ASSESSING THE FEASIBILITY
OF A NEW PRODUCT
Kenneth Crow
DRM Associates
© 2002 DRM Associates All rights reserved. May be used with attribution. Other use prohibited.
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During the feasibility stage of product development, a company needs to gather information and perform analysis to assess the feasibility or develop the business case for a new product. The fact that investment in product development and the cost of design changes increase rapidly after the feasibility stage emphasizes the importance of doing your homework well at the feasibility stage. The following areas questions need to be evaluated as a basis to proceed beyond the feasibility stage:
Is It Real? Does a market exist for the product. Is there a true need in the marketplace? Which markets might benefit from such a product? Will customers buy it? How large is the opportunity? Can the product actually be made? What technologies are required? Do we have these technical capabilities in-house, or are there opportunities to license or acquire what we need?
Can You Win?Analyze the competitive environment. Is the proposed product competitive? What are the competitive strength's of the product? Will we compete basd on price, perfomance, innovative features, service, reliability, or time-to-market? Is this competittive basis sustainable? What do we expect the competitive response to be? Is the basis of competition in line with our overall strategy?
Is It Worth It? Do we have realistic estimates of sales and revenue? Are product costs acceptable? Are development costs affordable and acceptable? Is the product going to be profitable? Is its profitability acceptable and as good or better than other opportunities that the firm has? Is there an adequate return on investment? Are the risks understood and are they acceptable? Is this product in line with our company strategy? These profitability questions are normally answered with a formal business case that shows projected profit over the life of th product or expresses this data in the form of return on investment (ROI) or other similar financial measure.
The following diagram represents the elements of this feasibility assessment:
