Concepts of Windows and Corridors for New Ventures

A window is time horizon during which opportunities exist before something else happens to eliminate them. A unique opportunity, once shown to produce wealth, will attract competitors, and if the business is easy to enter, the industry will become rapidly saturated. Bicycles did not become viable commercial products until people needed them as transportation. When that need occurred, hundreds of bicycle manufactures rushed to take advantage of the “window of opportunity.” Literally every successful product and service has had an optimal period of time for commercialization. Those introduced too early have usually failed, and those introduced too suffered from crowded markets.

A brief period of opportunity opened for electronic spreadsheets when micro-computer hit the fast growth curve. Several entrepreneurs entered the market with good spreadsheet products. The first, VisiCalc was designed for the Apple PC. VisiCalc was quite successful, and later versions for Ms-Dos systems were even more successful. But lotus 1-2-3 and Microsoft’s Multiplan and Excel programs forged into industry markets. By 1986, Lotus had set the industry standard, and today a handful of firms offering spreadsheets virtually control the market. Entrepreneurs, therefore, must not only recognize opportunities, but also take advantage of them while windows exist to be successful.

Another aspect of many successful ventures is called the corridor principle. The corridor principle suggests that opportunities evolve from entrepreneurs being positioned in similar work or having had experience with related ventures so that when a window opens it is easy for them to move quickly into a new venture. A corollary is that as a venture becomes expert in one activity, related opportunities evolve, and many of them are more rewarding than the initial activity.

Bill Gates of Microsoft, for example, was first approached by IBM in 1980 to program an operating system for the PC; Gates turned down the offer. He had a fledgling software company and was “hacking” with minor programs he hoped to sell; the idea of a major software effort was inconceivable. However, he and several friends realized the opportunity and began working independently to create the MS-DOS system. His early efforts probably would have kept Gates in an obscure part of the software industry, but the brief opportunity to create the operating system led to enormous success. Howard Head, the founder of Head Ski, leveraged his “sports manufacturing” experience to create prince manufacturing and a revolution new line of tennis rackets. This does not mean that entrepreneurs must first work aimlessly and wait for a twist of fate to create opportunities. It means that entrepreneurs who are active and watching for changes are more likely to recognize opportunities when they occur. For new ventures arise through “luck” which is one of the popular and inaccurate myths about entrepreneurial success.

There are various factors and elements which lead to success for new ventures but some major and important are describe as under;

  1. Stability: Requirements for market success are likely to change radically with market evolution. Superior performance arises from a fit between the key success requirements and the competencies of a venture. And while pioneers commit to a number of key factors they believe will lead to success within the competitive environment changes in that environment may render the venture at a competitive disadvantage. Later followers are often better able to recognize and respond to market opportunities as well as minimize costs of entry through cutting R&D corners and/or leapfrogging the pioneering technology.
  2. Lead Time: Barriers to entry initially provide pioneers with a period of monopoly. The lead-time between the pioneer’s entry into the market and the appearance of the first follower, at least initially, delays competitive rivalry within the industry. Lead time and competitive rivalry, in tandem; provide a greater understanding of new venture performance by identifying how an advantage is first obtained and the means by which over time it slowly erodes. A longer lead time may increase pioneering advantages by helping the pioneer establish an even stronger brand name and enabling the venture to move customers’ ideal points closer to the pioneer’s attribute mix. Further, increasing lead time provides pioneers with the opportunity to broaden their product line, and can return superior profits to the venture which enables them to better prepare for new battles. Longer lead times also provide an opportunity to increase share while charging premium prices. The pioneer may also achieve cost advantages in the short- and long-run via the experience curve. These cost advantages have the effect of putting later entrants at a distinct competitive disadvantage. Pioneers may also be able to erect barriers that virtually lock out followers, further increasing lead time and its commensurate advantages. Therefore, the market momentum supported by lead time helps pioneers maintain significant advantages. However, if lead time is short, there is less opportunity to fully develop and exploit these advantages which, of course, diminishes the advantages of early entry. Hence, it is argued that venture capitalists’ assessment of profitability increases with earlier entry. Further, this increase will vary as a function of lead time.
  3. Competitive Rivalry: Competitive intensity usually reduces overall industry profitability while concurrently reducing pioneering advantages developed through lead time. In other words, competition can quickly erode any advantages gained by a pioneer and creates pressures to respond both strategically and tactically. Often this will result in a reduction in prices and, in turn, profitability. In contrast, when competitive rivalry is low, the pioneering advantages developed during lead time are likely to be more sustainable.
  4. Educational Capability: There is often considerable uncertainty about the rate at which customers will substitute new technology for old. A pioneer’s potential customers often lack a frame of reference for understanding a new product concept and its benefits. A frame of reference needs to be constructed in order to encourage new thinking and substitution on the part of potential customers. They need to be informed and persuaded that the benefits of purchase are greater than the risks. In terms of time, as well as financial and human resources, a customer’s frame of reference can be difficult and costly to alter.
  5. Industry-related Competence: Success is more likely to be achieved by those entering an industry in which the experience of the management team is relevant to the endeavor. It’s found successful founders of start-up firms had related backgrounds in rapid growth firms that often competed in the same industry. Opportunities are likely to be less clear and may not be fully exploited by the uninitiated or may occur too rapidly to be grasped and capitalized on by industry “outsiders”. The successful new ventures must possess the requisite skills a priority.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.