pressure. In the developed world, ageing population and extended life expectancy are
leading to an increasing prevalence of chronic and expensive-to-treat diseases. In the
developing world, fast economic growth and an increasing middle class have
significantly increased demand for health services, while governments at the same
time are struggling to bring social services to remote and underserved areas (Bessant
et al. 2013). The growing shortage of medical personnel, nurses and other key
practitioners advances the argument in favour of more innovation in healthcare
(Omachonu et al. 2010). In addition to that, a trend towards modern citizens living a
less healthy lifestyle than previous generations has resulted in increasing volume of
lifestyle diseases such as diabetes, cardiovascular conditions and chronic obstructive
pulmonary disease (When remote care…, 2010).
It is also important to understand the evolution of the global burden of disease
(GBD) and the role of major health risks in order to develop effective solutions to
improve global health and also in order to identify the range of technologies that are
needed (Promoting Access to…, 2012):
- Large declines in mortality between 2004 and 2030 are projected for all of the
principal communicable, maternal, perinatal and nutritional causes of death,
including HIV/AIDS, tuberculosis and malaria.
- The ageing of populations in low and middle-income countries will result in a
significant increase in total deaths due to non-communicable diseases (NCD)
over the next 25 years.
31
- The leading global risks for mortality in the world are high blood pressure,
tobacco use, high blood glucose, physical inactivity, and overweight and
obesity (Promoting Access to…, 2012).
There is a clear need to recognise opportunities and introduce innovative solutions
in order to improve the healthcare by better prevention and delivery of care.
Specifics of healthcare industry
It is essential to define a value to understand any industry and its driving forces.
What is the value in healthcare?
In the healthcare market Porter (2010) defined value as patient health
outcomes achieved relative to cost of care. He said, „In a well functioning
healthcare system, the creation of value for the patients will determine
rewards for all system actors.“ If value improves, patients, payers, providers, and
suppliers can all benefit while the economic sustainability of the healthcare system
improves.
Røtnes et al. (2009) found that opportunity recognition in healthcare is a complex
issue. The healthcare sector is a hierarchical sector, with a complex of users and
buyers at all levels. How can an innovative product get access in a system where the
user, and even not necessarily the buyer make the decision on whether an innovation
product will be purchased? There is not one customer in the healthcare sector. The
buyer usually is not the same person as the user. Doctors, nurses, patients with all
kinds of needs, administrative staff are only examples of different users. This makes
the market screening a complex process. Further, some user groups constitute a
critical mass, while others are few and need individually adjusted products and
services. Too small markets remain uninteresting for both companies and investors.
Another barrier to selling a new product to the healthcare sector is that even when the
sector decides that the product is needed the sector is subject to strong regulations
and this may complicate the purchase. These specific demands for testing and
documentation are often underestimated by companies and thus constitute a barrier
for successful innovation (Røtnes et al. 2009).
In any field, performance and accountability improvement depends on having a
shared goal that unites the interests and activities of all stakeholders. In most fields
the preeminent goal is value. Instead of value, healthcare stakeholders have myriad,
often conflicting goals, including access to services, profitability, high quality, cost
containment, safety, convenience, and patient satisfaction (Porter, 2010). For
example, Omachonu et al. (2010) described five key stakeholders in the healthcare
industry, each with its unique and deliberate needs, wants and expectations as
described in Table 1.2. Omachonu et al. (2010) suggested that any attempts at
modelling the process of opportunity recognition in healthcare must take into account
all of these stakeholders.
Table 1.2. Stakeholders in the healthcare industry
Stakeholders Needs, Wants and Expectations
Physicians and Other Care Givers Improved clinical outcomes, improved diagnosis and treatment
Patients Improved patients’ experience, improved physiological well-
being, reduced waiting time, reduced delay
Organizations Enhanced efficiency of internal operations, cost containment,
increased productivity and quality and outcomes improvement
Innovator Companies Profitability, improved outcomes
Regulatory Agencies Reduced risks and improved patient safety
Source: Omachonu et al. 2010
Purely quantitatively, in terms of number of people involved, patients are the largest
group. Patients have gained enormous experience, either directly through their own
health records, or indirectly through the suffering of relatives or friends (Bessant et
al. 2013). It is important also to remind that there is currently a transformation to
outcomes-focused and patient-centric healthcare. Until now often the hospital or
33
physician’s office was the centre of healthcare. Sharing of the patients records, with
advances in telecommunications creating the potential for remote monitoring, are
changing how clinicians interact with patients. At the same time, social media and
the internet are changing how patients interact with their caregivers. Patients are
getting more informed and empowered (Bringing patients…, 2013).
Barriers to opportunity recognition and innovation in healthcare
Every year, billions of dollars are spent in countries globally to support the
development of evidence-based health innovations, interventions, practices, and
guidelines designed to improve human health. But only a small fraction of these
innovations are ever implemented in practice, losing billions along the way
(Herzlinger 2006; Chaudoir et al. 2013). Unfortunately about one-third of medical
spending is not linked with improved outcomes, considerably cutting the efficiency
of the medical system and leading to massive adverse effects. The application of
evidence based health innovations is a challenging process. It involves consideration
of a wide range of multi-level variables related to the innovation itself, the local
implementation context, and the behavioural strategies used to implement the
innovation (Chaudoir et al. 2013). Innovators encounter many barriers, including
difficulty generating funding, restrictive regulations, and other actors seeking to
protect their territory (Herzlinger 2006). Cutler (2010) found that also lack of
information and poor incentives are barriers to opportunity recognition and
innovation in healthcare.
The healthcare system builds an array of barriers to innovation. Herzlinger (2006)
offered the following guidelines to overcome these obstacles and move healthcare
innovations forward:
1) Understanding the forces affecting innovation
– Players. The healthcare sector has many stakeholders, each with a different
goal. Innovator can be helped or attacked by powerful stakeholders. These players
can have substantial resources and power to influence the public policy and opinion.
For example, hospitals and doctors sometimes blame technology-based product
innovators for the healthcare system’s high costs. The competing interests of
different groups are not often clear or permanent. Innovators should recognise and
work with different players.
– Funding. Innovation in healthcare presents two types of financial challenges:
the first is the funding of innovation’s development and secondly, figuring out who
will pay for the product or service. One problem is the long investment time needed.
Investors in a healthcare technology company may have to wait ten years even to
find out whether a product will be approved. The second problem is that many
sources of capital are not familiar with the healthcare sector and it is difficult to find
investors. A source of investor confusion may be the healthcare sector’s complex
system of payments or reimbursements, which often come from a third party like the
government or a private insurer, but not final consumer.
– Policy. Government regulation of healthcare sector can sometimes support
innovation, but sometimes hinder it. It is important for innovators to understand the
wide network of regulations that may affect innovation and also how and by whom
those rules are enacted, modified and applied.
