Introduction to Feasibility Analyses
Modified from Barringer and Ireland
(2006)
What Is Feasibility Analysis?
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Feasibility Analysis
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Preliminary evaluation of idea to determining if it’s worth pursuing
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Provides more secure notion that a business idea is viable
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Did analysis, feasible business: Intuit (Quicken, Quickbooks, etc.)
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Personal experience, observed others, surveyed customers
Did analysis, not feasible: Retailing Insights (grocery cart)
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Determined not a sufficient scale for advertising, needed large proportion of
grocery stores
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Dropped idea, focused on core competency, developed Trakus
No analysis, failed firm: Iridium (satellite phones)
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Too complex technology, too long to develop, new technology took over, line
of sight to satellite, large phone, low battery power
Prior to Feasibility Analysis Prepare a Concept Statement
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Concept Statement
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One page description of a business (not just the offering) that includes
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Description of the product or service
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Description of target market
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Benefits of the product or service (value proposition)
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Description of product/service differentiators
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Description of how product/service sold/distributed
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Description of the founder(s) of the firm
Given to people who provide feedback on the potential of the idea
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Give sense of the viability of the business idea
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Suggestions for how the idea can be strengthened or altered before
proceeding
When To Conduct a Feasibility Analysis
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Timing of Feasibility Analysis
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After concept statement evaluation
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After opportunity recognition, before business plan
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Before a lot of resources are invested
Four Components of Full Feasibility Analysis
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Product/Service Feasibility
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Industry/Market Feasibility
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Organizational Feasibility
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Financial Feasibility
Must pass all feasibility analyses to
proceed to full business plan
development
Product/Service Feasibility
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
Product/Service Feasibility Analysis
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Assessment of overall appeal of proposed product/service
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Main idea: before rushing to development, be sure product/service is what prospective
customers want
Two components of product/service feasibility analysis:
1.
Concept testing
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Purpose: Gauge customer interest, desirability, purchase intentions
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Involves showing a representation of product/service to prospective users
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Occurs before the prototype stage
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Websites and graphic designs are taking this to a new level
Concept test ≠ concept statement
2.
Usability testing
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Purpose: determine ease-of-use and user’s perceptions of using product
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Iterative process that involves creating a physical prototype (basic, elaborate, or hybrid prototypes)
and giving it to users, measuring usage results, and making modifications as necessary
Also called: user tests, beta tests, or field trials
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Example: http://scholar.google.com
Industry/Market Feasibility Analysis
 Industry/Market
Feasibility Analysis
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Purpose: assess overall appeal of the market
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3 primary issues to consider:
1.
Industry attractiveness: attractive industry characteristics include but are
not limited to—is the industry large and growing? Is the industry important
to consumers (e.g., needs vs. wants)? Stage of the industry life cycle?
Industry not crowded with competitors?
2.
Market timeliness: asks if the market will be receptive to the
product/service—is the WoO open? Are customers buying? Are
competitors making money? Can we gain a first- or second-mover
advantage?
3.
Identification of a niche market: Are we able to compete in a niche
market—a place in a larger market segment that represent narrower groups
of customers
Organizational Feasibility Analysis
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Organizational Feasibility Analysis
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Purpose: determine if business has sufficient skills/resources to bring
product/service to market successfully
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Non-financial factors are what is assessed here
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2 primary issues to consider:
1.
Management prowess: must evaluate the ability of the management team to determine
if the firm has or is able to recruit human resources with the required areas of expertise
2.
Resource sufficiency: must assess adequacy of other resources necessary for
successfully venture launch, development, and competition
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Focus is on nonfinancial resources like:
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Availability of affordable office or lab space,
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Labor pool quality,
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Proximity to key suppliers, customers, and similar firms (clusters)
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Likelihood of strategic partnerships,
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Likelihood of attaining IP
Product/Service Feasibility Analysis Studies
Diane M. Sullivan (2007)
1. Prepare a Concept Statement
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Preliminary description of the entire business that includes
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Description of the product or service
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Description of target market
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Benefits of the product or service (value proposition)
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Description of product/service differentiators
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Description of how product/service sold/distributed
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Description of the founder(s) of the firm
Purpose:
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Have relevant others (e.g., investors, target market members, suppliers, R&D
experts, etc.) provide feedback as to their perceived potential of the business
based on their area(s) of expertise
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Change components of the business model components prior to investing
many resources into the concept
Concept Statement – Super Slick Shower Doors® (SSSD)
Product/Service Description
Super 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 Description
SSSD’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/Distributed
SSSD’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 entrepreneurshiprelated 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.
