Product feasibility studies are serial researches carried out to investigate whether a product or idea is profitable, in demand, and viable for production. It takes place before you invest money into your actual design and manufacturing process. It is crucial for both start-ups and giant companies that proceed to a long-term profit with innovations. A comprehensive product feasibility study can prevent loss from the initiative stage, schedule plan for production and foresee challenges. It can help avoid some risks and turn them into opportunities.
The importance of a feasibility study cannot be overstated. Basically, if you don’t know the feasibility of idea, you can end up starting to developing a product you cannot finish developing. Worse of all, you can end up getting a product manufactured that no one wants. When the need for conducting a feasibility study arises, the question then becomes: How do we go about it? Usually, people conduct the following seven steps when it comes to studying idea feasibility.
Product ideas are a dime a dozen. Thousands of ideas pop into existence every day, but not all of them can be pursued. Some need to be eliminated from consideration, otherwise, companies can throw plenty of costly resources down the drain on a fruitless endeavour. One way of finding out if a product idea is worth pursuing is by looking at the idea feasibility. That is where the concept of a feasibility study comes in to shed some much-needed light.
What is a feasibility study?
When we say something is feasible, we mean doing that thing is practical given the circumstances. A feasibility study means ascertaining the practicality of undertaking that particular thing; which in our case, is a product development project based on a product idea.
Looking at the feasibility of idea is something that can tell you whether moving forward with the idea is worth it or not. For example, you might have a brilliant and unique product idea and a market with plenty of demand, but your lack of resources can make it less of a feasible product. This means if you undertake such a project, you are less likely to succeed.
And suppose you have two feasible ideas that you want to pursue. A feasibility study can reveal which idea you should move forward with first. In some scenarios, when doing projects simultaneously, one can hinder the ability for completing the other. It could be that the project being hindered is the one that could bring in the most returns. A feasibility study can help avoid such mistakes.
Feasibility studies types
Product feasibility studies in manufacturing industry consist of at least three following aspects: market, technical, and financial feasibility studies.
Market feasibility study, also called market research, is a process to evaluate the growth of market and industry that the new idea and product are involved. To begin with, entrepreneurs need to consider this: is the market a healthy growing one? There are several considerations to answer this question.
First, one should consider future possibilities. A five- to ten-year industry projection report may be helpful to analyse profitability of a new idea. In this case, government policies and changes of legal system in international markets should also be taken into account. A stable market is more likely to receive government support in the future, which in turn accelerate the development. Next, consider the competitors, especially the dominant players. Competitor analysis can identify the strength and weakness of the counterparts. This can help to finalise ideas and solutions that win customers and outstand rivals. Thirdly, consider the upstream and downstream market for choosing proper vendors, suppliers, and attracting customers in later stages.
Technical feasibility study (technical research) aims to identify technologies that companies need to develop products based upon the new idea. They facilitate the decision-making process. Say, if companies will build new production lines, or they will find other vendors and manufacturers to achieve the same goal. Analyses of different transportation methods add values when supply chains are long.
Existing technologies should be analysed as well. Intellectual property (IP) research should be carried out to investigate whether existing technologies are similar to proposed ideas. If not, the necessity of patent application should be addressed.
Another important aspect in technical feasibility study is to categories the knowledge and expertise level of the technical staff. Sometimes large companies can insource the staff to complete the product realisation, while for small enterprises they may outsource some expert teams to ground the innovations.
Financial feasibility study cares about the money. This analysis focuses on the possible expenditures of procedures and whether they may exceed the budget. For example, the cost of building production lines and seeking other manufacturers can be compared; various transportation cost in terms of the types and frequency are listed for companies to make decisions; patent application and maintenance cost will be counted into return on investment rate (ROI) if necessary. More advanced financial research will take suppliers and customers term into consideration to maintain a positive cash flow.
In a nutshell, most feasibility studies are interrelated, and they are the fundamentals to lay a solid ground for idea realisation. Challenges as well as opportunities are identified during the research procedures. Also, it is well noticed that acquisition of legal advice and patent application process will take time. Therefore, companies need to start these feasibility studies before large product investment is made, leaving buffer for the follow-up implementation.
