The Whys and Wherefores of a Project Feasibility Study

written by: Joe Taylor Jr. edited by: Rebecca Scudder updated: 2/25/2013

Project managers can cover the first four phases of the project cycle by conducting a comprehensive
feasibility study. The first part of this five-part series examines the role that a feasibility study can play
in any kind of organization.
Plenty of successful entrepreneurs have built businesses on the back of a
napkin. Or, at least, thats how they tell the story. In reality, every good idea in a business must first
survive a rigorous project feasibility study. For many project managers, a feasibility study represents
the first four phases of the project cycle.
People love ideas. They come to us in the blink of an eye, or even in our dreams. Although it can be tempting to
tackle a compelling new idea head on, project management veterans understand the importance of reviewing the
opportunities and the challenges posed by a project. Because project management professionals tend to focus on
getting things done, it can sometimes be hard to look at the overall viability of a new idea.

According to some business experts, only about one idea out of fifty has any real chance of long-term success.
Making sure your idea falls within that two percent success rate can prevent time and resources from being devoted
to a project that will probably fail, regardless of the execution. A well-orchestrated project feasibility study provides
the kind of impartial analysis that can separate profitable ideas from unproductive brainstorms.

Facing the Challenges of a Project Feasibility Study

Often, the biggest source of criticism for a project feasibility study will come from the person or the team that
championed the idea in the first place. Strong leaders can develop the ability to conduct a project feasibility study on
their own ideas, since they have learned how to make peace with the fact that not every idea deserves to be fully
explored.

First time entrepreneurs or project managers may prefer to conduct a such a study study with help from another
professional or an outside consultant. External perspective can make or break a project idea: if it makes sense to
an impartial third party, it will probably make sense to pursue as a project.

The Importance of a Feasibility Study

Many organizations overlook the early stages of the project cycle by leaping right into timelines and
delegation. Recognizing the importance of a feasibility study can save companies time, money, and
embarrassment. This is Part 2 out of 5 in a series.

Understanding the Science of Success

The previous article in this series introduced a startling statistic: Only one idea out of fifty has what it
takes to succeed in business. For project managers and other professionals that dont always get to
 brainstorm, its easy to fall in love with an idea. However, experienced business veterans understand
the importance of performing due diligence" on what may seem like a slam-dunk idea. Experts have
documented four moments in the life of a business when the importance of a feasibility study is
greater than ever.

1. Launching a New Business

Many entrepreneurs look at the launch of a new business as a short-term project that can get them to a sustainable
profit level. Business veterans often review two feasibility studies: one to determine the long term viability of the
business, and another to understand the resources necessary for a successful launch. During the original dot com
bubble" in the late 1990s, many companies overlooked the importance of feasibility studies, leaping into venture-
backed businesses without abandon. Anyone who remembers Pets.com, Kozmo.com, Webvan.com, or hundreds of
other high profile failures understands what can happen when companies cant sustain themselves.

2. Creating a New Product or Service

General Electric has become famous for experimenting with new products and services, some of which might not
seem like a perfect fit for a company with roots in engineering. However, a company that understands the importance
of feasibility studies can make strategic decisions that reap major dividends. Building a routine process for feasibility
studies within an organization helps develop a culture of experimentation without putting the entire company at risk.

3. Changing an Existing Internal Process

Many project managers face the challenges of implementing new internal systems, like customer relationship
management software or communications tools. Subjecting new ideas to a feasibility study before contracts are
signed can keep a company from investing too heavily in systems or processes that will fail to gain traction or meet
customer needs.

4. Deciding on a Partnership or Vendor

Shareholders and employees require assurance that a merger that looks good on paper will actually fly in the real
world. Likewise, white papers and glowing customer testimonials from a prospective vendor wont matter if their
product or service doesnt address critical issues.

Advantages of a Feasibility Study

written by: Joe Taylor Jr. edited by: Rebecca Scudder updated: 2/24/2013

Smart executives and savvy project managers understand how to leverage the learnings from a solid
feasibility study into a more efficient project cycle. Let's consider the four key advantages you can
work to your benefit.

Effective Project Choices

Effective feasibility studies can do more than just help executives choose which projects to greenlight.
Managers involved in a feasibility study can actually use much of the same data to shape the project
 planning process. Four main advantages to feasibility studies can generate crucial insight for approved
projects.

1. Understanding Demand

Feasibility studies always analyze whether a real demand exists for a product or a service. This holds true for internal
projects as well as for potential consumer offerings. For example, a project manager tasked with launching a
customer relationship management system can examine the real demand for specific features, based on feedback
from customers and from staff. The resulting data can shape the priority list, which impacts both the budget and
timeline. This way, project managers can avoid spending resources on features or projects with low impact and low
demand among end users.

