Introduction to Feasibility Analysis and Product/Service Feasibility Analyses

Diane M. Sullivan (2010)

What Is Feasibility Analysis?

Feasibility Analysis

– Preliminary evaluation of idea to determining if it’s worth pursuing

– Provides more secure notion that a business idea is viable

Did analysis, feasible business:

– Property Solutions: surveys and focus groups of complex managers and renters

– Intuit (Quickbooks): experience, observed others, surveyed customers

Did analysis, not feasible: Retailing Insights (grocery cart)

– Determined not sufficient scale for advertising, need too many grocery stores

– Dropped idea, focused on core competency, developed Trakus

No analysis, failed: Iridium (satellite phones)

– Too complex technology, too long to develop, new technology took over, line of sight to satellite, large phone, low battery power

When To Conduct a Feasibility Analysis

Timing of Feasibility Analysis– After opportunity recognition

– As a part of business planning, but before business plan written

– Before a lot of resources are invested

Four Components of Full Feasibility Analysis– Product/Service Feasibility

– Industry/Market Feasibility

– Organizational Feasibility

– Financial Feasibility

(covered in Entrepreneurial Finance Course)

Must pass all feasibility analyses to proceed to full business plan

development

Product/Service Feasibility

Product/Service Feasibility Analysis– Assessment of overall appeal of proposed product/service– Main idea: before rushing to development, be sure product/service is what prospective

customers want 3 reasons to conduct

1. Validate underlying premises of product/service idea

2. Help developing idea

3. Estimate potential market share 5 benefits

1. Getting product right the first time

2. Create a beta (or early adopter community)

3. Avoid obvious flaws in product/service design (e.g., Iridium satellite phones))

4. Use time and resources more efficiently

5. Potentially identify complementary product/ service offerings (e.g., iPod accessories)

Product/Service Feasibility Analyses

Five Main Steps:1. Concept Testing using a Concept Statement

2. Concept Testing using an illustration Collect primary data from technical experts and target customers Refine and solidify initial concept

3. Solidify target market profile via primary and secondary research

4. Usability Testing Prototype development Collect primary data from target customers Refine and finalize concept

5. Assess the potential for Intellectual Property (IP)

1. Concept Test using a Concept Statement

Preliminary written description of the entire business that includes– Description of the product or service

– Description of target market

– Benefits of the product or service (value proposition)

– Description of product/service differentiators

– Description of how product/service sold/distributed

– Description of the founder(s) of the firm

Purpose:– Have relevant others (e.g., “technical” experts like investors, suppliers, R&D

experts and potential customers) provide feedback as to their perceived potential of the business based on their area(s) of expertise.

– Change components of the business model components prior to investing many resources into the concept

Concept Statement – Super Slick Shower Doors® (SSSD)

Product/Service DescriptionSuper Slick Shower Doors® (SSSD) will sell decorative Plexiglas “artwork” that will enhance the appearance of glass shower doors and stalls within existing homes. SSSD’s products work much like the panels that are magnetized onto kitchen appliances like refrigerators and dishwashers to create a uniformed cabinet look in the kitchen. Do-it-yourselfers (DYI) will visit retailers selling SSSD products to purchase standard-sized shower door/ stall artwork and SSSD’s website or stores for customized sizes.

Target Market DescriptionSSSD’s target market consists of homeowners who want to improve their homes by doing-it-themselves. SSSD specifically targets owners of existing homes who want to create a customized and aesthetically appealing look in their bathrooms without full renovation costs or decreasing the value of the home to future potential home buyers.

Value Proposition

The DYI market within the US is estimated at $5.9 billion annually and it is projected to grow at 5.1% annually for the next several years (freedoniagroup.com, 2007). This trend, coupled with sociocultural trends supporting consumer’s increasing desires for luxury and customized products/services and the transient-nature of the US population (BrainReserve, 2002) suggests that the window of opportunity is open for a venture offering affordable, customized, and non-permanent home improvement products.

Differentiators SSSD’s production machinery and processes are patented. Further, the artwork designs offered for the glass are copyrighted and only available through the SSSD website, storefronts, and approved retailers. SSSD has secured a contract with the master artist Daniel Stone to produce the art designs for the glass. Further, SSSD artwork designs are produced in limited quantities, ensuring consumers that their bathrooms will look uniquely customized.

How Sold/DistributedSSSD’s products will be sold and distributed via two primary channels. Industry standard sized shower door panels with standard designs (e.g., tropical theme, tile mosaic look, etc.) will be distribute to and sold through large home-improvement stores such as Home Depot and Lowe’s. Customers requiring customized sizes and custom-made designs can shop at an SSSD brick-and-mortar store or via SSSD’s website (www.SSSD.com)

Description of Founder(s)SSSD is lead by Diane M. Sullivan, Ph.D.. Dr. Sullivan has 12 years of management experience, 6 years of entrepreneurship-related experience, and grew up in a family-owned business within the construction industry that operated for more than 20 years before the business successfully achieved a liquidity event.

