How to Do a Feasibility Study: To Build, or Not To Build?
Let’s play a game. How many cool product ideas can you come up with in a day? 10? 20? My record was 32. But, let’s be honest, having a cool idea is not equivalent to building a successful product.
As product managers who struggle to build and grow products every day, we know about this very well.
But does this mean that we should automatically discard all of our ideas? Of course not. Instead, you should analyze the potential risks and problems related to that proposed project and focus on the ones that are likely to succeed. Enter: the feasibility study.
What is a Feasibility Study?
In product management, a feasibility study, or "feasibility analysis," is the process of reviewing a product idea and understanding your company’s/team’s ability to build that product and make it a success in the market. You will also have a preliminary idea of the different risks and challenges you are likely to face when working on that product.
You would usually evaluate your product from different points of view and ask yourself these questions:
- Are we able to build the technology required for this product to work?
- What does the unit economics for it look like? Would the idea be profitable?
- Are there any legal and compliance limitations that we need to take into consideration?
- Will the market actually like our product and buy it?
By conducting a wide variety of studies, you will eventually have answers to most of these questions and have a more or less solid idea of whether building that product is worth the trouble.
Why Do You Need to Do a Feasibility Study Before Giving Your Product Idea the Green Light?
Let me be brutally honest. A good product idea is barely responsible for 20% of your success. The remaining 80% depends on your ability to build and grow it.
Most of the time, if you apply your critical thinking and study that idea, you will find that the product you envision requires a technology that does not exist yet or you will have to enter a fiercely competitive market.
So, the billion-dollar idea that came to your mind last week is worth nothing unless a project feasibility study confirms that it’s something doable.
The First Draft Of Your Business Plan Will Probably Suck
I want to talk a bit about business plans. There’s a common misconception among founders that the business plan they have just drafted is perfect, and they are automatically bound to success by following it (and no proper feasibility study is needed).
Yes, a well-drafted business plan will definitely increase your likelihood of success. But let’s not forget that whatever you create is simply the first draft. From my experience, you will end up revising it at least a couple of times based on the knowledge you gain about your users and the market.
So, to speed things up for you and make these revisions as early as possible, you have no choice but to conduct a full-scale feasibility study.
A Step-by-Step Guide to Conducting a Feasibility Analysis
Yes, at first glance, a feasibility analysis might look like a massive undertaking. However, let’s not forget that everything included in it is research that you might have already done (as part of your regular process) or plan to do anyway.
So, let’s see what each phase of this analysis is about and how you can conduct it.
Phase 1: Preliminary Analysis & Project Scope Definition
Our first step would be to document the idea and clearly define what it is about. My go-to platform for doing this is Craft.io (but you can use any other tool like Google Docs, Powerpoint, etc).
I’ll be using Craft.io's idea management module for this, as it facilitates collaboration with other stakeholders.
Let’s start by creating a new idea in the app by clicking on “+Create” > “Idea.”
The idea we want to explore involves building an app that will help companies track and manage their ecological footprint. Let’s call it the EcoFriendly Insights Platform and add relevant information to the idea we created.
First off, we will need an executive summary of what it is.
The point of preliminary analysis is to have a high-level view of the product idea and decide whether it is worth spending time and resources on the full-scale study.
To help our stakeholders with their decision-making, we will add a short SWOT analysis to it.
The final element required for this phase is the scope definition—a high-level explanation of product functionality and expected results. Let’s add that to the idea, too.
As we have all the necessary information ready, we’ll set the prioritization method to RICE (this is what I mainly use for startup idea evaluation) and send the idea link to our stakeholders.
The next steps would be for your stakeholders to review the idea, add comments, and set the RICE scores. Based on all of this, you (along with your leadership) will then decide whether to give this idea a green light or not.
Phase 2: Market Feasibility Analysis (or Market Research)
That’s right. To understand the probability of your product successfully entering your market and growing in it, you will need to conduct a good ol’ market analysis and understand the marketing strategy in your project plan.
