In addition to a problem fit assessment, the novel concept under consideration also needs to be assessed for feasibility in terms of market, technical and customer viability with reference to investing time and resources in further developing the concept.
Feasibility consists of various areas, including but not limited to:
- Market: the concept needs to be checked for market success. Specifically, you need to be able to answer the following questions:
- Who is your target audience, and what characteristics do they possess?
- How can you reach this target audience?
- What part of this target audience is likely to buy your product?
- At what price are they willing to buy this product?
- Technology: the concept needs to be checked for technological feasibility. It is the job of the engineers to determine whether the technology exists to evolve the concept into a market-ready product. Specifically, one should seek to answer the following questions:
- What technology is needed to turn this concept into a full marketable product?
- What technological constraints are there?
- Which technologies do not yet exist?
- How easy are technologies that do exist to come by?
- What is the cost of these new and existing technologies?
- Organizational: the organization needs to check if it is ready to transform this concept into a real marketable product. This means checking if the correct organizational structures exist, if the correct people are available, and if the correct culture is in place. Specifically, the following questions need to be answered:
- Which organizational structure is needed to bring this concept to market?
- Do we already have the right structures in place?
- What is the cost of setting up these new structures?
- Do we have the right corporate culture for bringing this concept to market?
- Do we have the right people to transform this concept into a real product?
- What is the cost of retraining existing staff, or the cost of hiring new staff with regards to this new product?
- Financial: keeping in mind the findings from the previous investigations, one needs to determine the financial aspect of bringing the concept to market. There are many different calculations that can be made, such as:
- NPV: a Net Present Value calculates the sum of all the expected benefits the innovation will generate and discounts it to today’s value of money. The advantage of this metric is that it gives a complete overview of the size of the returns. The disadvantage is that it says nothing on the time it will take to achieve the full extent of the returns and that it does not take into account the upfront investments needed to generate that value.
- ROI: a Return On Investment calculation provides information on the percentage of total benefits versus the total costs. Risk Adjusted ROI takes into account the time value of money when adding the various benefits and costs. It is therefore the safer measure, since normally costs will precede benefits in an innovation projects (and therefore the benefits are comparatively higher and discounted more in later months or years). The ROI measure says nothing about the time it takes to realize the benefits though…
- IRR: an Internal Rate of Return calculation is a calculation of the “interest rate” of the project for the company. It is calculated as the percentage by which you should discount the benefits for a given period until the NPV becomes 0.
- (Discounted) Payback Period: this measure indicates how quickly an investment in the new innovation will be paid back (usually expressed in months). The discounted version takes into account the time value of money. The disadvantage of this method is that it leads to a preference for shorter payback periods, and does not look at the total value the innovation might create.
The following tools and frameworks, already presented in the Concept Development section of the IPACSO Framework offer innovators a toolkit for navigating the complexities of determining the commercial feasibility of their concepts and offers specific resources for customer engagement, insights into finding markets for products as specified, strategies and tactics for market navigation (entering existing or new markets) and strategies for managing and responding to product and company growth.
- The Business Case Procedure (Kinnunen, Pekuri, Haapsalo, & Kuvaja, Business Case Analysis in New Product Development, 2011) ,
- The Business Model Canvass (Osterwalder & Pigneur, 2010)
- the New Business Road Test frameworks (Mullins, The New Business Road Test: What Entrepreneurs and Executives Should Do Before Writing a Business Plan, 2003)
- Four Steps to the Epiphany framework (Blank, The Four Steps to the Epiphany, 2005)
The feasibility assessment will prove a valuable input for the portfolio management activity. Even the best idea may still fail, in case it is just not feasible to put it in production, or in case the market is not (yet) ready for it.
Feasibility assessment :
Unstructured or semi-structured interviews :
Blank, S. (2005). The Four Steps to the Epiphany.
Kinnunen, T., Pekuri, A., Haapsalo, H., & Kuvaja, P. (2011). Business case analysis in new product development. Global Journal of management and business research, 11(2), 49-56.
Mitchell, D. & Coles, C., 2003. The Ultimate Competitive Advantage of Continuing Business Model Innovation. Journal of Business Strategy, 24(5), pp. 15-21.
Mullins, J. W. (2003). The New Business Road Test: What Entrepreneurs and Executives Should Do Before Writing a Business Plan. London: FT/Prentice Hall.
Osterwalder, A. (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. John Wiley and Sons.
Osterwalder, A., Pigneur, Y., & Smith, A. (2010). Business Model Generation.