– Technology. As technology develops, understanding how and when to adopt or
invest in it is very important. If entrepreneur moves too early, then the infrastructure
to support the innovation may not yet be in place; if to wait too long, then time to
gain competitive advantage may have passed. It is also important to keep in mind
that competition exists not only within each technology, but also across different
technologies.
– Customers. With access to comparative information, consumers may support or
reject innovations. Those who suffer from different diseases can pressure healthcare
providers for access to medicines, diagnostics, services or devices that they consider
effective. It is clear that consumers can spend large sums from their own pocket for
useful healthcare services. An entrepreneur that recognises empowered consumers
can greatly boost the adoption of an innovation.
35
– Accountability. There is also a need to address the demands of agencies that
audit the healthcare sector performance.
2) Managing and overcoming these forces
Every healthcare innovation, whether focused on satisfying consumers, developing a
new technology, or designing an improved business model, stands a better chance of
succeeding when they deal with the forces that affect innovation efforts (Herzlinger
2006).
Technology-based opportunity recognition in healthcare
Herzlinger (2006) suggested that three kinds of innovation can make healthcare
better and cheaper. One changes the way consumers buy and use healthcare. The
second uses technology to develop new products and treatments or otherwise
improves care. The third generates new business models, particularly those that
involve the horizontal or vertical integration of separate healthcare organizations or
activities. All three options are described as follows (Herzlinger 2006):
– Consumer focused. Innovations in the delivery of healthcare can result in more
convenient, more effective and less expensive treatments for today’s time-stressed
and increasingly empowered healthcare consumers. For example, a service provider
can focus on becoming more user-friendly. Patients are like other consumers, they
want not only a good product, but also ease of use.
– Technology. New drugs, diagnostic methods, drug delivery systems, and medical
devices offer hope of better treatment and of care that is less costly, disruptive, and
painful. For example, implanted sensors can help patients monitor their diseases
more effectively. And IT innovations that connect many islands of information in the
healthcare system can both vastly improve quality and lower costs by, for example,
keeping a patient’s various providers informed and thereby reducing errors of
omission or commission.
– Business model. Healthcare is an astonishingly fragmented industry (many general
practitioner offices, thousands of small firms offering healthcare related products or
services). Innovative business models, particularly those that integrate healthcare
activities, can increase efficiency, improve care, and save consumers time, for
example, rolling a number of independent players up into a single organization,
horizontal integration, to generate economies of scale, or bringing the treatment of a
chronic disease under one roof, vertical integration - making the treatment more
effective and convenient.
The history of healthcare has been in many ways a story of technology-based
opportunity recognition. But alongside the constant discoveries and inventions,
healthcare practitioners and patients have not always recognised the potential of the
latest innovations. This was stated in The London Times about the stethoscope in
1834: „That it will ever come into general use, notwithstanding its value, is
extremely doubtful; because its beneficial application requires much time and gives a
good bit of trouble both to the patient and the practitioner; because its hue and
character are foreign and opposed to all our habits and associations.” (Top Three
Healthcare…, 2013). It is the same with development of healthcare technology today
– its power has yet to be fully recognised. While many technological solutions (for
example, electronic health records) are now accepted, there are probably more wide-
ranging opportunities to be recognised.
Omachonu et al. 2010 found that in order to fully understand the opportunity
recognition and innovation in healthcare, it is critical to answer the questions: a) Are
innovations chasing a need; or b) Are needs chasing innovation? In the first case,
new or existing technology searches for a problem to solve, whereas in the second
case, new or existing problems chase after solutions in the form of innovation. Stated
differently, it comes down to solutions looking for problems to solve versus
problems looking for solutions to adopt. In either case, technology plays a pivotal
role in facilitating the process. Figure 1.7 is an example of how the process of
healthcare innovation works Omachonu et al. (2010). Many of the opportunities in
healthcare have been identified by healthcare stakeholders (patients, patient
37
advocacy groups, healthcare organizations, physicians, other healthcare
professionals, etc.).
Figure 1.7. The Process of Healthcare Innovation. Source: Omachonu et al. (2010)
Omachonu et al. (2010) added that the next challenge lies in determining whether the
opportunity can be met internally or by a healthcare innovation company. If the
innovation originates from within the healthcare organization, it is tested, modified
and adopted. If it does not originate from within the healthcare organization, the need
is instead met by a healthcare technology company that develops, tests and markets
the technology to healthcare organizations. In certain cases, a healthcare innovation
company takes what might be an imperfect attempt at innovation from a healthcare
organization and refines it into a better product, and then markets it to healthcare
organizations. The limitations in the resources available to the healthcare
organizations force them to partner with a healthcare innovation company to create a
product that meets their needs.
Consumer
Needs
R&DPhysicians/
Healthcare
Professionals
Healthcare
Organizations
Consumer
Advocacy
Groups
Patients
Innovation
Companies &
Universities
Respond to
Needs
Internally
Grown
Innovation?
Government
Agencies
Develop
And Adopt
Develop
And Market
New
Innovation
No
Yes
There are three main technology trends which affect future of healthcare (Top
Three Healthcare…, 2013):
1) The first is size. The scale of digital technology is amazing. For example, in 2015,
the world will create data equal to 120,000 times the total of all earlier written words
in history. This amount of data will be created by powerful computing, stored in the
cloud and available from a growing range of different devices.
2) The second is a shift to individuals. There is a trend for greater customization of
offers for specific person. Websites like eBay and Amazon are already tracking
individuals shopping habits and recommending goods or special offers accordingly.
3) The third is that technology is more and more social. Social networks are not
anymore just places to find friends. Networks, for example, Facebook, have helped
create interlinked communities of users. Consumers produce their own content in
addition to accessing and editing what has been created by others (Top Three
Healthcare…, 2013).
There is a growing body of evidence that technology can be brought to bear on
nowadays challenges in healthcare, not only by providing care to remote or
underserved populations, but also by reducing the overall health system costs. For
example, telehealth – remote exchange of data between a patient and a healthcare
professional – has already been proven to enhance patient care and reduce costs
(Care in a…, 2012). A greater diversity of healthcare technologies will be needed in
order to meet the challenges presented by the evolving GBD within a wider context
of preventive measures focusing on lifestyle, nutrition and environmental factors
(Promoting access to…, 2012). KPMG asked executives from healthcare industry
and found that they expect that health information technology will be most effective
trend in curbing costs in that sector (see Appendix 1). Evidence-based medicine,
disease management, and pay for performance from payers as other effective trends
followed (Transforming Healthcare… 2012).
39
2. RESEARCH METHODOLOGY
This chapter will point out the research problem and objectives of the thesis. The
research question and the expected outcome of the study are also established in this
chapter. In addition, the author will describe the research strategy, including
methods, data analysis and research data.
2.1. Research strategy
The theoretical foundations of this thesis described the importance of entrepreneurial
opportunity recognition, processes, key factors and specifics of technology-based
opportunity recognition. The theoretical part also covered current and future
problems in healthcare industry and the need for technology-based innovations in
that sector.
