How feasibility studies vary by industry

Mohammad Farooq
September 27, 2016

Every feasibility study, regardless of industry, requires:

  • A problem definition;
  • A study of opportunities and threats; and, most of all,
  • Assessment of viability for success from a financial standpoint.

If a project does not generate profit in the long run, it frustrates an organisation’s finances. A feasibility study prevents this from happening.

Activities conducted during feasibility studies tend to be generic across private and public sectors. This is regardless of the type of project. Certain variances in feasibility studies, however, are notable in the following areas.

Variance based on objectives

The kinds of objectives you set will determine the type of feasibility study you need to conduct. For example, let’s assume your company wants to invest in new computer systems. First they ask you to assess the feasibility of the project. With the help of your team, you come up with the following objectives for the study:

  • To pinpoint the shortcomings of the current computer system
  • To address how the new proposed system will address these shortcomings
  • Identify demand for the new system among employees
  • To determine how much money the new system will generate or save in the long term.

With these objectives in mind, you conduct technical and financial feasibility studies. An environmental feasibility study may not be necessary under these circumstances.

If the project is in real estate, however, you would need more studies besides the above such as environmental feasibility, legal feasibility and economic feasibility.

Activities behind each feasibility study

A well-conducted feasibility study allows for creation of prototypes first. Such prototypes undergo testing to gauge performance. This is common practice in healthcare projects, and the consumer goods and electronics industries. Mining projects also use models as proof of concept before going into production.

Project managers should not ignore models/prototypes or see them as a waste of money. For example in healthcare, a feasibility study:

  • Provides an opportunity to clarify the formula of a drug;
  • Establishes the creation process;
  • Determines the equipment required to create it; and
  • Enables the team to plan for the variables that may affect the end product.

As proof of concept, a research laboratory will have to create a ‘beta’ version of the drug. Some of the activities for such a process may include:

  • Carrying out experiments;
  • Coming up with a hypothesis to prove or debunk with these experiments;
  • Establishing materials and equipment used.

The purpose of experiments is to challenge variables. They also guide research teams on parameters for successful and consistent manufacture. If the feasibility study above omits experiments, the drugs will have quality issues.

Motive behind feasibility projects

Government projects are hardly ever profit driven while private projects are all about profits. This differentiates the focus of feasibility studies conducted by corporations and governments. The aim of government projects is to provide a service to majority of the public at little or no cost. Corporations cannot provide such services; If they do, citizens end up paying a lot of money for them.

If a government builds a hospital, feasibility studies will focus on:

  • What are the social costs versus benefits?
  • How can they provide quality medical care at low cost?
  • How can they achieve efficiency with the least resources?

But a corporation will not focus on cutting costs but increasing profits. It will conduct financial and market feasibility to determine chances of making profit. Such a study will ask these questions:

  • What is the average income level of the people in the area?
  • Does their income suggest that they can afford private medical care?
  • Which hospitals do they currently go to?
  • Are they happy with the services they are getting from these hospitals?
  • Are people looking for different or better service?
  • How many people have insurance cover?

Non-profit organisations are also driven by different motives. For instance, a non-profit that builds cheap housing needs to measure the needs of the people.

Ownership of policy

Local and national authorities ensure development projects don’t have negative effects on the community. They cannot approve projects that will strain facilities such as transport, water, sanitation, and so on.

To perform this role, authorities use existing policies. These policies are usually created after a series of feasibility studies. For example, a land use study is carried out by land planners to assess development patterns. Its outcome forms the basis for land policy, infrastructure development and zoning laws. With such policies in place, overseeing private and public projects becomes easier.

Every business must understand the main types of feasibility studies and their relevance. Even within the same company, different projects may need different types of studies.

Keep an open mind when conducting any project management feasibility study. If the results show that your project is not viable, you should avoid it. As long as you start with a goal, you will ask the right questions and then conduct the right study to get answers.

Author avatar
Mohammad Farooq
Mohammad Farooq works as an analyst and has a keen interest in project management. When not doing anything related to analytics, he goes backpacking around India. He regularly blogs about travel, movies, socio-political issues and a lot of other things on his blog Revering Thoughts.
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