Designing an Opportunity-Evaluating Model for Software Entrepreneurship in Conditions of Uncertainty: a Fuzzy Approach

Subject Areas : Management (system orientation)

Shiva MehdizadehAghdam ¹ , Jahangir Yadollahi Farsi ² , Narges Imanipour ³

1 - Ph.D. Candidate, Department of Entrepreneurship, Qazvin Branch, Islamic Azad University, Qazvin, Iran
2 - Professor of Entrepreneurship Department, Faculty of Entrepreneurship, University of Tehran, Tehran, Iran
3 - Associate Professor, Department of Entrepreneurship, Faculty of Entrepreneurship, University of Tehran, Tehran, Iran

Received: 2022-08-15 Accepted : 2022-12-14 Published : 2023-12-18

Keywords: Uncertainty, fuzzy approach, Technological entrepreneurship, Opportunity evaluation,

Abstract :

Choosing a suitable opportunity in conditions of uncertainty is a common problem for entrepreneurs. The software startup procedure is particularly vulnerable to extreme uncertainty and competition; therefore, analyzing opportunities and threats is critical for software entrepreneurs. Hence, the present study aims to identify the criteria of uncertainty in evaluating entrepreneurial opportunities in technology-driven businesses of the software industry with a fuzzy approach using a mixture of qualitative and quantitative methods. The statistical population of the research includes experts in the software industry. In this regard, first, a theoretical basis was obtained by examining the background. Second, we performed semi-structured interviews and extracted and coded 115 phrases. Third, after combining the general and subsidiary phrases, we reached 84 phrases, and by combining similar phrases, we selected 29 phrases.  Forth, after categorizing those phrases, we determined the six axes of uncertainty and used the fuzzy Ahp technique and Geometric Buckley averaging in Microsoft Excel to rank those six axes as follows: 1-uncertainty in resources, 2-uncertainty in competition, 3-technological uncertainty, 4-political uncertainty, 5-uncertainty in agents, and 6-customer uncertainty. Finally, the model of evaluating entrepreneurial opportunities in conditions of uncertainty was designed using a fuzzy approach in the software industry.

 

Key Words: opportunity evaluation, fuzzy approach, technological entrepreneurship, uncertainty

 

 

 

1. Introduction

Understanding the nature and sources of uncertainty has been the foundation of entrepreneurial decisions and the main focus of entrepreneurship. The software industry is turbulent and faces a lot of pressure due to rapid technological developments and innovations, unpredictability, and tough competition. Research on identifying and evaluating the uncertainties and opportunities that software startups create is scarce. Therefore, extensive research is important in starting software programs to help entrepreneurs make better decisions and avoid choices that lead to business failure. Most of the research in this regard is focused on the general process of entrepreneurship and is not specific to the establishment of software companies. There are a set of opportunities for entrepreneurship in the software industry, and to evaluate these opportunities, we need a model that includes a list of quantitative and qualitative criteria. Changes and dynamics, the complexity of the industry, market, and technology make the importance of qualitative components in decision-making to evaluate the opportunity to rise.

Therefore, due to the possibility of errors in choosing the right opportunity or the right idea for the opportunity, as well as the lack of knowledge to evaluate the opportunity in the conditions of uncertainty and the needs of entrepreneurs fitting the existing conditions, in this research, we want to answer the following research question:

What is an evaluation model of entrepreneurial opportunities in the conditions of uncertainty using the fuzzy approach in the software industry?

2. Literature Review

The literature review regarding opportunity evaluation shows that the logical and conceptual definition of the evaluation of existing opportunities is divided into five categories, including evaluation from a general perspective, profit estimation, loss estimation, perceived desirability, and feasibility understanding (Mehdizadeh et al, 2022). Tomy and Pardede (2017) classified uncertainties in the field of software entrepreneurship into six categories including political, technological, competitor, supplier, consumer, and resource uncertainties. Based on the related research review, uncertainty factors in software industry regarding different categories can be as follows:

1. Political uncertainty:

Political environment, government support, employment laws, taxation, and economy (Eriksson and Li,2012; Skinner,2008; Sahoo & Nauriyal,2014; Rakesh,2014).

1. Technological uncertainty

Technological developments, innovation speed, technological infrastructures, and alternate technological solutions (Dutot, Bergeron, & Raymond, 2014; Rose,2012).