Based on the theoretical part of this thesis, the case selection for this study was
settled. The author decided to investigate healthcare technology companies because
the technology-based innovations are believed to be one of the options to solve at
least some part of the healthcare industry problems. At the same time, companies are
not always able to identify all the technology-based opportunities available for them,
neither have they clear strategies to deal with that. The main tasks of the current
research were to add some new findings to the theoretical construction of opportunity
recognition and technology-based opportunity recognition, but also to complement
and specify previous findings by focusing the research on technology-based
opportunity recognition in healthcare technology companies.
The research problem of this thesis is that companies are not always able to
recognise the technology-based opportunities available for them.
The first question of this research is to understand how healthcare technology
entrepreneurs recognised the opportunities on which their current innovations (new
products or services) were built on. The second question of the research is to find out
how entrepreneurs identify new technologies outside their core competence (non-
core technologies).
The research objective is to enhance technology-based opportunity recognition
capability in healthcare technology companies. The expected result of this thesis
work is to suggest a model for enhancing technology-based business opportunity
recognition capability in healthcare technology companies based on research results.
2.2. Research methods
Qualitative research design and methods were chosen for the current research.
Multiple-case study
The author chose a case study research, which is a suitable approach regarding the
research problem and questions. According to Yin (2009), case study is a preferred
research method for a “why” or “how” question and when the focus of the thesis is
on real-life events such as small group behaviour or organizational processes, which
the current entrepreneurial opportunity recognition topic is.
Case studies can cover multiple cases and then draw single set of “cross-case”
conclusions. Each individual case study consists of a “whole” study, in which
41
evidence is sought regarding the facts and conclusions for the case; each case´s
conclusions are considered to be the information needing replication by other
individual cases. The multiple-case study design is the selection of two or more cases
that are believed to be literal replications, such as a set of cases with exemplary
outcomes in relation to research questions. It is suggested that if possible the
multiple-case studies should be chosen, because of the “vulnerability” of single-case
designs. Analytic benefits from having two or more cases may be substantial (Yin
2009). The author chose a multiple-case study, which is appropriate because having
multiple cases was helpful to strengthen the findings from entire research.
Research sample
Choosing the right research sample for qualitative interviews was important to reach
a credible result. The participants were chosen according to the research question to
find out how healthcare technology entrepreneurs recognise opportunities and
identify non-core technologies.
The author chose the participants according to the criterion that he or she had to
be directly involved in the opportunity recognition process of the healthcare
technology company or start-up. Nine representatives from different healthcare
technology companies agreed to give input to this research, six from companies with
the head-office in Estonia, one from Finland, one from UK and one from USA. The
research sample is presented in Appendix 2.
In-depth interviews
The research for the master’s thesis was carried out using in-depth interviews.
During the in-depth interviews it is possible to ask respondents their opinions. The
interviewees could also suggest other persons to be interviewed (Yin 2009). This
data collection method was chosen because the thesis is focused on entrepreneurial
opportunity recognition that can be influenced by many different key factors, which
is better to investigate through experiences of people directly related to that issue.
The author chose the type of semi-structured interview. In this type of interview
the researcher relies on a set of prepared questions that cover the main topics for the
respondent to address. At the same time there were few if any multiple choice
answers and the respondents were encouraged to expound at length in their own
words. The framing and wording of the answers are the key parts of what the
interviewer wants to learn. The semi-structured interview ensures that respondents
answer a similar set of questions and that similar topics will be addressed in all the
interviews (Scott et al. 2013).
The author of the thesis set the focus on informing the interviewees in advance by
e-mail about the context of the thesis and the research problem. This way the
participants were encouraged to produce information that acknowledges the
perspectives of the research and the topic will not spread. The interview framework
determined the questions and topics to be asked, but not how the questions were
asked. This way the researcher was flexible to leverage the background of each
participant in the best possible way. The research focused on nine different
healthcare technology enterprises, especially on investigation of entrepreneurial
opportunity recognition processes and non-core technology identification.
The questionnaire contained four identical open end questions for each
interviewee. The semi-structured interviews allowed adding complementary
questions for clarifying an answer or elaborating the participant’s opinion about a
certain topic even further. The questions were open ended, which gave the
participants greater freedom in formulating their answers. The researcher’s goal was
to find patterns between the answers when put into the previously established context
of the research.
The questions in the questionnaire were derived from the master’s thesis research
problem and objective. The questionnaire had two types of main questions. The first
two questions were related to the understanding of how healthcare technology
entrepreneurs recognise the opportunities which their innovations (new products or
43
services) were built on. The other questions were related to finding out if and how
healthcare technology entrepreneurs identify new technologies outside their core
competence (non-core technologies) in order to use them to develop their current or
new products or services.
The interviews were carried out by the author mostly in face-to-face meetings
(six), by telephone (one) or by e-mail (two), in case the interviewee was not living in
Estonia. The interviews were carried out between 26th
of April and 15th
of May 2013.
The interviews during face-to-face meetings were audio recorded, and during the
telephone interviews the information was written down by the author, to capture all
the nuances of wording and framing.
The length of the interviews was not determined because it depended on the
experience of the participant and how much the researcher could leverage this
knowledge.
There was the issue of confidentiality. The participants were asked if all
information learned from their interviews can be used in the master’s thesis. The
interviewees could ask to stay anonymous.
The main questions of the interviews are presented in Appendix 3.
2.3. Research data
Data analysis
Data analysis was the last part of the research process, where the data were
interpreted in relation to the research context. Data analysis is the most important
part of research, especially in qualitative research, where the author has a lot of
freedom to interpret and conclude the data according to his or her own choice.
The general data analytic strategy for this research was relying on theoretical
foundations. It means that theoretical orientation was guiding the case study analysis
and it helped focus attention to certain data and ignore other data (Yin 2009).
The data analysis of the master’s thesis was carried out through a thematic
analysis. Thematic analysis is a method for working through the gathered data by
identifying, analysing and reporting patterns or themes that emerge in the data. It is
commonly used to organize and describe data in a qualitative research process. This
analysis method is based on these predetermined themes, often identified through a
coding scheme (King et al. 2010). The accounts of qualitative interviews will be
treated as data sources for finding out about the reality, experiences or thoughts
about the topics under investigation. Analysis of the interviews started immediately
after these were conducted and in parallel to the still pending interviews in order to
preserve the sense created by the author during the interview.
In conclusion, the author finds that the methodology chosen for this study was
effective. After thematic analysis of the interviews the author presents the research
results where the outcomes of the interviews are compared with the theories and
studies based on the literature review. The model for enhancing entrepreneurial
technology-based opportunity recognition in healthcare technology companies will
be proposed based on the results.
Research data
The following methods were used to collect data: semi-structured interviews and
secondary data, including companies´ homepages in the internet, previous studies
and reports on relevant fields like opportunity recognition and healthcare industry
specifics. Table 2.1. summarizes the data sources, the time window and quantities of
data.
