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The Three Windows of Opportunity

A new book, Made in China, delivers lessons learned by Chinese entrepreneurs in the rugged and dynamic environment of that country. This excerpt zeros in on determining if your timing is right: Is the window of opportunity open?

Editor's note: We all know the stories of famous American entrepreneurs such as Henry Ford, Andrew Carnegie, and Bill Gates. But in China, the stories of pioneering business leaders are less widely known. Donald Sull's Made in China: What Western Managers Can Learn from Trailblazing Chinese Entrepreneurs gathers the experiences of successful Chinese companies such as Legend Group, Sina, and AsiaInfo, which have thrived despite an incredibly turbulent environment. Our excerpt deals with identifying the correct timing of an opportunity.

Three windows of opportunity
Golden opportunities hold out the promise of great rewards but generally require risky concentration of resources without the benefit of knowing whether the bet will pay off. The critical question is clear: How do entrepreneurs and managers recognize a golden opportunity from fool's gold before putting all their chips on the table to pursue it? The obvious questions are whether an unmet customer demand exists and how big the market might be if a company filled that demand. [Qinghou] Zong, [founder of the leading beverage company Wahaha] for example, knew from personal experience that parents were concerned about their little emperors' nutrition, and calculated that he could make a killing even if he served only a modest fraction of the country's 300 million children.

These questions of whether the customer need is real and the potential market big enough to constitute a golden opportunity are critical. They are also painfully obvious, and we add little by reminding managers to address them. The tougher question is whether the timing is right to concentrate resources to pursue the opportunity. People often use the phrase window of opportunity to describe a time period during which an opportunity must be seized or lost (perhaps forever). The notion of a window that opens for a while and then closes highlights the fleeting nature of opportunities, where timing is everything. Too early can be as bad as too late.

The reality of golden opportunities, however, is more complicated. Entrepreneurs and managers must consider not just one, but multiple, windows of opportunity—including customers, competitors, capital markets, technical evolution, and government policy among others. To further complicate matters, these windows vary in importance over time and are constantly shifting—opening a crack or threatening to close altogether. As a result, entrepreneurs must get the timing right to get through the windows that matter.

How do entrepreneurs and managers recognize a golden opportunity from fool's gold?

To simplify the task of evaluating the timing, it is helpful to focus on three windows of opportunity, specifically customers, competitors, and context (including external factors other than buyers and rivals), which consistently matter in evaluating whether the timing is right to pursue an opportunity. Many people have discussed time-based competition, in which the faster rival beats the slower. The three windows of opportunity model, in contrast, focuses on timing-based competition. There is no assumption that faster always trumps slower. Wahaha, for example, pioneered the children's nutritional drink segment. In other cases, however, Wahaha followed early entrants who educated consumers on the benefits of enriched milk, bottled waters, and cola. Success depends on concentrating resources on the right opportunity at the right time. Getting the timing right, to a large extent, requires managers to make their move when all three factors are aligned. Timing will, of course, also be influenced by internal factors. Much of timing, however, depends on forces largely outside the control of an entrepreneur or manager.

Although there is no one-size-fits-all list of questions to assess whether the timing is right for all opportunities, the following questions can help managers to think about the factors that influence whether it is the right time to make a move.

  • Is the market poised to take off? Timing the introduction of a new good or service is not an exact science, but there are steps managers and entrepreneurs can take to increase the odds that they get it right. Trial customers can provide insights into whether the market might be ready: If one customer wants a new good or service, the odds are that others will as well. To avoid jumping in too early, executives can wait for first movers to validate the market. To avoid being too late, they can rapidly and aggressively enter before another competitor establishes a leadership position.1 Wahaha was not the first entrant in the bottled water market—Zong let others test the waters and educate consumers. When he was convinced that the market was poised to take off, however, Zong aggressively secured resources from Danone to support Wahaha's bottled water offering.

    To differentiate Wahaha's offering from early leaders when entering a market, Zong looks for what he calls "the market behind the market." When entering the nutritional drink market, for example, Zong explicitly rejected the option of following the existing competitors by being the 301st competitor to offer a general nutritional drink. Instead, he was the first to offer a product targeted to children. Similarly, when Wahaha launched its first adult milk product in 1995, Robust had already invested in educating consumers about the benefits of calcium. As a latecomer to the general milk market, Wahaha launched "AD Milk" enriched with calcium and nutrients to enhance absorption as well.
  • What is the phrase that pays? The discipline of describing the opportunity in a short (five words or fewer) phrase forces the entrepreneur or manager to strip away the peripheral aspects and distill an opportunity to its essence. The phrase that pays can help assess whether the timing is right. If potential customers instantly understand your formula and find it fresh and exciting, you may have hit the sweet spot of timing. If they understand the formula but say it is oblivious, stale, or clichéd, then you are probably one step behind the market. If they think it sounds great in theory but doesn't resonate with them at a gut level, then you may be two or more steps ahead of the market. This process can also help you screen potential customers or investors who "get it" and would be good partners to work with in pursuing the opportunity.
  • Is there already an entrenched competitor? One of the most fundamental insights of military theory is the danger of engaging in conflict with strong and deeply entrenched enemies. Sun Tzu captured this with his famous maxim that military tactics are like flowing water; because water in its natural course flows on when it hits resistance and rushes in when it encounters a gap.2 Mao followed this approach when the Communists initially avoided the cities, where the Nationalists were strong, and swarmed the rural areas, where they were weak. Zong followed the identical approach when he launched carbonated beverages. Wahaha avoided the cities, where Coke and Pepsi were strong, while concentrating resources on the rural areas, where they were relatively weaker. It is, of course, impossible to find segments where there are no rivals at all. Golden opportunities will always attract many entrants. The key is to avoid terrain where a strong competitor has already staked out a position and fortified it with resources such as brand or distribution.
  • How quickly will competitors spot the opportunity? The question is not whether strong competitors will notice a golden opportunity—they always do if it is truly golden—but when they spot it. Sometimes competitors' strategic frames slow their opportunity recognition. Strategic frames are mental models dictating how executives interpret their industry, competitors, customers, and strengths. Existing frames influence how quickly executives identify new opportunities. In assessing the speed of potential rivals' responses, you should try to understand their strategic frames—how they are likely to interpret the situation, and when they will spot the opportunity. This gives you some estimate of how much time you have. Good competitors may fail to notice golden opportunities for various reasons. They might simply lack the situational awareness necessary to spot an opportunity. Expatriate managers, for example, would have had little chance of understanding how China's one-child policy would lead to malnutrition. Foreign competitors may view the Chinese market through the lens of their home market, making them slow to spot local opportunities. At some point, of course, competitors will wake up, smell the opportunity, and bring their resources to bear.
    The three windows of opportunity model focuses on timing-based competition.

