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Introduction to Feasibility Analyses Modified from Barringer and Ireland (2006)

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  • Introduction to Feasibility AnalysesModified from Barringer and Ireland (2006)

  • What Is Feasibility Analysis?Feasibility AnalysisPreliminary evaluation of idea to determining if its worth pursuingProvides more secure notion that a business idea is viableDid analysis, feasible business: Intuit (Quicken, Quickbooks, etc.)Personal experience, observed others, surveyed customersDid analysis, not feasible: Retailing Insights (grocery cart)Determined not a sufficient scale for advertising, needed large proportion of grocery storesDropped idea, focused on core competency, developed TrakusNo analysis, failed firm: Iridium (satellite phones)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 StatementConcept StatementOne page description of a business (not just the offering) that includesDescription of the product or serviceDescription of target marketBenefits of the product or service (value proposition)Description of product/service differentiators Description of how product/service sold/distributedDescription of the founder(s) of the firmGiven to people who provide feedback on the potential of the ideaGive sense of the viability of the business ideaSuggestions for how the idea can be strengthened or altered before proceeding

  • When To Conduct a Feasibility AnalysisTiming of Feasibility AnalysisAfter concept statement evaluationAfter opportunity recognition, before business planBefore a lot of resources are investedFour Components of Full Feasibility AnalysisProduct/Service FeasibilityIndustry/Market FeasibilityOrganizational FeasibilityFinancial Feasibility

  • Product/Service FeasibilityProduct/Service Feasibility AnalysisAssessment of overall appeal of proposed product/serviceMain idea: before rushing to development, be sure product/service is what prospective customers wantTwo components of product/service feasibility analysis:Concept testingPurpose: Gauge customer interest, desirability, purchase intentionsInvolves showing a representation of product/service to prospective users Occurs before the prototype stageWebsites and graphic designs are taking this to a new levelConcept test concept statement Usability testingPurpose: determine ease-of-use and users perceptions of using productIterative process that involves creating a physical prototype (basic, elaborate, or hybrid prototypes) and giving it to users, measuring usage results, and making modifications as necessaryAlso called: user tests, beta tests, or field trialsExample: http://scholar.google.com

  • Industry/Market Feasibility AnalysisIndustry/Market Feasibility AnalysisPurpose: assess overall appeal of the market3 primary issues to consider:Industry attractiveness: attractive industry characteristics include but are not limited tois 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?Market timeliness: asks if the market will be receptive to the product/serviceis the WoO open? Are customers buying? Are competitors making money? Can we gain a first- or second-mover advantage?Identification of a niche market: Are we able to compete in a niche marketa place in a larger market segment that represent narrower groups of customers

  • Organizational Feasibility AnalysisOrganizational Feasibility AnalysisPurpose: determine if business has sufficient skills/resources to bring product/service to market successfullyNon-financial factors are what is assessed here2 primary issues to consider: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 expertiseResource sufficiency: must assess adequacy of other resources necessary for successfully venture launch, development, and competitionFocus is on nonfinancial resources like:Availability of affordable office or lab space, Labor pool quality, Proximity to key suppliers, customers, and similar firms (clusters)Likelihood of strategic partnerships, Likelihood of attaining IP

  • Product/Service Feasibility Analysis StudiesDiane M. Sullivan (2007)

  • 1. Prepare a Concept StatementPreliminary description of the entire business that includesDescription of the product or serviceDescription of target marketBenefits of the product or service (value proposition)Description of product/service differentiators Description of how product/service sold/distributedDescription of the founder(s) of the firmPurpose: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 expertiseChange 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. SSSDs 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 SSSDs website or stores for customized sizes. Target Market DescriptionSSSDs 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 PropositionThe 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 consumers 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 SSSDs 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/DistributedSSSDs 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 Lowes. Customers requiring customized sizes and custom-made designs can shop at an SSSD brick-and-mortar store or via SSSDs 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.

  • 2. Conduct a Concept TestTraditionally entails showing a representation of the firms 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.Ideally a random, representative, sample of the target market would provide feedback about the offeringsCan 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 interviewsDiscuss the method used to solicit feedback (e.g., survey, focus group, or interview(s))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

  • BeforeAfter

  • BeforeAfter

  • BeforeAfter

  • 3. Study the Marketability of the OfferingDeals with the value proposition relative to the customerDiscuss how the business offering either:Solves a problem/serves a need;Makes someones life/business more efficient;Makes someones life/business more effectiveNote: The offering may address more than one of these. If it does, discuss all applicableThis step requires an understanding of the industry, competitors offerings, consumers wants/needs/trends.To find this information, study industry and firm publications and discuss these issues with potential users Hint: You will likely be able gather some of this information during the concept testBe 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)This is the point where 1) the profile of the target customer and/or 2) changes to the business offering should start to become solidifiedDetermine and study who the ventures customers are and what their needs areBased 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.)Assess the TCs perceptions of the offering, their purchase intentions, and any suggestions for changes to the offering(s)If the offering(s) need to be changed to address the TCs needs, discuss modificationsIf your initial conception of who the TC are was off, determine a more appropriate TC and assess their perceptions of the offering(s).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 OfferingInvolves creating a prototype of the offering(s)Services can involve practice roundsGoogle ScholarProducts can be physical representations (see example basic prototype)American Inventor Gym class exercise matShow the prototype to potential users (e.g., a beta test)Obtain feedback from customers based on their user experienceWas 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 accessoriesIntegrate feedback into the final form of the business offeringFor 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) PotentialIs the business offering a candidate for intellectual property protection?PatentsCopyrightsTrademarksAre there pending or existing patents for the same type(s) of offerings that might hinder the business concepts development?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 Second-mover AdvantagesCan 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 cant do the above,Will you suffer from a second-mover advantage?Second-mover advantages may occur where imitators can duplicate the first movers patentsresearch shows imitators can do this for 65% of the cost of the first-moverExample: IBM vs. Dell in personal computer retailingIf you cannot gain a first- or second-mover advantage, will that hurt you?Is the window of opportunity open?Are customers buying?Are competitors making money?