45
Table 2.1. Research data sources, the time window and quantities of data
Data Time window Number
Qualitative interviews with healthcare
technology company representatives
April – May 2013 9 interviews
Case companies’ home pages in
internet
2013 9 web pages
Literature review – research about
entrepreneurial opportunity
recognition
1994-2013 20 researches
Literature review – healthcare industry
reports and studies
2007-2013 14 reports/ studies
Source: Author
2.4. Limitations and implications for future research
Empirical research is often with limitations. The author can distinguish the following
limitations in the study. The first limitation relates to the generalizability of the
suggestions made in the thesis. The empirical part of the thesis was based only on
findings of healthcare technology companies. To gain a more general understanding
of the opportunity recognition topic and technology-based opportunity recognition
other industries as well as differences between the industries should be researched.
The second limitation comes from the sample selection. Most of the case
companies are based in Estonia. It was chosen by the author because of the intention
to carry out mostly face-to-face interviews, which are more informative compared to
telephone interview or written communication. To gain a more international view of
the opportunity recognition topic and technology-based opportunity recognition more
case companies from other countries should be researched as well.
The third limitation is that correlation between companies’ opportunity
recognition methods and business success was not measured during this research and
it could also be subject for future research.
47
3. CASE DESCRIPTION AND RESULTS
This chapter starts with brief descriptions of case companies. After that the key
information collected about opportunity recognition process and identification of
new technologies from the case companies combined with the literature review will
be discussed.
3.1. Overview of case companies
AlterG
AlterG Inc. offers a solution for people to exercise with less impact and rehabilitate
faster from injuries, established in 2004, headquarter in California, USA. Based on
NASA “differential air pressure” technology, Anti-Gravity Treadmills enable
individuals to improve mobility and health, recover from injury and surgery more
effectively, overcome medical challenges that limit movement, and enhance physical
performance. Customers include sports teams, hospitals, physical therapy clinics,
skilled nursing facilities and performance centres (AlterG 2013).
Cognuse
Cognuse produces and manufactures systems and devices specifically for cognitive
rehabilitation. Their clients are professional health care service providers who
specialize in brain health treatments, diagnostics and rehabilitation services like
hospitals with in-house mental health rehabilitation, mental health rehabilitation
clinics and elderly care institutions. Project started in 2005, headquarter in Estonia
(Cognuse 2013).
Docobo
Docobo Ltd is a UK healthcare solutions provider involved in management and
prevention of long term conditions (LTC), established in 2001. The company has
developed a remote monitoring service for LTCs, called doc@HOME, and is
developing a focused range of related services and products to expand its portfolio.
The telehealth service offers care providers an integrated low cost solution for the
collection, management and analysis of essential patient related data, and enables
efficient interaction between clinicians and patients at home (Docobo 2013).
LabToWellness
LabToWellness is a healthcare technology company developing a cloud-based IT
platform for healthcare organisations to deliver better personalised health reports.
Secure and adaptable IT system enables automated delivery of personalised, visual-
intensive and recommendation-rich health and wellness reports for both consumers
and medical professionals. Company was established in 2011 in Estonia
(LabToWellness 2013).
49
EdgeWise
EdgeWise is a privately held ICT company with a competence in the field of
eHealth, established in 2012 in Estonia. Together with the international network of
universities and leading healthcare providers they have personalized eHealth
applications for chronic disease management and prevention called Edgewise
Professional (EdgeWise 2013).
Flick Diet
Flick Diet LLC is a biotechnology start-up established in 2012 and located in
Estonia. They are developing consumer genomics applications. Flick Diet's method
uses modern biotechnology methods to review gut bacteria and DNA based on
research. The results will suggest what kind of foods is appropriate for a person and
which is not (Flick Diet 2013).
Mendor
Mendor is a Finnish company, established in 2010. It is committed to the design,
development and marketing of advanced diabetes management products. Mendor has
launched a portable all-in-one blood glucose meter and web-based software
application for the daily management of diabetes (Mendor 2013).
LifeInU
LifeInU is a start-up company and their product is being developed at Tallinn
University of Technology. The product is a remote monitoring system for pregnant
women in order to prevent pregnancy complications and miscarriages (LifeInU
2013).
Quattromed
Quattromed HTI Laboratories Ltd is the privately held company in Estonia,
established in 1995. The core competence of the company is to offer medical
laboratory services to its customers, like general practitioners, providers of
ambulatory and stationary medical care, occupational healthcare centres, different
public institutions and private individuals (Quattromed 2013).
3.2. Research results
In this sub-chapter the opportunity recognition process and identification of non-core
technologies in case companies combined with the literature review will be
discussed.
Opportunity recognition process in case companies
Discussion and presentation of the results of opportunity recognition are based on the
framework by Ardichvili et al. (2003) where the process was divided into three
stages: perception (sensing or perceiving market needs or underemployed resources),
discovery (recognising a ‘‘fit’’ between particular market needs and available
resources) and creation (forming a business model).
Perception is the first stage of opportunity recognition process where the initial
idea starts with sensing of market needs or unused resources (Ardichvili et al. 2003).
51
Bhave (1994) found that there are two distinct routes in the opportunity recognition
process:
1) Externally stimulated opportunity recognition where the decision to start a
project preceded opportunity recognition for certain entrepreneurs;
2) Internally stimulated opportunity recognition where the opportunity recognition
preceded the decision to start their projects.
Based on information from nine case companies mostly internally stimulated
opportunity recognition was presented where the opportunity recognition comes
before decision to start the project. Still, there were two clear examples where a
group of people with different background in terms of education or prior experience
came together, first chose an interesting industry and started to look for opportunities
(Reinsalu 2013; Vedeshin 2013). Vedeshin (2013) said, “We chose healthcare
industry because we found that it is still in developing stage with many unsolved
problems in the air and it may lead to successful business models. We discovered
that there are many other industries which are much more developed and where
finding new opportunities is difficult.”
According to Barringer et al. (2008), there are three general approaches
entrepreneurs use to identify an opportunity: observing trends, solving a problem and
finding gaps in the marketplace. Omachonu et al. (2010) stated that it is also
important to differentiate between two versions: are the discovered solutions looking
for problems to solve, or problems looking for solutions? In some case companies
first the problem as opportunity was found and then the looking for solutions
followed (Kask 2013; Mellik 2013; Reinsalu 2013; Ranta 2013). In other cases
technology as a solution was the trigger to start finding for problems in healthcare to
solve (Anier 2013; Raska 2013; Vedeshin 2013; Whalen 2013).
Shane (2000) suggests that three major dimensions of prior knowledge are
important for the process of entrepreneurial perception of opportunities: knowledge
of markets, ways to serve markets or customer problems. Also prior knowledge of
market let entrepreneurs see the usefulness of a technology in solving different
customer problems. Marvel et al. (2006) found that prior knowledge of technology is
positively associated with opportunity or innovation radicalness.