    Part of getting the timing right is staying under rivals' radar screens long enough to dig in before they respond. At that point, it may be too costly for even deep-pocket competitors to dislodge an early entrant. Companies can buy time by framing the opportunity as outside their rivals' core business.3 Internet pioneer Netscape, for instance, rushed to an early lead by framing its software as a "Web browser" compatible with Microsoft's operating system. When Netscape's CEO reframed the company's product as a "desktop" alternative to Microsoft products, he put his start-up squarely in the cross-hairs of the richest and most feared software company in history, with predictable results.
  • Do competitors have incentives to pursue an opportunity right now? Rivals may lack the incentives to pursue an opportunity even if they notice it. The market size may be too small relative to alternatives. The multinational personal computer companies, for example, all knew China was an important market in the 1980s, but the market was still small relative to Japan, North America, and Western Europe, which were booming with explosive growth. Pursuing a golden opportunity may also force established players to destroy their current profit base. Zong, for example, reckoned that Coke would sacrifice market share in rural areas rather than sacrifice profits by matching Future Cola's lower prices. The new opportunity may not serve the needs of a competitor's existing customers, and therefore may fail to gain funding.4
  • Can competitors pounce right now? Sometimes good companies see an opportunity, have strong incentives to pursue it, and still fail to execute. Rivals may, of course, simply lack the resources required to pursue an opportunity. Recall how computer maker Great Wall was so battered by the onslaught of multinationals in the early and mid-1990s that it could not match Legend's decisive moves to gain market share. Internal management turmoil can also temporarily hobble a worthy rival. Galanz made its move in microwaves while Whirlpool was integrating acquisitions and temporarily unable to respond quickly. The key phrase in this question is "right now." Competitive gaps, like unmet customer demand, are fleeting. Management turmoil at a competitor might last a year, but it won't last forever. The best time to strike may be right after a competitor has committed to an alternative opportunity. Again, this won't prevent them from going after your golden opportunity forever, but it might slow them down long enough for you to establish a lead and dig in.
  • How will you defend your position? Suppose you can beat your competitors to the punch and establish an early lead; how will you defend that beachhead against the inevitable attack by competitors? Can you develop a strong distribution network, process expertise, brand recognition, proprietary technology, deep relationships with customers, or other resources that will keep rivals at bay? In a dynamic market such as China, it will be impossible to sustain these defenses forever. It is, however, critical to consider how you can fortify your position long enough to build a war chest to seize the next golden opportunity or survive sudden-death threats.
  • Why is the $20 bill still on the ground? An old joke describes two economists walking down the street. The first one looks down and exclaims, "There is a $20 bill on the ground." The other one turns to him and says, "That's impossible. If it were there, someone would have picked it up already." The joke reveals an important insight from economics—if opportunities are attractive, someone will seize them rapidly. The joke also raises an important question: If this really is a golden opportunity, why hasn't someone seized it already? Of course, someone has to be first. But given the number of entrepreneurs in the world, the odds are low that it is you. Odds are that the timing is either too late or too little.

    There are, however, convincing answers to the question. The most compelling answer to the question of why the $20 bill is on the ground is that a change in the broader context is just now creating the opportunity. The need for children's nutritional drinks, for example, arose from China's one-child policy. Demand for bottled water arose, in part, from the degradation of drinking water resulting from rapid industrialization. Growing nationalist sentiment created demand for a Chinese cola, which spiked with the bombing of the Chinese embassy in Belgrade. Before concentrating their resources, entrepreneurs and managers should ask themselves what changed in regulatory, market, technical, or social context to generate this opportunity right now. If they cannot point to a specific change, the apparent golden opportunity may be fool's gold.

Excerpted by permission of Harvard Business School Press from Made in China: What Western Managers Can Learn from Trailblazing Chinese Entrepreneurs. Copyright 2005 Donald N. Sull.

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Donald N. Sull is an associate professor of management practice at London Business School.


1. Constantinos C. Markides and Paul A. Geroski, Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets (San Francisco: Jossey-Bass, 2005).

2. Sun Tzu, The Art of War, trans. Lionel Giles (Mineola, NY: Dover Publications, 2002).

3. In an extensive study of newspapers' responses to the Internet, Clark Gilbert found that executives were more likely to allocate resources to the Internet when it was seen as a threat to their core business. Ironically, when executives framed the Internet as a threat to the core business rather than an opportunity, they failed to pursue the upside opportunity aggressively and concentrated on defending their core. See C. Gilbert, "Change in the Presence of Residual Fit: Can Competing Frames Coexist?" unnumbered working paper, Harvard Business School, Boston, 2004.

4. C. Christensen, The Innovator's Dilemma (Boston: Harvard Business School Press, 1996).