Now, let’s tackle each element in your market survey one by one:
Market Size
We’ll need to use public data sources like data.org to understand the number of SMBs in our target market (US and UK in this case). This number will give us the TAM (total addressable market)—500,000.
Based on the same source, we find that the SAM (Serviceable Available Market) is 200,000 SMBs.
Next, we aim to get 5% of the market (a standard goal in the industry) in the first 3 years. So, our SOM (Serviceable Obtainable Market) is 10,000.
Finally, through a series of interviews, we know that the average SMB is ready to pay $500 - $2,000 a year for sustainability solutions—converting our SOM in the arena of $5m - $20m.
Customer Needs
We’ll conduct a series of interviews and surveys by attending relevant trade shows and using specialized tools like Respondent.io to find the right people to talk to.
With the help of these interviews, we will understand the following:
- Who our users are and what are the realities they're living in?
- What are the alternative solutions they are using and where are they falling short?
- What are the minimal requirements in terms of functionality for a sustainable product?
- Which platforms do they use in their day-to-day operations that need to integrate with our tool?
We can then gather and analyze all of this data and create our user persona (including their demographics). However, for the feasibility study, the entire persona is not necessary. You can create a short summary that covers the most important learnings from your users.
From the imaginary interviews we have done, we find out that the main problem is that SMBs understand that they need to work on their sustainability to comply with local regulations and improve their reputation, but they have no idea where to start.
Competitor Analysis
Finally, we need to admit that there is no real blue ocean market out there and you will almost certainly have competitors to deal with. So, we’ll need to understand who they are as well.
From my experience, the quickest way to understand your competitors is to do the following:
- Interview their users and see what they like and hate about the competitor's product.
- Sign up for their platform and list the different features and Jobs to be Done they cover (you will then create a table comparing them to your product as well as to other competitors' products).
- Look at their G2 or TrustPilot reviews. Again, you will find loads of interesting feedback from users there.
- Run SEMRush or Ahrefs on their website to see their primary acquisition channels.
Based on all of this, you will prepare your competitor profiles and understand where your product stands in the market.
Again, add the summary and not the entire doc for the feasibility analysis.
As a result, we will have something that looks like this:
I have still kept the document in an Idea state, but you can also turn it into an agile epic at this point.
Phase 3: Technical Feasibility Analysis
Even if the market looks promising and you have a good idea of how you can handle competition, there’s another major factor that you need to consider—can you even build it?
Technical feasibility is usually about these two aspects:
- The existence of the necessary technology to solve that problem. You can’t build a Dyson sphere even if you have the smartest minds out there working with you.
- Your ability to hire and finance the creation of a new technology. Technically, you could go to Mars if you were willing to out-rocketship Elon Musk. But could you finance that project? My money says no.
There’s also the time constraint. If it takes you 10+ years to build something, the chances are high that the market will change drastically by then and your product will not be able to enter it.
To conduct a technical feasibility analysis, you will need to ask your engineering team (or external engineers if you don’t have a team yet) to analyze your requirements and come up with a high-level technical solution.
Here’s how we will handle it with Craft.io.
As it is not us but a different stakeholder conducting this research, we will need to create a “task” under our idea and assign it to them.
We will then open the dependencies tab of our idea and select it.
With the dependency added, we will not consider our feasibility analysis done until our tech team closes its dependent task and gives us the tech evaluation results.
Regarding the results themselves, they will usually look something like this.
Based on these technological considerations, we can see that our product is not really complex and we have the necessary technical resources to develop it.
Phase 4: Financial Feasibility Analysis (or Economic Feasibility)
The next phase of our feasibility study is about your potential costs and revenue. Here, you will need to get an answer to the million-dollar question of any business—is my business idea profitable?
There are two sides to this analysis—overall financials and unit economics.
For the first item, we will need the help of our finance, HR, engineering, and marketing/sales teams as we will need to figure out the total cost of development (including salaries), infrastructure costs, and the projected revenue for the next couple of years.
It means that, in Craft.io, we will need to create a couple more dependencies and assign them to each team. The result will look something like this in our idea document.