In case of LabToWellness knowledge of markets, ways to serve markets and
information about customer problems all helped to sense the market need and
identify the opportunity. Kask (2013) said that customers were asking for such
service while he was still working for another healthcare technology company. But
as this company had a different strategic focus the new enterprise was established to
develop the current solutions. In case of Cognuse, one of the founders had a
background in psychology and other in computer engineering, it means that prior
knowledge of customer problems and technology was used to develop current
services of cognitive rehabilitation (Mellik 2013). Knowledge of customer problems
was the trigger also in the case of Mendor, because one of the co-founders had
diabetes and the initial idea came from him (Ranta 2013).
Prior knowledge of technology was the trigger in the case of Flick Diet and
AlterG products. Both founders of Flick Diet had a good experience in biotechnology
and the idea for current product just came into their mind one day while working in a
laboratory. They were just thinking what could be other options to use the
technological possibilities of their familiar area. Raska (2103) described them both as
venturesome persons who have high interests in biotechnology. The initial idea for
AlterG anti-gravity treadmill came from the father of the founder, who was trying to
figure out how to stimulate gravity in space, later he had the idea of reversing the
effect to make people lighter. Whalen (2013): “My father was a biomechanics
engineer and had been doing a lot of research on bones and working with veterans
so I believe all those experiences helped make it obvious that the idea of an Anti-
gravity treadmill would work and make a lot of sense.” Whalen (2013) added that as
he had been an athlete all life then it was easy to him to see why this idea would
make a lot of sense as a better alternate to water therapy.
All previous descriptions of the perception phase of opportunity recognition in the
case companies are good examples of opportunity recognition behaviour described
by Puhakka (2002), like knowledge acquisition, proactive searching and collective
53
action. It was confirmed that prior knowledge about healthcare industry and also
about technology has been useful. As different dimensions of prior knowledge were
important for perception of opportunities, it can be said based on information from
case companies that interdisciplinary teams were the most successful.
Discovery is a phase of opportunity recognition where a cap between particular
market needs and specified resources is established. Creation phase is about
developing and deciding on the business model (Ardichvili et al. 2003). According to
the information acquired during interviews the author can say that these two phases
are more or less overlapping and they cannot be easily separated. Singh et al. (1999)
studied how entrepreneurs turned their ideas into opportunities and the results were
that they were searching for information or feedback from business associates,
contacted potential customers, discussed idea with friends or family, gathered
information on competitors, just knew idea was an opportunity or prepared financial
statements. Reinsalu (2013) confirmed that after having an idea of remote monitoring
of patient and finding necessary technology they contacted potential customers,
medical doctors to discuss the idea. At the same time Reinsalu (2013) stressed out
the complex of healthcare industry: “There is not one customer in the healthcare –
doctors would use the product or service, but they are not buyers, neither is hospital.
Instead it is the insurance that will pay for the services. There are different decision
makers and they all have own objectives.” This confirms the findings by Røtnes et
al. (2009) that opportunity recognition in healthcare is a complex issue with a
complex of users and buyers at different levels. How can an innovative product get
access in a system where the user, and even not necessarily the buyer make the
decision on whether an innovation product will be purchased? Reinsalu (2013)
admitted that the solution for removing barriers for innovators would be that
government takes a decision that one or other kind of service will save the overall
healthcare costs and will support its usage by healthcare organisations. It has been
the case in UK and this is one of the reasons why Doc@home has been successful in
this market. Reinsalu (2013) confirmed that probably they should have been talking
to more customers during opportunity recognition process - as a lot of decisions were
based on personal emotions they many times failed in market evaluation.
Kask (2013) added: “Everything orbits around the customer”. They also
contacted customers, clinics and hospitals to get feedback. Customers validated the
need for such a service, but were immediately asking for solutions, because
themselves they have no capabilities to innovate. Beside meetings with customers,
participation in accelerator program1
and support from mentors were helpful.
Mentors helped to set and keep the focus, “open the doors” and expand the network.
Participating in the industry-related conferences was especially important to get
contacts and increase the network. That kind of beneficial effect of conferences was
especially mentioned by many interviewees. LifeInU was started during the
accelerator program and it confirms the importance and feedback of mentors, which
helps to find the right direction and business model. Also networking as a beneficial
tool was mentioned, but meeting with real customers who will be payers, customer
validation, was believed to be number one thing to do (Vedeshin 2013). Quite similar
were the answers from Mellik (2013): “Main and most useful information comes
from customers”, also participating in the accelerator program and support from
mentors and increasing network were useful. Ranta confirmed the previous findings:
“We went out there to talk to a lot of patients and professionals to find out whether
the same need that was uncovered internally was also present externally - and it
was.“ When they had recognised a new opportunity they started to talk with different
stakeholders and discuss openly all of the teams’ ideas to find something new that
would work. Ranta added: „We are very much into the lean start-up2 ideology“.
1
Accelerator or incubator program – can be described as a set of programs set up by a
government, business alliance or academic group through a variety of services/training. The intent is
to help small companies in the incubator have a better chance of survival through the start-up phase.
Author 2 The Lean Startup - The movement that is transforming how new products are built or launched.
Approach fosters companies to be more capital efficient and to leverage human creativity more
effectively. Based by the book: Ries, E. The Lean Startup. (2011). How Today`s Entrepreneurs Use
Continuous Innovation to Create Radically Successful Businesses. 1st ed. USA: Crown Business.
55
Anier (2013) admitted that continuous consultations with customers are important
to recognise the fit between market and available resources. He also suggested
participating in some joint European R&D projects, where from the experience
thoughts, information and network can be acquired. Beneficial has been participation
in conferences to get into the community. “If you have been seen or you have been a
lecturer in the conference, it is much easier to get meetings later“. Whalen (2013)
confirmed the importance of customers: “It is important to listen to early adopters
about how they are using your product. In general they are going to give you a good
idea of where the business should head.” Whalen (2013) suggested developing the
idea where entrepreneurs are pulled to by customers, not trying to push their way.
Mölder (2013) said, “At first customer should be listened what they really need,
expect and are willing to pay for. And then it must be decided with what kind of
resources the best solution can be offered to clients.” Flick Diet’s idea started to
develop into business model after participating in a big European field-based
conference where the idea was confirmed, later they joined the accelerator program
and used the help of the mentor. They talked with many customers to get feedback
and information whether and how much they should pay for their service.
Discussions with people with different background, for example, business people,
have also been a valuable input in the discovery and creation phase of opportunity
recognition. Raska (2013) said, “As we both have a scientific background we did not
have clear understanding of sales or business models”. Beneficial was participation
in conferences to get into the community and increase the network.
