Appraising New Products, Processes and Services

Posted on April 13, 2008
Filed Under Business Strategy | Leave a Comment

The following check list covers some of the KEY questions that need to be answered when appraising new products, services or processes. It covers the issues that are sometimes skated over or even forgotten when new projects are proposed, whether they be completely new or modifications of existing ones. The list is not exhaustive, but it should stimulate other questions to ensure that new ideas receive a thorough investigation before significant amounts of money and time are devoted to developing them. Some of the questions will be more or less relevant depending on whether the new venture involves a product, process or service.

Use of this list does NOT guarantee success nor will it ensure all unviable projects are rejected! Nevertheless at the very minimum, it should ensure that the issues are aired before wise or unwise decisions are made.


1. What is the proposition and in particular, its unique features?

Product/process/service

Literally what is it – how would you describe it to someone who knew nothing about it?

Market need

How do you know there is a market need – will someone buy it – what evidence do you have?

2. What is the relevance to the sponsoring company/organisation?

Technology synergy

Does it fit with what you do already – will it enhance your existing way of doing things?

Market synergy

Will it complement or enhance your existing market activities and if so how?

Impact on current products/processes

What effect will it have on what you already make/sell?

3. What financial resources are required?

Research and development

Do you need to spend any money on further research to refine it – does it require additional development to ensure acceptance?

Capital investment

Will it require investment in for example additional plant or warehousing?

Return on investment

Related to the above – what are the forecast payback periods and/or percentage return on the money invested in the project?

4. What is the market?

Size and growth prospects

What is the size of the market for your new product/process/service – can you identify likely customers?

Competition

Who is already in the market – what do they do?

Proposed market share

What share of the total market are you likely to achieve and over what time scale?

5. What is the forecast scale of the business?

Timescale for development from idea to finished product/process

How long is it going to take to achieve your stated goal(s)?

Turnover, profits, assets, cash flow, people

Related to items 3 & 4 – what are likely sales, margins, profits – how long before it generates cash – do you have enough people to develop/manage it – what assets will be needed to ensure success?

6. What are the % chances of success?

Sensitivities

What is the probability that you will achieve your forecast levels of sales and profits – what is the effect of varying levels of sales and cost structures?

Barriers to entry

Are there any legislative/statutory barriers to market entry, approvals to achieve and/or distribution/sales difficulties to overcome?

Impact of competitive responses

How will the competition (if any) respond to a new market entrant eg lower prices, special offers etc?

7. How is the product/process to be exploited?

Make/use

Are you going to make/develop and use it yourself?

Sell

Are you going to sell the product etc yourself or sell it to someone else?

Licence/franchise

Can you licence production or sell a franchise rather than sell in all markets and all territories?

Factor

Can you get someone else to sell it on your behalf?

Joint venture

Should you share the risk with someone else – perhaps a company that has more experience than you in certain markets?


There are of course a whole series of sub sets of questions which follow on from each of the main questions listed above. It is hoped in due course to prepare supplementary lists covering these as well as Check Lists for particular projects eg new market development.

For more information on our to evaluating new ventures and appraising existing ones contact Nick Booker of Booker & Hopkins Associates.

Comments

Comments are closed.

Contact Us

BHA Consultants Ltd
Brook House | 4 Lawrence Gardens Kenilworth | Warwickshire | CV8 2GH
Tel: + 44 (0) 1926 864900
info@bhaconsultants.co.uk