Here, we have the summary from the projected income statement, data from our balance sheet, financial projections, cash flow, liability calculation, return on investment calculation, and other high-level financial metrics and forecasts.
Regarding the second element of the financials analysis, we will need to determine a single customer's profitability and understand the LTV/CAC ratio. To ensure sustainable scaling, the goal is to have a lifetime value at least three times larger than the cost of acquisition.
Here’s what the unit economics analysis would look like.
Our new project idea looks promising from a financial standpoint. The initial costs are not small, but the unit economics are looking good.
Phase 5: Operational Feasibility Analysis with Your Project Management Team
Sometimes, the potential risks that your product can face are not related to the market or the tech under its hood. Instead, they rest on your operational capabilities, organizational structure, and processes.
For instance, you might not have the customer support capacity to serve your clients' needs and, as a result, end up with massive churn.
Therefore, operational feasibility is another aspect that you should pay attention to. This is something to discuss with your project managers as well as the team leads from all divisions.
To organize this properly, you can create a leadership team in Craft.io and assign the task/dependency for Operational Feasibility to them. We do this by opening Settings > Team Manager > Invite
We’ll then rename the default team name to “leadership team.”
After creating the task and selecting the leadership team as the assignee, everyone in that team will get the notification, open the task, and start working on it collaboratively.
The result of this collaboration should look something like this:
Based on this assessment, we see that there are team members of certain professions that we need to hire, which is an operational risk considering the time and effort needed to source that talent.
We also lack proper CX capacity and would need to expand our support team.
Both are serious staffing risks (and have a strong impact on the go/no-go decision) that we need to consider when evaluating our new product idea.
Phase 6: Security and Legal Feasibility
Finally, we need to make sure that our product is compliant with all relevant security standards and government regulations. The types of standards and laws to comply with will depend on the nature of your product as well as the countries where you will operate.
For instance, if you want to get customers from the EU, you have no choice but to comply with GDPR’s legal requirements. From my experience collaborating with the legal and security experts in my company, it is a better option to make the entire product compliant with GDPR and any other major regulation (e.g. HIPAA for medical data or CalOPPA for California residents).
This phase also includes the risk assessment of legal consequences and preparing a contingency plan in case our business case or idea faces serious legal challenges during its lifecycle.
This way, you will rid yourself of the extra hassle of offering your product in different ways to different markets. Plus, compliance with these rules for the worldwide audience will give you an extra reputation boost as you position yourself as a security-first company.
Bonus Phase: AI Feasibility Analysis
As a person working with AI products, I cannot omit this step. This is especially important considering the immense popularity of AI solutions for products and the fact that you will most likely end up using AI, too.
You might think that AI model development feasibility analysis should be part of the technical feasibility phase. That’s logical, but no.
AI is a completely different world and the risks associated with it are different from tech risks.
For instance, before starting to build a model, you need to be sure that you can gather the right training data (and in the right amount). If you can’t find quality training data, then what are you going to train your model with?
There’s also the risk of your models behaving unethically (or even being racist). Just read the latest news on Google Gemini’s ethically bizarre behavior.
The Feasibility Report: Your Final Deliverable
Your final deliverable is the Feasibility Analysis Report. It’s simply a single document that has combined the information from all of the phases described in this article. There is nothing special here; simply add all of the summary analyses from all of your teams to a file and call it a day.
You can keep it in the form of a Craft.io idea or convert it into a PDF file.
Alternatively, if you have the time, you can create a PowerPoint/Slides presentation where you mention the most important pieces of information from each phase. You can show this during a feasibility analysis meeting to your key decision-makers and send them the full PDF later for their review. This way, you can make sure that they are making informed decisions for that new business idea.
Avoid Building Unrealistic Products
Product managers have a mindset of “everything is possible.” That’s great, and you should definitely keep thinking that way. However, you should also acknowledge that some product ideas are highly risky and are not worth the effort.
So, to let you use your precious time on something that has a real potential for success, a feasibility analysis should be a requirement for all of your product ideas. (At least, the ones you're actually serious about.)
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