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Feasibility Analysis for New Venture Creation and Management Diane M. Sullivan (2007)

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Presentation on theme: "Feasibility Analysis for New Venture Creation and Management Diane M. Sullivan (2007)"— Presentation transcript:

1 Feasibility Analysis for New Venture Creation and Management Diane M. Sullivan (2007)

2 What Is Feasibility Analysis? Feasibility Analysis – Preliminary evaluation of idea to determining if its 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

3 When To Conduct a Feasibility Analysis Timing of Feasibility Analysis – 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 Entrepreneurial Finance Course) Must pass all feasibility analyses to proceed to full business plan development

4 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 1. Validate underlying premises of product/service idea 2. Help developing idea 3. Estimate potential market share 5 benefits 1. Getting product right the first time 2. Create a beta (or early adopter community) 3. Avoid obvious flaws in product/service design (e.g., MobileStar wireless hotspots) 4. Use time and resources more efficiently 5. Potentially identify complementary product/ service offerings (e.g., iPod accessories) * Note: Product/service feasibility topics with an asterisk are part of the team assignment

5 1. Prepare a Concept Statement* Preliminary description of the entire business 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 Purpose: – 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. – Change components of the business model components prior to investing many resources into the concept

6 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. 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 Description SSSDs 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 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/Distributed SSSDs 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.

7 Concept StatementAssignment Requirements Show 1) at least 2 technical experts or other relevant network partners (e.g., suppliers, engineers, etc.) and 2) at least 3 potential users your Concept Statement, and solicit their feedback via a survey or interviews – Develop a concept statement for the teams business – Develop a protocol for collecting the feedback about the initial idea Cover letter and survey document OR Interview cover story and question protocol – Discuss feedback received (e.g., if interviews were used, what are transcribed quotes illustrating concerns, changes, etc.? Show tabulated results/quotes from surveys.) – How did the initial concept change as a result of the feedback received? – Deliverables to be turned in: Include your concept statement in your appendices Target market cover letter/story and survey/interview protocol Industry expert cover letter/story and survey/interview protocol Tabulated feedback/results from target market Tabulated feedback/results from industry experts – Discuss this procedure and the results in your presentation * Note: the concept statement stage is usually an iterative process until technical and user feedback is positive

8 2. Conduct a Concept Test* Entails showing a representation of the firms offering to prospective users in hopes of gaining feedback and insight as to product/service preferences, likelihood of purchase, etc. – Sketch, website, computer-generated design Ideally a random, representative, sample of the target market would provide feedback about the offerings – Can show the representation and solicit feedback via survey, focus group, interviews (see next three slides)

9 BeforeAfter

10 Starting Point: Device obtains and displays song and artist information from the vehicles radio unit as well as if it is available for download. User chooses to download currently playing song. Cellular signal is sent from the vehicle to our servers Server confirms availability of the song for download and status of the users account (active, payment info, etc) Server sends a signal back to the vehicle to either confirm or deny the download. If confirmed, the song begins downloading to the vehicles hard drive via cellular signal If the signal is interrupted during a download, our server makes a note of this. Then when the connection is re- established, the download resumes. Device notifies the user that the download is complete. Account info (credits remaining or song cost, etc) and space left on hard drive are displayed. Device prompts the user to see if theyd like to play the song now. Download Beastie Boys: Sabotage Available for Download Download Complete! ConfirmDeny

11 Servers Store Fitness Software and Create Customized Health and Fitness Programs Daily Nutrition Schedules Fitness Plan Schedule of other Daily Activities Servers Distribute Health and Fitness Information to Students Students Follow Custom Fitness Plan and Nutrition Guide Students Input Progress into Software; Data is Stored on Servers; Students Receive Ongoing Support, Fitness Plans, and Updates

12 Building Layout Concept PARTY & DINING AREA FOOD SERVICE GAME ROOM PRIZES 10,000 Square Feet (min)

13 Concept TestAssignment Requirements Develop a representation of your conceptan illustration that can include a short descriptionthat integrates feedback from concept statement stage – Construct one survey and one cover letter Broadly assess the target markets profile and their perceptions regarding the concept, purchase intentions, any modifications needed (see the next slide for more information on thisTarget Customer) – Distribute this survey and collect data from at least 30 potential users – Include your concept test representation in your appendices – Include the survey, cover letter, and tabulated survey results in your appendices – Discuss this procedure and the results in your presentation

14 3. 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 solidified Done hand-in-hand with the concept test Often entrepreneurs inappropriately identify their target market and/or have inaccurate assumptions about their target market A detailed study of the target market (e.g., demographics, socioeconomic status, etc.) can help to appropriately identify the proper market – Note this is often an iterative processmay require reworking the concept to meet the TCs needs/preferences and/or targeting a different customer group – Even after venture launch, regularly assessing the TCs needs/preferences should become a habit

15 Target CustomerAssignment Requirements For the class assignment, determine, study, and discuss who the firms customers are and what their needs are – Based on your initial conceptions of who the TC are, as a part of your concept test survey Include questions that allow you to develop a more detailed understanding of their profile – Demographic data, socioeconomic data, psychographic data, etc. – Relevant characteristics will be firm specific – If your initial conception of who the TC are was off Adjust the concept to meet the TCs requirements and/or Determine a more appropriate TC and assess their perceptions of the offering(s) and their profile

16 4. Study the Usability of the Business Offering Involves creating a prototype of the offering(s) – Services can involve practice rounds Google Scholar – Products can be physical representations (see example basic prototype) American Inventor Gym class exercise mat Show the prototype to potential users (e.g., a beta test) – Obtain feedback from customers based on their user experience 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? – Example: iPod and cell phone accessories – Integrate feedback into the final form of the business offering

17 5. Determine Intellectual Property (IP) Potential* Is the business offering a candidate for intellectual property protection? – Patents (protection for an invention, including processes) – Copyrights (protection for original works of authorship) – Trademarks (indicates the source of manufactured goods) – Service marks (indicates the source of services provided) Are 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: For class project: search the patent database to determine if others have protected this concept – Discuss your findings

18 6. Study the likelihood and Impact of 1 st and/or 2 nd mover Advantages* Discuss if you can 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, Discuss if you will 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-mover Example: IBM vs. Dell in personal computer retailing If cannot gain first- or second-mover advantage, discuss if that will hurt you? – Is the window of opportunity open? – Are customers buying? – Are competitors making money?

19 Product/Service Feasibility Analysis Deliverables* In the appendices, include – The concept statement that the team constructed Concept statement cover letter and survey for the target market Tabulated results or transcribed interview text from target market Concept statement cover letter and survey for the technical experts Tabulated results or transcribed interview text from technical experts – The concept test illustration that the team constructed Concept test cover letter and survey for the target market Tabulated results from concept test – Be sure all cover letters and surveys utilized effective primary research construction techniques, per class discussion – Be sure that all tabulated results utilized tables and/or graphics to effectively illustrate results See examples on my website


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