The most often mentioned activity in discovery and creation phase of opportunity
recognition was the customer validation. Varkey et al. (2008) confirmed that
innovation in healthcare can be described as the successful implementation of a new
idea in a way that involves great value for some or many of the stakeholders
(customers). And as there are many stakeholders in the healthcare industry, it means
that validated should be definitely those who will use the product or service, but also
who will pay. Porter (2010) found that in a well-functioning healthcare system, the
creation of value for patients will determine rewards for all system stakeholders.
Bessant et al. 2013 added that quantitatively, in terms of number of people involved,
patients are the largest group. They have gained enormous experience, either directly
through their own health records, or indirectly through the suffering of relatives or
friends. As a result, many patients can develop ideas of how to make the process of
care more efficient, how to improve a medical device, or how to test new ways of
treatment. From an opportunity recognition perspective, patients should be served as
valuable knowledge resources. Blank et al. (2012) also emphasises the importance of
meetings with customers during opportunity recognition process. The most often
made mistake by entrepreneurs is that their understanding about their customers, who
they are, what they need and how to sell them, is based on hypotheses only.
Identification of non-core or new technologies in case companies
Technology-based opportunity recognition and introduction of innovations is
unavoidable for firms which want to develop and maintain a competitive advantage
or gain entry to new markets (Becheikh et al. 2006). Parhankangas et al. (2003)
described that technology-based firms rarely have clear strategies for dealing with
what they see as their non-core technologies. Du et al. (2013) found that
entrepreneurs usually have a tendency to collaborate with R&D in their core
technological fields, but at the same time collaborations in firms’ non-core
technological fields would benefit them the most in finding new opportunities. There
is also a growing body of evidence that new technological solutions can solve
nowadays challenges in healthcare and reduce the overall system costs of health
(Care in a…, 2012). A greater diversity of healthcare technologies is needed in order
to meet the challenges presented by the evolving of GBD within a wider context of
preventive measures focusing on lifestyle, nutrition and environmental factors
(Promoting access to…, 2012).
57
Many of the interviewees reflected proactive behaviour and mentioned that
internet is the main channel for searching information about new or non-core
technologies (Reinsalu 2013; Vedeshin 2013; Mellik 2013; Ranta 2013; Anier 2013).
It was noticed by the author that especially persons who were holding CTO
positions or had a technological background (education) in the company were more
proactive in this area of searching for new technologies. This confirms the result of
Rice et al. (2001) who found that activating of non-core technology-based
opportunity recognition in a company typically starts with technologists who are the
generators of ideas. Vedeshin (2013) said, “I investigate new technology related
topics continuously, from internet. There are different useful web-sites and blogs and
newsletters for that. I think I am more or less informed with all possible
technologies.” Some most useful websites for him were mentioned by Vedeshin
(2013), like http://www.hackaday.com/ and http://www.instructables.com/. The
interest is especially about new and emerging technologies, also about new uses of
existing technologies. Mellik (2103) said, “I am interested about different
technologies and want to be informed in this area, because it can be also a trigger
for the brain. It can happen that you are viewing at completely different technology
and then you will discover the way how it could be used in case of your product or
business model.” A similar opinion came from Raska (2013). Also co-operation with
universities and networking were mentioned by Mellik (2013) as beneficial channels
to identify new technologies. Anier (2013) said that he also uses internet search to
find about technological solutions, but based on concrete need for a current product
or service. Mölder (2013) suggested that attending at clusters´ conferences will also
give new information about technological changes and developments. Whalen (2013)
added, “We also attend a lot of trade shows and conferences and are able to quickly
gather an idea of who is out there do what. The best way is probably staying very
close with our customers because they are constantly being approached by people
trying to sell their technology and they can also give a very quick idea of what
actually works and what we should be looking out for.”
Many of the interviewees emphasised that after finding new interesting
technological possibility suitability must be carefully evaluated to minimize different
risks (Anier 2013; Mellik 2013; Mölder 2013). Some of the questions that should be
answered are whether there is a competitive advantage or a need by customers. Or
whether the price customers are willing to pay will cover the costs used for
developing the product. This is clearly the same statement found in Norhashim et al.
(2007) that technology-based business ventures usually require huge R&D costs, but
in the end it is hard to be certain of market acceptance. Even if market accepts it, the
price that consumers are willing to pay may not commensurate with the Euros poured
into the R&D. It means that importance of customer validation rises up again.
Summary of research results
Perception is the first stage of opportunity recognition process where the initial
idea starts with sensing of market needs or unused resources (Ardichvili et al. 2003).
To summarise the perception phase of opportunity recognition based on nine case
companies mostly internally stimulated opportunity recognition was presented where
the opportunity recognition comes before decision to start the project. In almost a
half of case companies first the problem as opportunity was found and then the
looking for solutions followed. In other cases technology as a solution was the
trigger to start finding for problems in healthcare to solve. As different dimensions of
prior knowledge were important for perception of opportunities, it can be said that
interdisciplinary teams are the most successful. A team of people with multiple
knowledge and background are more effective in sensing market needs and
underemployed resources. Prior knowledge about healthcare industry and also about
technology has been useful and it can be concluded that these topics are important to
learn in order to perceive opportunities in this sector. Barringer et al. (2008)
confirmed that people who have more knowledge of an area tend to be more alert to
opportunities in that area than others.
59
Discovery is a phase of opportunity recognition where a cap between particular
market needs and specified resources is established. Creation phase is about
developing and deciding on the business concept (Ardichvili et al. 2003). According
to the information acquired during interviews the author can say that these two
phases are more or less overlapping and they cannot be easily separated. To sum up
the discovery and creation phase of opportunity recognition of case companies all
entrepreneurs started with describing and emphasising the importance of customer
validation, talking to as many real customers as possible. According to their
experiences, customers will advise entrepreneurs where the business should focus
and also what would be the price that they are willing to pay. Even the interviewees
mostly talked about customer validation as activity, author concluded that it would
be also important as a topic to learn, to do it correctly. Also the importance of
network has been pointed out and many interviewees said that it can be increased
especially during participation in seminars or conferences. Size of the network is
useful to get broader feedback about the idea and also “opens the doors” or contacts
entrepreneur with the “right” people. In addition participation in conferences or
seminars gives opportunity to study deeper the field where the opportunity has been
perceived. Next the support of mentors has been mentioned as very valuable in case
companies to develop, set and keep the focus of business. In addition, participation in
accelerator or incubation programs were mentioned as a tool for boosting the
opportunity recognition process.
All the case companies confirmed that it is necessary to identify and learn about
new technologies in order to find new or alternative possibilities to develop their
current business models or introduce new ones. At the same time, most of the
companies do not have a systematic process established, one of the reasons for that
was mentioned to be the lack of resources like people, time or knowledge. Still, the
proactive behaviour by many entrepreneurs was recognised, especially by those who
had a CTO position or technological background. They were actively searching for
information about emerging, new or non-core technologies from the internet. The
interest is especially about new and emerging technologies, also about new uses of
existing technologies. It means that to recognise technology-based opportunities it is
especially important to have a person with technological background in the team.
