Ian C. MacMillan of the Wharton School and I taught a lot of classes on ways entrepreneurs go about finding opportunities. The analogy we often used to describe the process is akin to how an expert art thief might go about stealing paintings in a heavily guarded museum. In the thieves' equipment arsenal were special goggles which allowed them to see (and avoid triggering) the infrared rays that would cause an alarm to go off.
The point was that with the goggles, beams could be seen that were invisible to the naked eye. We urged our students to practice developing their own "goggles" for spotting opportunities that might go unnoticed by people who were not paying attention. What we had them do was create a list of the characteristics of a situation that might create a business opportunity. Then each week, the students would share both the list of characteristics and the opportunities these characteristics made them think of. By the end of the semester, the students had a long list of ways to spot opportunities, some of which they could use in the business plans that were required by the end of the course.
Examples of "goggles" could include things like: needs met badly, inefficiencies that could be made more efficient, the capability to transplant a situation from one setting to another, and so on. One that I hadn't thought about for some time was one we used to call "uneven demand." That's when there is strong demand for an asset or solution in one place, but a lack of demand for the same in others.
Luxe Valet: A perfect example
A new company called Luxe Valet is a beautiful illustration of how an entrepreneurial opportunity can be created by demand imbalances. Here's how it works: drivers who need to park their cars in places where parking is difficult to find log onto the Luxe app and tell the system where they need to park. When they get there, a Luxe employee in a distinctive uniform greets them by name and is given the keys to the car (yes, a total stranger gets handed the keys). The driver then goes on his or her merry way, while the Luxe valet drives the car to a garage in another location. When the driver wants to reclaim the car, he instructs the Luxe app where the car should be brought and the car is driven back. As an extra bonus, the car can be delivered to a different location than it was dropped off, and even washed and filled up with gas upon request. Farhad Manjoo of the New York Times was so enthusiastic about the service in crowded San Francisco that he gushed about its life-changing qualities.
What makes all of this work is the presence of demand imbalances. The drivers who use Luxe Valet are coping with excessive demand for parking spaces where they wish to go (not to mention with the breathtaking prices some of those spaces can run). Luxe Valet, on the other hand, contracts with garages which have more capacity than they can fill at the exact same time. By effectively arbitraging between the two, the company solves the problem, and everybody is happy. Drivers get the parking space they need, garages that would otherwise have empty spaces get them filled, and Luxe gets paid for the solution. Read more here.
Seeing the opportunity
What is particularly interesting about this story is that demand imbalances in the parking business have been around as long as people have been parking cars. And yet, it was only last year that a company was founded to address it. And Luxe isn't the only one--other valet companies are getting into the act, including ValetAnywhere and Zirx. One wonders how many other opportunities are right in front of our eyes, but sight unseen. Maybe it's time to revisit our goggles.