1. Competitive uncertainty

Competitive environment, type of competition, leading competitor, share of market, and marketing strategy (Rose,2012; Tribby,2013; Wenzel ,2012).

1. Supplier uncertainty

Distribution channel, alliances, software licenses, and presence of substitute products (Wenzel,2012; Rose,2012; Skinner,2008)

1. Customer uncertainty

Potential market size, segmentation, living conditions, customer needs, purchasing power, and purchase behavior (Eriksson and Li,2012; Rose,2012; Shi, Xu, & Green,2014; Ng, Macbeth, & Southern,2014; Wenzel,2012).

1. Resource uncertainty

Social networks, capital, technological resources, patents and copyrights, skilled human resources, innovation process, R&D, operating expenses, revenue streams, and entrepreneur’s education and experience (Eriksson and Li,2012; Bergeron, and Raymond,2014; Wenzel,2012; Rose,2012; Eriksson and Li,2012; Ng, Macbeth, & Southern,2014; Dutot, Bergeron, & Raymond,2014).

Considering the existence of severe uncertainty in the software industry and also the lack of a comprehensive model regarding the evaluation of uncertainty in the above industry, the purpose of this research is to design a model for evaluating entrepreneurial opportunities under conditions of uncertainty using the fuzzy approach in the software industry.

3. Methodology

The research has a mixed methods (qualitative and quantitative) research design in which interviews, questionnaires, and expert opinions were used to answer the proposed research question. In the qualitative section, content analysis, continuous reference to the related literature, checking with participants and experts, and coding were done.  In the first step, the results went through content analysis, and in the second step, they were reported in the form of ranking and grading, as well as central indicators such as the average. In the qualitative section, content analysis and coding were used for the data analysis and in the quantitative part, weighting, variance analysis and multi-criteria decision making were carried out. The fuzzy hierarchical process method was used for weighting and ranking criteria or research options, in which there are three methods for weighting: Chang's development analysis method, improved method, and Mykhailo's fuzzy prioritization method. In this study, the improved method was used since it was more appropriate as regard to the purpose of the study.

 

4. Results

As indicated by the analysis, the criterion of resource uncertainty has the first rank, competitive uncertainty has the second rank, technological uncertainty has the third rank, and political uncertainty, agent uncertainty, and customer uncertainty are in the fourth to sixth ranks. Moreover, the findings show that among the 29 sub-codes, uncertainty caused by distribution channels with a weight of 0.1111 has the first rank of uncertainty, uncertainty about the economic conditions of society with a weight of 0.0812 has the second rank, competition in the environment with a weight of 0.0689 ranks third, market share with a weight of 0.0668 ranks fourth and income stream with a weight of 0.0539 ranks fifth.

Considering the very high speed of innovations in the software industry and the change in demand for new technologies and products, the uncertainties related to distribution channels are presented as a powerful uncertainty, considering those new technologies. Due to their unstable and unpredictable nature, a more complex technology increases the level of uncertainty. Uncertainty requires evaluating new technology or innovation in terms of price, performance, and quality. Compared to other sectors, technological advancements in the software industry grow much faster, so it is important to keep up with the technology to avoid threats and misunderstanding opportunities. There is great uncertainty about customer expectations of innovative software products or services. Start-up companies often develop software applications with customers and end users fully known. Therefore, to exploit an opportunity, the entrepreneur must understand certain aspects of the user's needs. Several sources of uncertainty occur throughout the software life cycle which are unavoidable. The proper management of these uncertainties is very significant because they have been identified as the main determinants for the effective achievement of software projects whose performance is optimal.

5. Discussion

The results of the present study revealed that better decisions regarding the evaluation of software entrepreneurship opportunities, considering the rate of uncertainties in the aforementioned criteria can lead to better decisions and as a result, can reduce the degree of uncertainty for software companies. The step-by-step procedure is as follows:

Step 1-Determining the sub-criteria of uncertainty in the entrepreneurship opportunity

Step 2-Quantitative calculation of each opportunity according to the final weight of sub-criteria of each opportunity

Step 3-Quantitative comparison of available opportunities

Step 4-Choosing the right opportunity

 

 

 

 

 

 

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