Table 3.1. summarises the research results from the interviews with the case
companies.
Table 3.1. Research results
Perception phase of
opportunity recognition
Discovery and creation
phase of opportunity
recognition
Identification of new or
non-core technologies
Key
factors
Interdisciplinary teams Network
Mentors
Person with technological
background in team
Key
activities
Proactive searching
Knowledge acquisition
Collective action
Customer validation
Conferences and seminars
Accelerator program
Proactive searching
(i.e. from Internet)
Key topics Technology
Healthcare
(broad view for perceiving
opportunities)
Technology
Healthcare
(more focused, according
to the perceived
opportunity)
Customer validation
Technology
(new and emerging
technology, new uses of
existing technology)
Source: Author
3.3. A model to enhance technology-based opportunity recognition capability in
healthcare technology companies
The research problem of this thesis is that companies are not always able to
recognise the technology-based opportunities available for them. The expected result
of this research was based on combining research data and the literature review
suggesting a model for enhancing technology-based business opportunity recognition
capability in healthcare technology companies.
61
The following suggestions and a model (see Figure 3.1.) are proposed for
healthcare technology companies in order to enhance technology-based opportunity
recognition. This model is valid for both cases, for newly created ventures or for
existing organisations.
Opportunity recognition process starts with the perception phase where the initial
idea is discovered with sensing of market needs or unused resources. At first the
interdisciplinary teams should be combined. A team of people with multiple
knowledge and background are more effective in sensing market needs and
underemployed resources. To recognise technology-based opportunities it is
especially important to have a person with technological background in the team.
Proactive behaviour should be expected from all team members.
The most important topics in the perception phase of opportunity recognition are:
1) Technology (technological changes, new or emerging technologies, new
uses of existing technologies);
2) Healthcare (broader topics like actual problems in healthcare sector,
different stakeholders, their problems and expectations).
Both topics should be investigated thoroughly to get the essential knowledge base.
Beneficial activities for gathering previously mentioned information can be internet
searches, participating in industry-related conferences or seminars and networking.
Based on the research results conferences are mostly valuable because of the
networking – getting to know more people who can help validate the idea, to “open
the right doors” or to contact the entrepreneur with the next person who can be
useful.
During discovery phase of opportunity recognition the cap between particular
market needs and specified resources is established. Creation phase is about
developing and deciding on the business model. According to the information
acquired during the interviews there is no clear difference between these two phases
of opportunity recognition. The most important activity in the discovery and creation
phase of opportunity recognition is customer validation, but at the same time it is
necessary to keep informed about relevant technological and healthcare related
topics. In this phase both these topics should be more focused to the field where the
opportunity has been perceived. Customer validation in that phase is important as a
topic to learn (how to do it right), but also as activity. It has been said by Blank
(2012) that founders of products or services who are getting out of the building to
meet customers early and often, will win, because there are no facts inside buildings
or in people´s minds. It is important to acquire a deep understanding of customer
needs and to use this knowledge during product development. The most often made
mistake by entrepreneurs is that their understanding about their customers, who they
are, what they need and how to sell them, is based on hypotheses only (Ibid.). There
are many stakeholders (customers) in healthcare with different needs and
expectations, all that must be investigated. Participating in accelerator program and
using support of mentor is also suggested in that stage of opportunity recognition.
Participations in industry-related conferences and networking should not be forgotten
either because of their specific values to increase network and give a new
knowledge.
The opportunity recognition process ends with the introduction of innovation, a
new product of service. As depicted in Figure 3.1., during this opportunity
recognition process the knowledge, experience and ties to networks increase
significantly. It is a valuable asset for every entrepreneur. It means the capability to
recognise new business opportunities will increase as well.
63
Figure 3.1. The model for technology-based opportunity recognition capability
enhancement in healthcare technology companies. Source: Author
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CONCLUSION
The objective of the current thesis is to enhance the technology-based opportunity
recognition capability in healthcare technology companies. This thesis is divided into
three parts.
The first part covers theoretical foundations of entrepreneurial opportunity
recognition processes and key factors, including technology-based opportunity
recognition. The theoretical part also covers opportunity recognition specifics in
healthcare industry. Literature review stresses the importance of opportunity
recognition in almost every industry. Technology-based opportunity recognition is
needed for firms which want to maintain and enhance their competitive advantage.
Often enterprises are not capable to identify the technological opportunities, neither
have they developed strategies for dealing with non-core technologies. At the same
time there are significant challenges ahead in the healthcare industry. In many
countries healthcare costs are increasing at an unsustainable rate, ageing population
is leading to an increasing prevalence of chronic diseases and consumers become
more informed and demanding. Thus, technology–based innovations can be one of
the opportunities to improve healthcare, it can lead to more effective prevention and
care, also to save overall costs. Author concludes that the need for enhancing
technology-based opportunity recognition in healthcare industry is an update and
pressing issue.
The second part of the thesis is about research methodology. In this chapter the
research problem, objectives, questions and expected outcome are described by the
65
author. In addition the author describes the research strategy, including methods, data
analysis and research data. Research problem of this thesis is focused on the notion
that companies are not capable to recognise the technology-based opportunities in
timely. The first research question aims to understand how healthcare technology
entrepreneurs recognise the opportunities. The second question of the research is to
find out how entrepreneurs identify new technologies outside of their core
competence (non-core technologies). The research objective is to enhance
technology-based opportunity recognition capability in healthcare technology
companies. Expected result of this research is to suggest a model to enhance
technology-based business opportunity recognition capability in healthcare
technology companies. Qualitative research design and methods are chosen for the
research. Limitations of the study and implications for further research are also given
in the second part.
The third part of the thesis includes the case study on opportunity recognition and
identification of new technologies in nine healthcare technology companies. This
chapter starts with brief descriptions of case companies.
Here is the summary of the findings of opportunity recognition in case companies:
Positive effect of interdisciplinary teams has been noticed; the importance of prior
knowledge of markets and technology; valuable effect of customer validation; the
importance of network; support of mentors and participation in accelerator or
incubation programs.
All the case companies confirmed that it is necessary to identify and learn about
new technologies in order to find new or alternative opportunities to develop their
current products or business models or introduce new ones. Most of the companies
do not have a systematic processes established, still, the proactive behaviour by
many entrepreneurs was recognised, especially by those who had a technological
background.
Based on the research results a model is proposed for healthcare technology
companies to enhance technology-based opportunity recognition capability. This
model is valid for newly created ventures and also for existing organisations.
The thesis offers a useful input for entrepreneurs in order to understand the
opportunity recognition concepts, technology-based opportunity recognition process
and healthcare industry specific opportunity recognition patterns.