2. Assessing Resources

Another of the advantages of feasibility studies is the opportunity to catalog the current resources available for a
project and to estimate the need for additional resources. Feasibility studies that recommend against projects often
cite a lack of human resources or financial capital. This kind of result gives a project manager the opportunity to reset
expectations based on real budgets and headcount.

3. Marketing Feasibility

Even for products and services with measurable demand, companies must examine their ability to spread the word
about a new offering. During the evaluation process, project managers learn whether the market is already over
saturated with stronger competitors. Company leaders can also discover any potential legal roadblocks involving
trademarks, patents, or other intellectual property rights.

4. Marking a Timeline

One of the biggest advantages of a feasibility study is the validation of a prospective timeline. When
moving into a formal project planning phase, a project manager can use data generated by the study
to help set milestones and deadlines. A quality feasibility study examines the timetable suggested by
project sponsors for potential delays or breakdowns. When project managers use a study as the basis
for making timeline decisions, they run the least risk of being overruled by anxious stakeholders.

Reviewing the 4 Steps of a Feasibility Study Method

Whether a feasibility study lasts for six months or six days, it should follow a four-step method outlined
by experienced project management professionals. This is the fourth of five articles on this important
business topic.

Four-Step Feasibility Study Method

Feasibility studies can take on different forms, depending on their contexts. In large enterprises,
schools, and government agencies, a feasibility study could take months or even years of work in
conjunction with outside consultants. On the other hand, a small business with the right connections
and resources can perform an ad hoc feasibility study over the course of a few days. Regardless of the
timeframe involved, the project manager in charge of the feasibility study must remain impartial as he
or she handles four critical tasks:

Examine the Market

The first step to an effective feasibility study method involves a critical analysis of the competitive
landscape for a product or service. Many first-time entrepreneurs make the mistake of assuming that
their product has no competition. In reality, any other way in which a customer allocates money, time,
or attention can be viewed as competition. The feasibility study should paint a realistic picture of the
likelihood that enough customers will be satisfied to result in a sustainable offering.

Review Technical Requirements

Understanding the needs of the marketplace does not always guarantee the ability to meet customers expectations.
Including this analysis in the feasibility study method puts the overall requirements for a successful project into
the proper context. In many cases, a study can help determine whether the project sponsor will require more
resources internally or whether an outside vendor or partnership can handle the tasks more effectively.

Explore the Business Model

Having assessed the current market need and a teams ability to execute, a feasibility study can look at the long-term
viability of the overall business model. This feasibility study method relies heavily on tools like scenario planning
to ensure long-term success. Project managers can discover whether the business model actually offers enough
profit potential to make the initiative worthwhile. Likewise, study administrators can examine whether the new product
or service under consideration requires such a significant change as to make it untenable within a business.
Look for an Escape Route
Forever" is a dirty word among many venture capital firms. Investors like to know that theyll make a profit, and they
want to have a strong idea about when they can cash the check. Common

Six Essential Feasibility Study Steps

By following the accepted feasibility study method, project managers and their teams can reach the point of
delivering their findings to stakeholders. The written report generated at the conclusion of the feasibility study can
help move a team into the presentation phase of the project cycle. Moving readers through the following
feasibility study steps can clarify questions about the studys recommendations.

Executive Summary

The most important page of the report is often the only page that many stakeholders actually take the time to read.
Although it should always be presented on the first page of a report, the executive summary is a digest of the
following five feasibility study steps.
 Clear Project Description

of the project as it is defined for the study can help stakeholders understand the questions asked and the results
generated. Stating the project description in very basic terms removes uncertainty about a project for
stakeholders who might otherwise be unfamiliar with the ideas the project represents.

Competitive Landscape

Reviewing the strengths, weaknesses, opportunities, and threats faced by a project helps decision makers focus on
the big picture. In some organizations, leaders may not want to approach a new market unless they know they can
dominate it. Other companies prefer to focus on profits gained instead of market share. Either way, the challenges
faced should be clearly defined, along with the consequences of failure.

Operating Requirements

When following this set of feasibility study steps, authors can use this point in the report to stay clear, focused,
and unbiased about a projects real needs. Project managers that understate the physical and fiscal resources
required for a new product or service often end up with failed projects or unfulfilled promises

Financial Projections

More than ever, Investors and CFOs pore over the financials in a feasibility study to make sure that
projects can generate the kind of scalable profits that warrant their approval. Expert project managers
emphasize the break-even analysis, a timeline view of the moment a project can pay for itself.

Recommendations & Findings

Summarizing all of the previous feasibility study steps, the recommendations and findings can shape
the outcome of a project proposal. Instead of simply stating a yes" or no" answer to the question of
project approval, this section offers an opportunity to enhance a project by pointing out areas of
opportunity.