What is a feasibility study in the context of new product development?
Developing a new product can be very risky and companies need to ensure that they have thoroughly considered all the implications and potential pitfalls before launching a new product.
A feasibility study is conducted as part of this process and helps to determine whether a proposed new product is financially viable. They are normally done at the concept stage of new product development.
Feasibility studies are highly confidential. Businesses often don't understand the strategic gravity of undertaking a new product development project. Feasibility studies are used to show the commercial jeopardy of choosing not to do something.
What is a business plan?
Hint: it's not a business case.
A business plan is a written document that describes the current reality of your product or product range, and what you want to do about it. A good business plan can help you define your new product mission, understand where you are today, determine where you're going tomorrow, learn the pitfalls that could knock you off track, and map out how to avoid them so that you get where you want to go.
What is the difference between a feasibility study and a business plan?
Consider the Similarities
It's crucial to note the differences between a feasibility study and a business plan since both are utilized in different ways to help you establish a successful new product. The following are some of the similarities between the two documents:
- Timing: Both are initially done before the product launches, and can be conducted again later to determine the next steps on future ideas.
- Input: Both include input from several individuals or departments that have different skills.
- Format: Both include other documents that are pulled together in order to compose the report.
- Components: Some of the issues analyzed are similar, including examining the target market, market conditions and financial costs.
- Usage: Both help the organization's management make decisions, and can also be shown to potential investors.
Understand the Differences
It's equally important to understand the difference between a feasibility study and a business plan. They are not the same, and one cannot substitute for the other. Differences include:
- Purpose: A feasibility study decides whether to proceed with the new product or another concept, whereas a business plan is created after a decision to proceed has already been made.
- Methodology: Typically, a business plan is considered to be a projection for the future, whereas a feasibility study is a research project.
- Risks: Feasibility studies determine the risks associated with the idea, whereas business plans explain how management will deal with the risks so that it will make a profit.
- Cost: Feasibility studies can require hiring outside professionals with expertise who will conduct thorough studies, whereas business plans are written by employees of the business, as part of their jobs.
Examples of when each document would be used
Examples of new product feasibility studies are, "The market is too small to have an impact", "We don't have the resources to achieve our goals", or "we can't find a way to produce this product at a low enough cost."
Examples of when a business plan would be used are, "We're going to start production in three months", "we're hiring 30 people to help us produce this by next month", or "our goal is to double our sales every year for the next five years."