2. Conduct a Concept Test
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Traditionally entails showing a representation of the firm’s offering (e.g., sketch,
website, computer-generated design) to prospective users in hopes of gaining
feedback and insight as to their preferences, likelihood of purchase, etc.
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Ideally a random, representative, sample of the target market would provide feedback
about the offerings
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Can show the representation and solicit feedback via survey, focus group, interviews
(see next three slides)
For the class assignment, required to show prospective users or other relevant
network partners (at least 5) your Concept Statement, and solicit their feedback via
a survey, focus group, or interviews
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Discuss the method used to solicit feedback (e.g., survey, focus group, or interview(s))
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Discuss the feedback received (e.g., if focus groups or interviews were used, what are
some transcribed quotes of feedback? What are the tabulated results/quoted comments
provided on surveys if used?) and any concept changes made
Before
After
Before
After
Before
After
3. Study the Marketability of the Offering
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Deals with the value proposition relative to the customer
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Discuss how the business offering either:
1.
Solves a problem/serves a need;
2.
Makes someone’s life/business more efficient;
3.
Makes someone’s life/business more effective
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Note: The offering may address more than one of these. If it does, discuss all applicable
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This step requires an understanding of the industry, competitor’s offerings,
consumers’ wants/needs/trends.
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To find this information, study industry and firm publications and discuss these
issues with potential users
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Hint: You will likely be able gather some of this information during the concept test
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Be sure to address if the business concept needs to be modified to more effectively
address one or more of these customer-related value propositions based on what was
learned in studying the marketability of the offering(s)
4. Study the Target Customer (TC)
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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
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Determine and study who the venture’s customers are and what their needs are
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Based on your initial conceptions of who the TC are, construct a survey so you can
develop a more detailed understanding of their profile (e.g., demographic data,
socioeconomic data, etc.)
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Assess the TC’s perceptions of the offering, their purchase intentions, and any
suggestions for changes to the offering(s)
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If the offering(s) need to be changed to address the TC’s needs, discuss modifications
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If your initial conception of who the TC are was off, determine a more appropriate TC
and assess their perceptions of the offering(s).
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Where possible, use a random selection procedure to gain the most accurate and generalizable
information regarding the TC and their preferences
5. Study the Usability of the Business Offering
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Involves creating a prototype of the offering(s)
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Services can involve “practice rounds”
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Products can be physical representations (see example basic prototype)
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Google Scholar
American Inventor
Gym class exercise mat
Show the prototype to potential users (e.g., a beta test)
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Obtain feedback from customers based on their “user experience”
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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?
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Example: iPod and cell phone accessories
Integrate feedback into the final form of the business offering
For class project, if cannot conduct an actual usability test, describe what
you would do to conduct one and what you would expect to learn
6. Determine the Intellectual Property (IP) Potential
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Is the business offering a candidate for intellectual property
protection?
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Patents
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Copyrights
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Trademarks
Are there pending or existing patents for the same type(s) of
offerings that might hinder the business concept’s
development?
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Search the US Patent and Trademark Office at:
http://www.uspto.gov/patft/index.html
7. Study the likelihood and Impact of First- and/or Secondmover Advantages
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Can you capture a first-mover advantage by
1) Being a technology leader (e.g., Microsoft),
2) Obtaining strategically valuable assets (e.g., favorable access to raw materials, favorable
geographic locations, and/or valuable product/market positions), and/or
3) Creating customer switching costs?
OR, if you can’t do the above,
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Will you suffer from a second-mover advantage?
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Second-mover advantages may occur where imitators can duplicate the first movers’
patents—research shows imitators can do this for 65% of the cost of the first-mover
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Example: IBM vs. Dell in personal computer retailing
If you cannot gain a first- or second-mover advantage, will that hurt you?
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Is the window of opportunity open?
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Are customers buying?
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Are competitors making money?