Just as space programs must carefully think out which parts of the cosmos can and should be explored, so must entrepreneurs navigate a seemingly endless universe of possibilities for their intellect, time and money. Predicting winning opportunities can be daunting, but data analytics can serve as an indispensable instrument panel. These tools help entrepreneurs zero in on possibilities that may become opportunities; eliminate those that are impractical or already well served; and improve upon established products and services to serve consumers’ needs more effectively. While they will never supplant the entrepreneurial instinct, these tools can help entrepreneurs decide where to boldly go.
Zhu Zhang, a faculty member in information systems at Iowa State University with expertise in artificial intelligence and big data, has shown in a new paper how entrepreneurs can harness the power of data analytics, even if they are not experts in that field. Along with co-author James C. Wetherbe, Professor of MIS at Texas Tech University, Zhang demonstrates how search engines and social media can help entrepreneurs choose opportunties and hone their strategies.
“Most entrepreneurs find themselves drowning in possibilities but starving for opportunities,” says Zhang. “While it’s not a silver bullet, data analytics can be a powerful aid in helping identify problems in need of solutions.”
Entrepreneurs face three major challenges, Zhang points out:
For the first challenge, Zhang and Wetherbe show entrepreneurs how to use Google Trends, Twitter, and analytic tools based on Twitter to find the promising regions of the universe to explore. “These will help you confirm that your ideas are not just a hunch, and provide empirical grounds for exploring further,” says Zhang.
Google Trends shows Google users’ search trends, which often hint at what they might be willing to buy in the future. Twitter tweets reflect what people are talking about, and programs like Topsy, which analyze aggregate data from Twitter, can help entrepreneurs make better sense of social trends.
“Entrepreneurs want to ride an upward trend, not a downward trend,” said Zhang. “The hottest, or maybe the most controversial, hashtags help us sense the pulse of potential consumers.”
Once a region of possibilities is cordoned off as a ”promising land,” other analytical tools help entrepreneurs explore it more deeply, an exercise Zhang calls “growing the space.” The goal is to find concrete consumer needs that are not being met.
Data analysis of social media posts – especially product reviews-- can provide some critical insights here. It can show where others have innovated successfully (Zhang calls it “publishing the location of a gold mine”), and point out where current products are falling short. This is one area that may require a data scientist who can use the right keywords and algorithms to ascertain whether comments are favorable or unfavorable.
“The human language is very different from computer language…humans are more ambiguous,” said Zhang. “For example, a computer alone would not know, at least now, how to parse the emotions behind a review that reads, ‘I can’t imagine anybody sitting through this movie.’”
Zhang does not de-emphasize the use of traditional methods for this stage, such as focus groups and surveys. “If you can do some groundwork first, then test your findings through analyzing social media sentiments, your findings will be more large-scale and robust,” he said.
Once opportunities are identified for further exploration, another type of data analysis can help entrepreneurs figure out which ones are likely to be impractical to develop or already over-saturated. Using Google Adwords can help entrepreneurs see who is already marketing similar products, and what it might cost to market a new one.
“Google Adwords is a proxy for understanding the amount of competition out there,” Zhang said. “It’s a useful tool to understand where there is a worthy market. If there are no Google ads for a product concept, this could mean two things: it’s either not lucrative, or nobody’s built the product yet.”