In his classic formulation of entrepreneurial opportunities, Schumpeter described five different types.12 First, opportunities arise from the creation of new products or services. When a new type of medical device is created, for example, an opportunity exists in the form of convincing doctors to use the new device in their practices. The invention of the heart stent became an entrepreneurial opportunity for companies like Boston Scientific and Abbott Laboratories. Stents help doctors open a patient’s arteries and keep them open, which in some cases enables the patient to avoid open-heart surgery altogether. Today, an estimated 1 million Americans per year undergo the stent procedure.14

Second, opportunities arise from the discovery of new geographical markets in which new customers will appreciate the new product or service. As an example, suppose an individual has the exclusive rights to produce and distribute within the United States action figures based on a popular movie. After saturating the domestic market, the individual might begin to distribute the action figures in China. This scenario would represent an opportunity arising from the discovery of a new geographical market.

Third, opportunities may arise from the creation or discovery of new raw materials or after discovering alternative uses for existing raw materials. For example, ethanol, which can be produced from corn, represents a new use for corn. Although farmers typically sell corn to the manufacturers of food products, ethanol provides farmers with another use for the corn they grow.

Fourth, opportunities may emerge from the discovery of new methods of production. According to Schumpeter, new methods of production allow entrepreneurs to produce goods or services at lower costs, which allows the entrepreneurs to satisfy the needs of customers more effectively. Finally, opportunities may arise from new methods of organizing. The emergence of the Internet provides an example of such an opportunity. Specifically, the Internet allows entrepreneurs to reach consumers without the need of bricks-and-mortar retail locations.15 For example, the Internet allows Netflix to offer customers a new way to rent DVDs and video games. Instead of driving to a retail outlet like Blockbuster, Netflix users order their DVDs and video games online.

In sum, then, five different types of opportunities arise from the creation of new products or services, the discovery of new geographical markets, the discovery of new raw materials, the discovery of new methods of production, and the discovery of new methods of organizing. Table  A2.2 summarizes and provides examples of each of these different types of opportunities. In the following sections, we describe in detail how entrepreneurs identify, evaluate, and exploit these opportunities.