I have mentioned the term opportunity trap in my previous post, Stages of Firm’s Development and the Golden Eagle Strategy. The two words trap and opportunity together create a paradoxical term which is the result of poor opportunity recognition. This misjudging mostly accounts for the lack of panoramic view and prey focus that can cause fatal problems to any enterprise. The term trap came to my mind when I first was trapped myself in what I called later opportunity trap.
While I was on a one-month vacation in early 2011, I was in the taxi that the news in radio attracted my attention. This news was about the product X which I have found relevant to my own business in Sweden and my customers should have loved to have such product. The news just gave a brief description without mentioning the brand name and more details. But the main issue I have learnt was about the innovative part and that it attracted the attention of most outdoor people at the time of launch. The product X was designed in the U.S and was made in China and what I have found was that it should be a WOW product. What a smart business person does in such cases is to take an immediate note and follow it at the earliest convenient occasion and so did I.
After finding the product and watching the demo clip, I was kind of sure it is an amazing opportunity. Thus, I contacted the company and after talking to them I have realized that this company has neither a distributor nor an authorized dealer in Sweden or even in Europe as they are quite new. From the first negotiations and e-mail correspondences I have found out that the company is also as excited as I am when they got my inquiry of being their authorized dealer. At this moment, I had couple of advantages over the competitors and I thought this opportunity will reinforce our company value proposition. On the negotiation and when I felt that the CEO of the manufacturer is also excited-considering my negotiation talent which is now a habit- I started to get more out of it. Their company was new and while I was negotiating with them I focused on two major issues: price and protection of sales.
After couple of negotiations, we compromised on the price and signed an exclusive right contract for our company to sell the product X in the whole Sweden. I was happy at the time and saw a success due to the following advantages:
Exclusive contract to sell in Sweden protects me from the threat of other competitors after recognition of the product by them
- Entering a niche market would add more diversification to our product line
- Reinforced the company value proposition through product X
At the time when I ordered the product X I was also in contact with the bank to get the first loan and got rejected in the first round as I discussed with the bank. However, it was evident for me that some financial institutions will reject the first round in order to see how passionate the entrepreneur is to get the loan and implement the plan. When I went to the bank again to present the business plan again, product X was the focal point of my maneuver and a week later I got the acceptance of the loan.
Before having the loan in, the first parcel that was ordered based on the minimum order quantity arrived home and due to the security provided by the exclusive sales contract, an aggressive marketing strategy via magazine ads and Google campaigns was conducted. The results however, were disappointing and even a single call, e-mail, or even slight interest in the product X did not come in.
I tested the product myself and after I used in the first time on a fly fishing trip of mine, I decided not to use it again myself for the product had some problems with the Swedish weather condition and despite of the advertising by the manufacturer, it is not designed for all climate conditions. When I was ordering the product, I considered the following strategies:
- To have a minimum shipping cost and this resulted in skipping to order one sample before the first main order which was based on online reviews I have read
- Reduce the risk which resulted to the first order as being in minimum order quantity
The product received some positive and negative reviews later on the Internet, but I stopped the campaigns and was reluctant to offer it as I was sure that we will receive customer complaints and returns that will increase our costs and bring new frontier for us to deal with. Therefore, the sales of the products to some particular markets and customers who will benefit from the product X was the priority, but the mistake made a failure to sell the product X in Sweden.
Experience is the name we give to our mistakes.
Oscar Wilde
The product X which was supposed to create value for us became a loss generator imposed by opportunity cost, inventory carrying costs and other relevant costs that contributed to this loss.
Where the problem lied
The problem lied in the misjudgment of the opportunity which was more a trap than an opportunity. The product X was not what my target audience wanted and needed. It did not create any value for them either.
Have I had a panoramic view and scanned the playground precisely from the top of skies and considered all aspects of the opportunity, I would not even think of ordering a sample of the product X. Have I had a prey focus and an outside-in approach, I would have considered the customers before my personal feelings and first impression made by the product X.
How to recognize an opportunity trap?
It is almost a tricky task to recognize the trap particularly when dealing with contingencies and new products. Even the concept of lean startup will cause you some losses in such cases (I will make a post on the lean startup analysis separately) and such small losses for new-born and small-size firms are sometimes too much and cause fatal problems. Our aggressive marketing campaigns, opportunity costs, lead time costs, and all other costs imposed by this product contributed to a loss that harmed the company and could be more fatal if I was going to insist on selling it the way the manufacturer sells for that the harm by one unsatisfied customer is the most fatal one to any firm.
The golden eagle is careful when dealing with opportunities. It considers all aspects before taking an action. Not every movement and species on the playground below is a proper prey. The golden eagle uses its panoramic view and prey focus facilitated with advanced tools and makes sure that the movement is an opportunity. The golden eagle knows that the energy gained from consumption of its prey should be more than the energy spent during the whole hunting process.
In order to avoid an opportunity trap, the golden eagle entrepreneur/manager considers the followings:
- Avoid the excitements caused by the first positive impressions
- Get out of playground and soar to the top of it, make circle movements and scan all directions
- Make sure to be objective when analyzing the data gathered from panoramic view
- Focus on your customer needs and not on a successful product elsewhere
- Not every innovation in your industry is an opportunity
What to do once trapped?
It is critical to make the best decision when trapped. Sometimes the trap makes some early injuries that helps you to recognize the trap sooner and sometimes you do not know that you are inside the trap and you realize it when your resources are about to be depleted and you do not have energy in your wings to fly over and prey on another thing again. The sooner you recognize that you are trapped, the better you can manage it. The golden eagle entrepreneur can get out of any trap if recognizes the trap soon.
What you should avoid after being trapped are:
Do not give up: The golden eagle’s one percent rule gives your ability to solve the problems even in a condition of 99% uncertainty. You may need just a pivot. Try to find your way out of the trap.
Do not consume inside the trap: It is dangerous that you try to keep going the same path when you are inside the trap. Recognize the trap as early as possible and try to find the new way. Consuming inside the trap which means keeping the same way just results in a condition of depleting your current resources.
