How to Leverage Feasibility Study as a Project Manager in 5 Easy Steps
Imagine you want to grow tomatoes on your farm, but you’re plagued by questions: “Is this possible?” “Will the soil suit the fruit?” There are numerous questions to answer before you sow your seeds. How do you navigate this situation? A feasibility study helps answer these questions to produce a clear roadmap for your endeavor. Similarly, project management relies heavily on this tool to save time and money. The feasibility report functions like a crystal ball for project managers, providing a glimpse of your project’s implications. They are useful in analyzing various factors such as technical hurdles, market demand, and financial viability. In short, a feasibility study is an investment to ensure your project is viable, risk-free, and driven by informed decisions. So, let’s examine the concept of a feasibility study, how it should be conducted, and why it can set your project up for success.
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What is a Feasibility Study?
A feasibility study is a formal analysis conducted to evaluate the viability of a project or plan. It assesses parameters to gauge whether the project is sustainable and profitable before allocating significant resources. The purpose of feasibility analysis in project management is to spot the strengths and weaknesses of a proposed venture rationally. Let’s now look at the different types of feasibility studies one can use:
1. Types of Feasibility Studies
A. Economic Feasibility
It requires evaluating the financial aspects such as cost-benefit analysis, Return on Investment (ROI), and payback period. The feasibility report will, thus, touch upon a project’s capital costs, operating costs, revenue projections, and financial risks.
B. Legal Feasibility
This weighs the legal requirements that can impact the project. For example, feasibility analysis will shed light on regulatory conditions, zoning laws, patents, and intellectual property rights by studying various laws and considering legal liabilities.
C. Operational Feasibility
Examines the operational aspects like staffing and logistics to gauge if the project can be executed and managed subsequently. The feasibility study helps one figure out if the project is practical in terms of the firm’s human resources and operational capacity.
D. Technical Feasibility
It evaluates the technical resources and expertise by analyzing the technical requirements, like hardware, software, and technical skills. In other words, a technical feasibility study reveals if the firm has the technical resources, expertise, and systems to execute the project.
2. Key Steps
A. Preliminary Analysis
First, consider the viability, benefits, and constraints to define the study’s scope and identify potential roadblocks consequently.
B. Conduct Market Research
Understand the market conditions and demand using factors such as market size, target audience, and competitive landscape.
C. Ascertain Feasibility
Then look at the financial, technical, legal, and operational aspects to determine whether the project is viable to address potential challenges.
D. Identify Risk
Spot and analyze potential risks to come up with mitigation strategies and contingency plans to secure the overall project.
E. Prepare the Draft
Finally, document the findings concisely and provide recommendations using data and analysis. This information is useful in deciding whether to proceed with the project.
3. Considerations
- Ensure the study is free of bias and based on objective data
- Cover all aspects comprehensively to ensure you do not miss critical factors
- Engage key stakeholders to shore up insights
- Maintain a detailed dossier of all research for transparency and future reference
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Why Feasibility Studies are a Project Manager’s Best Friend?
It is no secret that project managers come up with a million ideas daily. However, not every idea is worth a follow-up. This is because a feasibility study acts as a project manager’s reliable sidekick by helping in the following manner:
1. Supports Decision-Making
The findings of a feasibility study are rooted in data. It analyzes factors like market need, technical feasibility, and financial viability. As a result, project managers make informed decisions based on objective data instead of intuition.
2. Manages Risk
Most new projects are risky. Project managers can discern potential roadblocks, such as technical hurdles, resource limitations, and contingencies, before they derail the project. As a result, they can develop mitigation strategies and steer the project to success.
3. Streamlines Resource Allocation
Project managers need to prioritize projects most likely to attain success because resources like time, budget, and manpower, are limited. Moreover, they can allocate resources efficiently, choosing projects that yield the most benefits without burning capital.
4. Builds Confidence Among Stakeholders
Feasibility studies are a sure-shot way of fostering trust among stakeholders. The level of due diligence presents a clear plan complete with risks and solutions. As a result, it creates an atmosphere of collaboration and support within the organization.
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Best Practices for an Effective Feasibility Study
A project manager needs to keep several things in mind to come up with a thorough feasibility study that enables a successful project implementation. For instance, Tesla’s Gigafactory in Nevada Tesla is a good feasibility study example. The company undertook extensive studies focusing on economic feasibility as well as technical feasibility. The exercise led to the establishment of one of the largest lithium-ion battery factories in the world. Here’s what we can glean from this feasibility study example:
1. Set Clear Objectives
The presence of relevant evaluation criteria is undoubtedly crucial to developing a useful framework that assesses factors systematically. This is possible by defining specific goals, developing parameters such as cost-effectiveness and market potential, and aligning the goals with the overall strategic priorities of the organization.
2. Collect Authentic Data
There is no substitute for accurate data for a feasibility study that ensures informed decisions. It confirms the validity of the study and boosts trust among stakeholders. A manager must procure data from credible sources such as surveys, industry reports, and competitor analysis and use analytical tools to interpret data wherever needed.
3. Assemble a Team
Have representation from all departments, leverage the unique skills of team members, and encourage open communication among team members. A cross-functional team brings a range of expertise to the feasibility study, ensuring a comprehensive analysis of finance, marketing, and legal aspects, among others.
4. Present Coherently
Structure the report concisely with sections such as executive summary, methodology, and recommendations. Many visual aids like charts, graphs, and infographics can make the data more accessible. Do not forget to be mindful of the background of the stakeholders when preparing the presentation. These tips will help achieve consensus ultimately.
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Common Challenges and How to Overcome Them
1. Handling Complexity
It is cumbersome to prepare a comprehensive feasibility study as it covers many issues. Therefore, be sure to limit the study to key aspects like market demand or the financial viability of the project. It is better to follow feasibility study templates available online to cover indispensable elements. Furthermore, the study should be divided into small phases to pave the way for a focused analysis.
2. Managing Stakeholders
Most stakeholders get overly optimistic about the project if their expectations are not managed properly. There should be open communication throughout the study to prevent unrealistic expectations. Many clear benchmarks foster trust and tie expectations to only these parameters. It is also beneficial to simulate multiple scenarios with outcomes ranging from best to worst. It gives a balanced picture of the range of possibilities to stakeholders.
3. Ensuring Accuracy
There is no way to avoid forecasts and assessments. It is better to work on creating accurate reports instead. Gather information from multiple sources like industry reports, government statistics, and customer surveys. It is useful to analyze how your forecasts change with variations in key assumptions. Lastly, always consult experts in their fields to verify your assumptions and assessments and strengthen your study’s credibility.
A feasibility study is inevitable if you aspire to become a project manager. Feasibility studies provide a structured approach to understanding a project’s viability by helping you identify potential risks and aligning your project with the strategic goals of the organization. It is, thus, important to know how to leverage them if you are just starting as a project manager. Emeritus offers a range of project management courses designed to enhance your skills. These courses will empower you to deploy essential tools, including feasibility studies, in your projects to attain success. Sign up for one of these courses and boost your confidence to increase your chances of career success.
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