The managerial implications of thesis are bound to enhancement of technology-
based opportunity recognition capability in healthcare technology companies. It leads
to development of innovative products and services which will improve overall
healthcare industry outcome. This thesis is also useful for motivating new companies
outside the healthcare industry to enter the sector. Additionally this thesis may
inspire all other people with entrepreneurial spirit to start looking for technology-
based opportunities in healthcare industry and start up their own company.
67
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ACKNOWLEDGEMENTS
Writing this master´s thesis was an interesting journey in search of new knowledge
and discoveries on entrepreneurial opportunity recognition topic. It has been a
process of exploration of information both in scientific fields and in many healthcare
technology companies.
The author would like to thank Associate Professor Peeter Ross for supervising
the thesis and assisting the research. He has been encouraging and supportive by
taking the time to give his helpful comments and guidance.
I am grateful to my employer and colleagues from Takeda Pharma Ltd. They
supported me in the process to pursue the educational goal.
This thesis is based largely on the data from the case organisations. The author is
thankful to the interviewees from the case organizations like Alter G, Cognuse,
Docobo, EdgeWise, Flick Diet, LabToWellness, LifeInU, Mendor and Quattromed
for sharing their time and experience on opportunity recognition process.
The most grateful I am for the valuable support and understanding from my
husband and son, also from other close relatives.
RESÜMEE
Käesoleva magistritöö eesmärk on edendada tehnoloogial põhinevate ärivõimaluste
identifitseerimise võimekust tervishoiutehnoloogia ettevõtetes. Magistritöö on
jaotatud kolmeks peatükiks.
Esimene osa käsitleb ärivõimaluste identifitseerimise teoreetilisi aluseid,
sealhulgas tehnoloogial põhinevate ärivõimaluse identifitseerimise protsesse ja
võtmetegureid. Peatükk kirjeldab ka tervishoiusektorist tulenevaid eripärasid, mida
peab arvestama ärivõimaluste identifitseerimisel. Kirjanduse ülevaade kinnitab, et
ärivõimaluste identifitseerimine on oluline kõikides tööstusharudes. Tehnoloogial
põhinevate ärivõimaluste äratundmine on eriti vajalik ettevõtetele, kes soovivad
säilitada ja arendada oma konkurentsieeliseid. Tihti ei ole ettevõtted võimelised
potentsiaalseid tehnoloogilisi ärivõimalusi ära tundma ja neil puuduvad kindlad
firmasisesed protsessid identifitseerimaks tehnoloogiaid väljaspool nende
põhitehnoloogiaid.
Tervishoiusektoris on ees ootamas probleemid ja väljakutsed, nagu näiteks järjest
suurenevad kulud, rahvastiku vananemisest põhjustatud kasvav krooniliste haiguste
määr ning teadlikumad ja nõudlikumad tarbijad. Uutel tehnoloogiatel põhinevate
lahenduste turuletoomine on üks võimalustest tervishoidu edendada. Magistritöö
autor järeldab, et vajadus edendada tehnoloogial põhinevate ärivõimaluse
identifitseerimist tervishoiutehnoloogia ettevõtetes on aktuaalne teema.
Teine peatükk kirjeldab magistritöö metoodikat. Peatükis on sõnastatud teadustöö
probleem, eesmärgid, küsimused ja oodatav tulemus. Magistritöö
uurimisprobleemiks on püstitatud, et ettevõtted ei ole tihti võimelised
75
identifitseerima tehnoloogial põhinevaid ärivõimalusi. Esimene uurimusküsimus on,
et kuidas tervishoiutehnoloogia ettevõtted identifitseerivad ärivõimalusi ning teine
uurimisküsimus on, et kuidas ettevõtjad identifitseerivad uusi tehnoloogiaid
väljaspool oma põhitehnoloogiad. Lähtuvalt uurimisprobleemi ja -küsimuste
püstitusest valis autor kvalitatiivse uurimisviisi, mitme juhtumi analüüsi, kus andmed
koguti süvaintervjuude kaudu. Intervjuud viidi läbi üheksa tervishoiutehnoloogia
ettevõtte esindajaga.
Magistritöö kolmas peatükk sisaldab uurimistöö tulemusi. Uurimistöö tulemusena
selgus, et positiivset mõju ärivõimaluste identifitseerimise juures omab
interdistsiplinaarsete meeskondade moodustamine, lisaks on oluline taustainfo
kogumine nii turu kui tehnoloogiate kohta. Tähtis on kliendi valideerimine, see
tähendab, et tuleb kohtuda ja rääkida nii palju reaalsete klientidega kui võimalik, et
täpselt teada saada kes on uue toote või teenuse klient, mis on tema täpsed soovid ja
kui palju ta on nõus selle eest maksma. Veel selgus uuringust, et ärivõimaluste
identifitseerimisel mängib olulist rolli suhtlusvõrgustik, samuti mentorite toetus ning
osalemine ettevõtluse inkubaatorprogrammides. Kõik ettevõtjad kinnitasid, et uute
tehnoloogiate identifitseerimine on vajalik, et leida uusi või alternatiivseid võimalusi
arendamaks olemasolevaid tooteid ja ärimudeleid või luua uusi. Kuigi enamik
ettevõtetes ei ole sellekohased süsteemsed protsessid juurutatud, leiti uuringus
proaktiivset käitumist uute tehnoloogiate otsinguil eriti tehnoloogia-alase taustaga
ettevõtjate poolt.
Magistritöö tulemusena pakub autor välja mudeli, mis aitab edendada
tehnoloogial põhinevate ärivõimaluste identifitseerimist tervishoiutehnoloogia
ettevõtetes.
APPENDIXES. APPENDIX 1. Effective trends to curb costs in
healthcare
Source: Transforming Healthcare… (2012)
77
APPENDIX 2. Interview sample
Name of the
enterprise
Name Position in company Education
1 AlterG Sean Whalen Founder, was CTO,
now product
consultant
Mechanical Engineering,
Management Science and
Engineering
2 Cognuse Andres Mellik Founder, CEO, CTO Computer Engineering
3 Docobo
Ardo Reinsalu Founder, Member of
board
Informatics, business
administration
4 EdgeWise Andres Anier Founder Systems and Computer
Engineering,
Biomedical Engineering
5 Flick Diet Henri Raska Founder, CEO Chemistry, Biotechnology
6 LabToWellness Indrek Kask Founder, CEO Biotechnology and
Biomedicine, Molecular
Diagnostics, Entrepreneurship
and Technology Management.
7 LifeInU Anton Vedeshin Founder, CTO Business Information
Technology
8 Mendor Kristian Ranta Founder, CEO Economics, Entrepreneurship
9 Quattromed Erki Mölder Chairman of Board Economics
Source: Author
APPENDIX 3. Questionnaire for the interviews
What is your position and responsibility in the company?
What is your background (work experience, education)?
1. How do you recognise business opportunities?
1.1 How to improve recognition of business opportunities in your company?
2. How do you identify new technologies outside your core competence?
2.1 How to improve identifying of new technologies in your company?
Source: Author