Concept Statement (CS): Assignment Requirements

Show 1) at least 2 technical experts or other relevant network partners (e.g., suppliers, engineers, etc.) and 2) at least 3 potential users your CS, and collect feedback via a survey

– Develop a concept statement for the team’s business– Develop a protocol for collecting the feedback about the initial idea

Cover letter and survey document– Discuss feedback received (e.g., Show tabulated results/quotes from surveys.)– How did the initial concept change as a result of the feedback received?– Deliverables to be turned in:

Include your concept statement in your appendices Target market cover letter and survey protocol Industry expert cover letter and survey protocol Tabulated feedback/results from target market Tabulated feedback/results from industry experts

– Discuss this procedure, the results, and what you did with the results in the presentation

2. Concept Test with an Illustration

Show a representation of the offering to prospective users to gain feedback about product/service preferences, likelihood of purchase, etc.

– Sketch, website, computer-generated design

– Revised concept statement often included as well

Ideally a random, representative, sample of the target market would provide feedback about the offerings

– Can show the representation and solicit feedback via survey, focus group, interviews (see next four slides)

Before After

Starting Point: Device obtains and displays song and

artist information from the vehicle’s radio unit as well as if it is available for download.

User chooses to download currently playing song.

Cellular signal is sent from the vehicle to our

servers

Server confirms availability of the song for download and status of the user’s account (active, payment info, etc)

Server sends a signal back to the vehicle to either confirm or deny the download.

If confirmed, the song begins downloading to the vehicle’s hard drive via cellular signal

If the signal is interrupted during a download, our server makes a note of this. Then when the connection is re-established, the download resumes.

Device notifies the user that the download is complete. Account info (credits remaining or song cost, etc) and space left on hard drive are displayed.

Device prompts the user to see if they’d like to play the song now.

Download

Beastie Boys: SabotageAvailable for DownloadDownload Complete!

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Confirm Deny

Servers Store Fitness Software and Create Customized Health and Fitness Programs

• Daily Nutrition Schedules

• Fitness Plan

• Schedule of other Daily Activities

Servers Distribute Health and Fitness Information to Students

Students Follow Custom Fitness Plan and Nutrition GuideStudents Input Progress into Software; Data is Stored

on Servers; Students Receive Ongoing Support, Fitness Plans, and Updates

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Building Layout Concept

PARTY & DINING AREA

FOOD SERVICE

GAME ROOM

PRIZES

10,000 Square Feet (min)

Concept Test Graphic: Assignment Requirements

Develop a graphic representation of your concept that integrates feedback from concept statement stage

– Construct one survey and cover letter Broadly assess you potential target market

– Include a section of questions about their perceptions regarding the concept, purchase intentions, any modification needed

– Include a section of questions to allow you to understand their demographic profile (see the next slide for more information on this—Target Customer)

– Distribute this survey and collect data from at least 30 potential users– Include your concept representation in your appendices– Include the surveys, cover letter, and tabulated survey results in your

appendices– Discuss this procedure, results, and what you learned in the

presentation

3. Study the Target Customer (TC)

This is the point where

1) the profile of the target customer and/or

2) changes to the business offering should start to become solidified

Done hand-in-hand with the concept test graphic data collection

A detailed study of the target market (e.g., demographics, socioeconomic status, lifestyles, etc.) can help to appropriately identify the proper market

– Even after venture launch, regularly assessing the TC’s needs/preferences should become a habit

Target Customer: Assignment Requirements

Discuss who the firm’s customers are and what their needs/preferences are

– Based on your initial conceptions of who the TC are, as a part of your concept test survey

Include questions that allow you to develop a more detailed understanding of their profile

– Demographic data, socioeconomic data, psychographic data, etc.

– Relevant characteristics will be firm specific

– If your initial idea of who the TCs are was off Adjust the concept to meet the TC’s requirements and/or Determine a more appropriate TC and assess their perceptions of the

offering(s) and their profile

4. Assess the Usability of the Offering

Involves creating a prototype of the offering(s)– Services can involve “practice rounds”

Google Scholar

– Products can be physical representations American Inventor Gym class exercise mat

Show the prototype to potential users (e.g., a beta test)– Obtain feedback from customers based on their “user experience”

Was it easy to use? Was anything frustrating? Would other features make the offering more desirable?

Are there any complementary offerings that might enhance the initial offering?– Example: iPod and cell phone accessories

– Integrate feedback into the final form of the business offering

Usability Test: Assignment Requirements

None! – We do not have the capabilities to produce prototypes in

this class– Pleas note that this is part of the process you would ideally

undertake in the “real world”

5. Assess the Intellectual Property (IP) Potential

Is the business offering a candidate for intellectual property protection?

– Patents (protection for an invention, including processes)

– Copyrights (protection for “original works of authorship”)

– Trademarks (indicates the source of manufactured goods)

– Service marks (indicates the source of services provided)

Is there any pending or existing IP for the type(s) of offerings that might hinder the business concept’s development?

IP: Assignment Requirements

Search the US Patent and Trademark Office at: http://www.uspto.gov/

– Determine if there are any exact or similar offerings in the database

– Discuss up to 3 of these in your presentation

– Discuss the implications of your findings

Documents to be Turned in Relative to the Product/Service Feasibility Analysis Study

In the appendices, include – The concept statement that the team constructed

– The concept illustration that the team constructed

– Cover letters and surveys used to collect the product/ service feasibility study data

– Tabulate the results of the data that were collected via surveys and/or interviews

Be sure to use an effective and clear table format to illustrate results

– See examples on MGT320 website