Sometimes, a client comes to us ready to dive right in and start developing a product. Other times, they’d rather have some help with due diligence before they commit tens of thousands or even millions of dollars to a research and development project. In these latter cases, we can provide a feasibility study to reduce the unknowns, estimate the overall development costs, and provide a road map forward. A feasibility study can save millions of dollars in development costs to the client.

Note: Some details have been altered, obscured or sanitized to safeguard the client’s operational security. 

Project Description

In this case, we were asked by a client to examine the technical and financial feasibility of developing a drone parachute product based on an existing product to create a low-cost competitor. The client was an experienced manufacturer, but new to the drone industry and some of the technologies involved. The client wished to be able to make a well-informed decision about whether the project was worth pursuing, and what the costs would be.

This project brings together some of our core competencies in mechatronics product development. You can see from the teardown that the final product includes metal springs, moving plastic parts, electronics, packaging, motors and of course software development.   

Develop Product Strategies

A great first step in developing a new product is answering the question, “what is the problem we are trying to solve?” In this case, the existing product is typically used to expedite regulatory compliance within the drone industry, and the available products are rather expensive. So, at first, it might seem that the question is, “Can we save money by making our own device?”, but actually turned out to be “How can we overcome regulatory hurdles as cheaply as possible?”

In investigating this project, we helped the client develop three strategies to consider:

1. Do not develop a product and work with regulatory experts to achieve compliance.
2. Reverse engineer an existing product and clone it.
3. Create a new product, based on existing products with significant enhancements to performance 

Understand the Regulatory Landscape

Developing new products takes more than engineering and manufacturing know-how. You’ve got to understand the legal and regulatory environment that your product is operating in. In this case, the product required not only typical consumer electronics certifications, but also compliance with FAA guidelines and safety testing.

Paladin Robotics maintains an extensive network of industry professionals in a wide variety of industries and research areas. In this case, we reached out to members of the advisory board who helped write the FAA regulations and the ASTM testing standard, our manufacturing partners, lawyers and product safety testing experts to make sure we had a clear understanding of what would be required. When we completed the feasibility study, we’d clearly identified regulatory, certification, and legal requirements that needed to be addressed for a successful product launch. 

Tear-down an existing product

Being able to tear-down an existing product is tremendously beneficial in developing a new product. Not only can we examine in detail how others have solved the problem, we can send those parts out to manufacturers for cost estimates and bids that will help us develop a very accurate product budget for the various product development strategies. For this project, we were able to develop very accurate price estimates for all the plastic parts, the packaging, the springs, the electronics, printing and instruction manuals, and the software development by reverse engineering the product, developing specifications, and sending the details out to our partners for bids. 

Estimate Schedules and Budgets

Before the client had even committed to developing the product, we could tell them what it’s going to cost and how long it’s going to take, and we were able to proceed with recommendations to reduce the manufacturing and development costs, or expedite the development timeline. We sourced every component from the teardown. We got bids from manufacturers, assemblers, and compliance testers.  Of course, we don’t have a crystal ball. These are estimates,after all. Occasionally unforeseen circumstances arise. Covid-19, for example, has slowed production timelines, and hadn’t even been identified in the first patient.

Still, by this point in the study, we knew with great accuracy what the development costs and the timeline would be. We sourced and priced all the components. We had pinned down production and manufacturing costs. We had figured out the shipping and fulfillment costs. We knew what compliance testing was required and what it would cost. 

Build a financial model

By this point in the feasibility study, we had pinned down most of the original unknowns, and it was time to develop the financial model. The financial model is more than just an estimate of the costs and the timelines. We combine market analysis with the cost estimates. In this case, the task was to build an end-to-end financial model answering the following:

• How many unit sales would a new Drone Parachute System need to achieve, and at what market price, to recoup the investment required to develop a new system?

When we build these models, we’re able to explore many different scenarios. We can examine each development strategy, vary the size of the production run (which has a huge effect on unit price), vary the sale price, and show the resulting changes to revenues and profit. Alternately, we can take a market-research determined sales price and calculate how many units must be sold to break even. 

Articulate the Risks and Propose Mitigation

It’s self-evident that almost every project entails risks and challenges. One of the final contributions of the feasibility study is to identify the risks and challenges that are specific to the project, as well as the common pitfalls we’ve encountered through years of project experience. These aren’t generic or boilerplate project risks. We research, investigate, gather intelligence, and dig up insider knowledge, just as one might with a military intelligence assessment. Of course there’s not much point in identifying a risk without some type of mitigation plan, so that’s a critical part of the feasibility study too. 

Here are some examples* of risks we identified for this project: 

1. Regulatory – Drone regulations and standards are rapidly evolving; therefore, designing to the current standard may result in an obsolete product at the time of manufacture.
2. Market – Entrenched players in the market are currently forming strategic partnerships to develop integrated products. This will make it harder to compete on specific airframes. 
3. Certification Requirements – Drone platforms evolve over time, meaning technology developed for today’s small drone may need additional development efforts to function with new models.

*Note: Here’s an example of some heavily obscured information. In our actual study we provided highly-specific details of likely timelines for regulatory changes, details of partnerships, and the latest information on potential changes to relevant regulations, which we simply cannot provide to the public.