Why a Feasibility Study is Important in Project Management
What is a feasibility study? As the name implies, a feasibility study is used to determine the viability of an idea, such as ensuring a project is legally and technically feasible as well as economically justifiable. It tells us whether a project is worth the investment—in some cases, a project may not be doable. There can be many reasons for this, including requiring too many resources, which not only prevents those resources from performing other tasks but also may cost more than an organization would earn back by taking on a project that isn’t profitable.
A well-designed study should offer a historical background of the business or project, such as a description of the product or service, accounting statements, details of operations and management, marketing research and policies, financial data, legal requirements, and tax obligations. Generally, such studies precede technical development and project implementation.
Five Areas of Project Feasibility
A feasibility study evaluates the project’s potential for success; therefore, perceived objectivity is an important factor in the credibility of the study for potential investors and lending institutions. There are five types of feasibility study—separate areas that a feasibility study examines, described below.
01. TECHNICAL FEASIBILITY
This assessment focuses on the technical resources available to the organization. It helps organizations determine whether the technical resources meet capacity and whether the technical team is capable of converting the ideas into working systems. Technical feasibility also involves evaluation of the hardware, software, and other technology requirements of the proposed system. As an exaggerated example, an organization wouldn’t want to try to put Star Trek’s transporters in their building—currently, this project is not technically feasible.
02. ECONOMIC FEASIBILITY
this assessment typically involves a cost/ benefits analysis of the project, helping organizations determine the viability, cost, and benefits associated with a project before financial resources are allocated. It also serves as an independent project assessment and enhances project credibility—helping decision makers determine the positive economic benefits to the organization that the proposed project will provide.
03. LEGAL FEASIBILITY
This assessment investigates whether any aspect of the proposed project conflicts with legal requirements like zoning laws, data protection acts, or social media laws. Let’s say an organization wants to construct a new office building in a specific location. A feasibility study might reveal the organization’s ideal location isn’t zoned for that type of business. That organization has just saved considerable time and effort by learning that their project was not feasible right from the beginning.
04. OPERATIONAL FEASIBILITY
This assessment involves undertaking a study to analyze and determine whether—and how well—the organization’s needs can be met by completing the project. Operational feasibility studies also analyze how a project plan satisfies the requirements identified in the requirements analysis phase of system development.
05. SCHEDULING FEASIBILITY
This assessment is the most important for project success; after all, a project will fail if not completed on time. In scheduling feasibility, an organization estimates how much time the project will take to complete.
When these areas have all been examined, the feasibility study helps identify any constraints the proposed project may face, including:
Internal Project Constraints: Technical, Technology, Budget, Resource, etc.
Internal Corporate Constraints: Financial, Marketing, Export, etc.
External Constraints: Logistics, Environment, Laws and Regulations, etc.
Benefits of Conducting a Feasibility Study
The importance of a feasibility study is based on organizational desire to “get it right” before committing resources, time, or budget. A feasibility study might uncover new ideas that could completely change a project’s scope. It’s best to make these determinations in advance, rather than to jump in and learning that the project just won’t work. Conducting a feasibility study is always beneficial to the project as it gives you and other stakeholders a clear picture of the proposed project.
Below are some key benefits of conducting a feasibility study:
Improves project teams’ focus
Identifies new opportunities
Provides valuable information for a “go/no-go” decision
Narrows the business alternatives
Identifies a valid reason to undertake the project
Enhances the success rate by evaluating multiple parameters
Aids decision-making on the project
Identifies reasons not to proceed