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

What Is Feasibility Analysis? Preliminary evaluation of idea to determining if it’s worth pursuing Provides more secure notion that a business idea is viable Did analysis, feasible business: Intuit (Quicken, Quickbooks, etc.) Personal experience, observed others, surveyed customers Did analysis, not feasible: Retailing Insights (grocery cart) Determined not a sufficient scale for advertising, needed large proportion of grocery stores Dropped idea, focused on core competency, developed Trakus No 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 Statement One page description of a business (not just the offering) that includes Description of the product or service Description of target market Benefits of the product or service (value proposition) Description of product/service differentiators Description of how product/service sold/distributed Description of the founder(s) of the firm Given to people who provide feedback on the potential of the idea Give sense of the viability of the business idea Suggestions for how the idea can be strengthened or altered before proceeding

When To Conduct a Feasibility Analysis Timing of Feasibility Analysis After concept statement evaluation After opportunity recognition, before business plan Before a lot of resources are invested Four Components of Full Feasibility Analysis Product/Service Feasibility Industry/Market Feasibility Organizational Feasibility Financial Feasibility (covered in Dr. Janney’s class) Must pass all feasibility analyses to proceed to full business plan development

Component 1: Product/Service Feasibility Product/Service Feasibility Analysis Assessment of overall appeal of proposed product/service Main idea: before rushing to development, be sure product/service is what prospective customers want 3 reasons to conduct Validate underlying premises of product/service idea Help developing idea Estimate potential market share 5 benefits Getting product right the first time Create a beta (or early adopter community) Avoid obvious flaws in product/service design (e.g., MobileStar wireless “hotspots”) Use time and resources more efficiently Potentially identify complementary product/ service offerings (e.g., iPod accessories)

Component 1: Product/Service Feasibility Two components of product/service feasibility analysis: Concept testing Purpose: Gauge customer interest, desirability, purchase intentions, technical feasibility Involves showing a representation of product/service to prospective users and industry experts Occurs before the prototype stage Websites and graphic designs are taking this to a new level Concept test ≠ concept statement Usability testing Purpose: determine ease-of-use and user’s perceptions of using product 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 Example (elaborate prototype): http://scholar.google.com

Component 2: Industry, Competitive, & Market Feasibility Analysis Industry/Market Feasibility Analysis Purpose: assess overall appeal of the industry and market 3 primary issues to consider: 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? Market timeliness: asks if the market will be receptive to the product/service—is the WoO open? What do trends in the external environment impact us? Are customers buying? Are competitors making money? Can we gain a first- or second-mover advantage? Identification of market to be served: Are we competing in a niche market—a place in a larger market segment that represents narrower groups of customers—or within a larger segment of the industry? Determines the scope of our competitors and how we will serve our market.

Component 3: Organizational Feasibility Analysis Purpose: determine if business has sufficient skills/resources to bring product/service to market successfully 3 primary issues to consider: Appropriateness of the Business Model (e.g., fundamental logic underlying firm) Management prowess and human resource needs: 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 Resource sufficiency: must assess adequacy of resources necessary for successfully venture launch, development, and competition