Feasibility Studies for New Product Ideas
Once someone comes up with what they think is a great idea for a new product, service or business they often immediately sit down and try and write up a business plan that can be used to obtain funding or other resources. While a business plan is absolutely essential in establishing the direction for any new venture it should not be written unless and until some sort of feasibility study has been conducted on the idea and the business that would need to be built to execute and support it. A feasibility study is not simply a test of a product prototype and should instead be thought of a rigorous and objective assessment of several key issues—is it technologically feasible to create, efficiently manufacture and distribute the proposed product in volumes that will be sufficient to capture the projected market share; what is the size of the potential market for the product; what competitive challenges will confront the business; does the inventor (as well as other members of the founder group) have the skills and experience to create and manage the organizational structure necessary for operation of the business; and what is the projected financial performance of the business?
The answers to some of the questions listed above can be found by researching available data and information on industries, markets and average profit and expense percentages. However, in order for the feasibility study for a new idea to be useful and effective there must be tough and honest feedback from potential customers and other business partners. The entrepreneur (or new product manager in a larger company) should create a short description of the product or business concept, no longer than a single page, and circulate it to persons that have knowledge of the applicable technologies and markets. Prospective customers can provide their opinion on whether they would be interested in buying the product or service described in the concept and, if so, how much they would be willing to pay and how much of the product or service they would be willing to purchase over a specified period. Potential manufacturers should provide feedback on the costs associated with the actual design and manufacture of the product. In order to expedite the process of obtaining feedback one or more focus groups can be put together quickly by advertising on online services such as Craigslist. Software packages are also available to assist in navigating the process of completing a feasibility study.