Why do it?
As you can see, a feasibility study is about finding feasible product ideas. However, telling you whether a project is worth pursuing is not the only thing a feasibility study is good for. Here are some other advantages of looking at the feasibility of product.
Helps time projects
Timing is everything. Sometimes, the time in which you carry out the project can greatly determine the outcome. By conducting a feasibility study, you can identify the optimal time to carry out the project, giving it the greatest chance of succeeding. For example, you may find that during the winter, the weather affects certain machinery and slows down the labour force, meaning summer is the optimal time for the project to be conducted.
Helps ascertain staff quality
Just because you have a lot of staff, it doesn’t mean you will complete the project. Quantity is not quality. If you have employees that are unskilled in carrying out the project, it can become time-consuming and costly to finish. A labour analysis, which is included in any feasibility study, can offer significant insight into the feasibility of product.
Highlights alternative solutions and opportunities
With a feasibility study, you increase your chances of getting it right the first time. This is particularly important if a company does not have the resources to try again. Furthermore, since conducting a feasibility study involves asking broad questions and then moving towards something more specific, an unexpected answer can reveal hidden solutions or opportunities. These can lead to revenue streams that previously weren’t considered.
Only feasible products are worth the time and money of any company. A product development project is one that can drain a company’s resources, and doing that on an unfeasible product is a huge waste. By looking at the benefits of a feasibility study mentioned above, you should easily see why conducting one is necessary next time you have product ideas you wish to develop.
1. Conduct a preliminary analysis
A feasibility study will take resources to conduct, and a preliminary analysis allows you to screen an idea before investing time and money on it. The point of the step is to determine if a product has potential, which will warrant further looking into by continuing with the feasibility study. A preliminary analysis will involve a detailed description or outline of the idea, which includes its unique features and target markets, and any factors that can hinder its success.
2. Prepare a projected income statement
How will the product make money? How much money will that be? Will it be enough to cover costs (direct and indirect)? What are the costs? These are the questions that a projected income statement will answer. Keep in mind that the goal of developing a product is to make money, meaning this is a very important step. You cannot build a business on something that has no indication that it will make money.
3. Conduct a market survey
To make any future revenue projections more accurate, a market survey is needed. This is something you don’t have to do yourself since there are many firms that can do this for you on your behalf. With a market survey, you will find out things like if there is a market for the product, as well as if there is demand in that market and if your target consumers are going to use the product.
While doing this step, it also makes sense to do a competitive analysis. What products are already on the market that resemble yours? What are they lacking? With this data, you can be able to create a product that is unique from the competition, offering customers unique benefits that will make them choose your offering over the competition’s.
4. Plan business organisation and operations
At this point, the feasible product ideas should start to become more pronounced. You can now start thinking deeply about the structure of the organisation you want to create. As part of the step, you will also need to outline the resources needed to handle the operational side of the company. This includes any equipment, machinery, facilities, supply chain and staffing needs along with the associated costs.
5. Review and analyse all data
By the time you reach this step, you will have gathered enough data, and you need to review and analyse it to determine the feasibility of product. This step requires reflecting on the data carefully and thorough giving it a once over. You never know what you will find. For example, you might discover previously overlooked opportunities or that the market conditions have changed.
6. Make a “Go/No Go” Decision
Now that all the data has been reviewed and analysed, you should know whether you have a feasible product on your hands. The leads to either a “go” or “no go” decision. If you find out the product idea has the potential to generate the minimum revenue, allowing you to meet your return on investment, as well as grow as your company, then a “go” decision is appropriate. If not, that is not a feasible product, which should lead to a “no go” decision.
A feasibility study is something that should not be overlooked nor taken lightly. It is one of the most important concepts in product development that can make or break a project. As you know, a successful product can ensure the continued existence of a company. If you want to conduct a feasibility study the right way, follow the above-mentioned seven steps.