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 feasibility study examines, described below.
1. 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.
2. 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.
3. 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.
4. 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.
5. 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 to
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
