What Is a Feasibility Study in Project Management?
Before any executive gives the green light to a project that could cost thousands (or millions) of dollars, you can bet he or she will want to see a feasibility study. So what is a feasibility study in project management?A feasibility study determines whether the project is likely to succeed in the first place. It is typically conducted before any steps are taken to move forward with a project, including planning. It is one of the—if not the—most important factors in determining whether the project can move forward. The study identifies the market for the project (if applicable); highlights key goals for the project based on market research; maps out potential roadblocks and offers alternative solutions; and factors in time, budget, legal and manpower requirements to determine whether the project is not only possible but advantageous for the company to undertake.
Although project managers are not necessarily the ones conducting the feasibility study, it can serve as a critical guideline as the project gets underway. Project managers can use the feasibility study to understand the project parameters, business goals and risk factors at play.
Key points of a feasibility study
A feasibility study in project management usually assesses the following areas:
- Technical capability: Does the organization have the technical capabilities and resources to undertake the project?
- Budget: Does the organization have the financial resources to undertake the project, and is the cost/benefit analysis of the project sufficient to warrant moving forward with the project?
- Legality: What are the legal requirements of the project, and can the business meet them?
- Risk: What is the risk associated with undertaking this project? Is the risk worthwhile to the company based on perceived benefits?
- Operational feasibility: Does the project, in its proposed scope, meet the organization’s needs by solving problems and/or taking advantage of identified opportunities?
- Time: Can the project be completed in a reasonable timeline that is advantageous to the company?
Conducting a feasibility study
Anyone conducting a feasibility study will take several steps to put together the report. These research actions typically include:
- Preliminary analysis: Before moving forward with the time-intensive process of a feasibility study, many organizations will conduct a preliminary analysis, which is like a pre-screening of the project. The preliminary analysis aims to uncover insurmountable obstacles that would render a feasibility study useless. If no major roadblocks are uncovered during this pre-screen, the more intensive feasibility study will be conducted.
- Define the scope: It’s important to outline the scope of the project so that you can determine the scope of the feasibility study. The project’s scope will include the number and composition of both internal stakeholders and external clients or customers. Don’t forget to examine the potential impact of the project on all areas of the organization.
- Market research: No project is undertaken in a vacuum. Those conducting the feasibility study will delve into the existing competitive landscape and determine whether there is a viable place for the project within that market.
- Financial assessment: The feasibility study will examine the economic costs related to the project, including equipment or other resources, man-hours, the proposed benefits of the project, the break-even schedule for the project, the financial risks associated with the proposal, and—very important—the potential financial impact of the project’s failure.
- Roadblocks and alternative solutions: Should any potential problems surface during the study, it will look at alternative solutions for the project to go ahead successfully.
- Reassessment of results: A holistic look at the feasibility study with fresh eyes, particularly if any significant amount of time has passed since it was first undertaken, is essential.
- Go/no-go decision: The final aspect of a feasibility study is the recommended course of action—in other words, whether the project should proceed or not.