Speaking at AVANCE Global, entrepreneur and investor Fernando De Leon shared a deceptively simple observation about how he uncovers new commercial opportunities. Faced with the recurring cost of paying high insurance premiums across his growing portfolio of companies, De Leon did not simply search for a cheaper vendor to cut short-term expenses. Instead, he took a far more aggressive entrepreneurial approach: he bought an insurance brokerage and eventually built two insurance carriers from the ground up.
"Anytime I get upset about paying for something," De Leon told the audience during his presentation, "I try to build a business."
It is a memorable line that captures a gritty, pragmatic approach to enterprise creation. Yet, beyond its clever delivery, it raises a compelling and practical question for any executive, founder, or manager staring down a stubbornly expensive line item on a corporate balance sheet: Can everyday business frustration actually serve as a reliable compass for identifying viable commercial opportunities?
According to decades of academic research, the answer is a qualified yes. However, business scholars note that a painful overhead cost is merely the starting point, not a guaranteed ticket to market success.
Your Frustration Knows Something
To understand why a frustrating expense can spark a profitable venture, it helps to examine the mechanics of user innovation. MIT professor Eric von Hippel has spent decades studying a phenomenon where products, services, and solutions are developed not by traditional companies trying to sell to a market, but by the very people and organizations that directly need them.
One primary reason why end-users are often exceptionally well-positioned to identify novel solutions involves a concept that von Hippel and fellow researcher Ralph Katz describe as "sticky information." Information regarding what a customer truly needs can frequently be costly, slow, or exceedingly difficult to transfer across a market. This friction exists because a massive portion of that vital data is embedded entirely within the customer’s unique operational circumstances, daily workflows, and specific practical experiences.
Consequently, a company that is repeatedly forced to deal with an inefficient vendor, an exorbitant service contract, or a clumsy operational process possesses something potentially invaluable: deep, firsthand knowledge of market failure. Being on the receiving end of a bad product or an inflated bill creates a distinct informational advantage. While outside observers must rely on broad market surveys and educated guesses, the frustrated customer lives with the problem every single day.
Your Problem Isn’t Necessarily a Market
That distinct informational advantage, however, comes with an important caveat that every aspiring entrepreneur must carefully consider. Von Hippel’s foundational research on lead users has demonstrated that certain users experience critical needs long before the broader market recognizes them. Because of this, the custom solutions they build for themselves can offer valuable clues regarding what other customers might eventually demand in the future.
Yet, solving your own problem only proves one fundamental reality: that the problem exists for you and your specific enterprise. It does not automatically prove that thousands of other potential customers share that exact same pain point, nor does it guarantee that they will be willing to open their wallets to pay for your solution.
That single distinction separates a clever internal fix from a scalable, independent company.
Additional research conducted by entrepreneurship scholar Scott Shane provides further nuance to this dynamic. Examining entrepreneurs who were all presented with the exact same MIT-developed technology, Shane discovered that they recognized vastly different commercial opportunities based entirely on the prior knowledge they already possessed. An entrepreneur’s background, past career, and accumulated expertise shape not only how they choose to solve problems, but which opportunities they are even capable of seeing in the first place.
In this light, true opportunity recognition is rarely just a matter of waiting around for a sudden, brilliant flash of inspiration. Instead, it is largely about being positioned in the right informational place to notice when a gap in the market appears.
Before You Build It, Run Four Tests
When a major corporate expense makes an executive wonder whether they could handle the operation better themselves, economic and management research suggests pausing to evaluate the situation through four critical questions.
The first question involves the frequency of the issue: Is the problem recurring? Repeated, ongoing exposure to a pain point allows an organization to accumulate deep, granular knowledge about precisely where existing market solutions fall short.
The second question addresses scale: Is the problem shared by others? Founders are encouraged to talk with customers and peers outside their own company walls. An internal frustration becomes significantly more compelling when other independent market participants spontaneously describe experiencing the exact same operational pain.
The third inquiry centers on capability: Do you actually possess a strategic edge? Knowing a problem intimately matters, but it becomes truly powerful only when paired with specific expertise, valuable industry relationships, proprietary technology, or specialized operating capabilities that allow you to solve the issue in a fundamentally different way than incumbent providers.
The final and most crucial question is market demand: Would someone who isn’t you actually pay for it?
That last inquiry is essential because bringing an activity in-house is not automatically more efficient than outsourcing it. Decades of economic research into the boundaries of firms demonstrate that deciding whether an enterprise should make a product or buy it involves navigating complex trade-offs. Bringing a business activity inside corporate walls can create unique operational advantages, but it can also sacrifice the tremendous cost efficiencies and innovations available through outside suppliers and competitive open markets.
Fernando De Leon’s insurance story ultimately succeeded because his frustration pointed well beyond the confines of his own companies. What began as an irritating line item on a corporate invoice became a specific problem to solve, evolved into a functional solution, and eventually matured into an independent, thriving business enterprise.
That evolution is worth keeping in mind the next time a costly invoice lands on your desk. The financial expense itself is never the actual business opportunity. Rather, it is the valuable, hard-earned information hidden quietly inside it.
