Feasibility Study for New Product Development
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Outline of a typical new product development feasibility study
Once a new product has been defined and has gone through the initial screening process, the next stage is a feasibility study and market research. New products are developed so that they can be sold to customers; so the product must meet a real customer need, and be able to be marketed in a way that produces profit. The purpose of the feasibility study is to go through the new product development process, produce a realistic fully costed development programme, and establish whether the product is likely to be viable and profitable. A typical feasibility study can take anywhere between eight hours and fifteen days and would include the subjects defined below.
New product description. The proposed product is defined in some detail and most of the main features specified. While there can be some minor modifications at a later stage, any major changes might alter the whole market position.
Development process, programme and budget. This is defined, normally as a bar chart, and each element is costed. During this discussion phase you need to keep an open mind and look for ways to reduce costs and especially risks. For example, subcontracting out (initially) a complex CNC machining might be better than buying a CNC machine and doing it yourself.
Design. The design process and methodology are defined, eg will you use full 3D CAD with virtual usability studies by potential customers or will 2D drawings be sufficient?
Patents. You need to review whether the ideas have been patented or the new ideas can be patented. The patenting process can be very expensive and time consuming.
Licencing and certification requirements. These requirements must be defined as they can have significant cost and timescale implications, eg medical products. Costs of manuals etc must be defined.
Whole life environment impact assessment and health and safety risk assessment. These are important for your customers and can have a significant financial and sales impact.
Market research. The programme and methodology are defined.
Key customer needs. These must be defined as you are developing a new product for your customers, not for yourself. You also need to identify key competitorsí products, and critically review whether your product is or can be better.
Customers, competitors, markets and sales. You need to consider the size and shape of the potential market, both UK and export, distribution methods, selling methods and aftersales requirements. Marketing costs need to be identified, as well as any specific new marketing requirements.
Product pricing. The product pricing strategy is identified, eg skimming or market penetration. The whole-life costs are calculated, including operating costs, maintenance, spares, consumables, and disposal costs.
Manufacturing process and costs. This could include initial make or buy decisions, identifying potential suppliers, identifying tooling costs etc. The major manufacturing risks are identified, and any compromises you are starting to make or that need to be made are reviewed.
Organisational skills The skills required by the business for the new product are identified, as well as whether you have them in house already.
Financial, sales, margins and returns. This could includes financial analysis, cashflows, sensitivity analysis, sources of funds and grants.
Main risks. The technical, marketing and financial risks are identified and reviewed. Steps to reduce the risks are identified. The main reasons for equivalent product failures are considered.
One of the main outcomes of the feasibility study is to make you think in advance about all of the aspects of your new product development, especially reducing the risks, and how you are going to sell the new product to real customers.