The Feasibility Study

It is very difficult to complete a very good feasibility study. You are confronted, quite often, with inadequate business information to assess the value of a proposed new system or modification.

The feasibility study is all about evaluating the the proposed business benefits against the cost of their delivery. A new system should be able to deliver an adequate return on investment. The study should also examine the technical aspects of a proposed new system as it may not be possible to deliver the promised business benefits from an operational, throughput or timing point of view.

It is relatively easy to marshal and gather all the facts regarding the cost of implementing a new system or modification and it also easy to be tempted to ignore or reduce the cost of an item if it does not support the financial case. This temptation should be resisted strongly as no organisation is done a favour if the cost of a change outweighs the financial benefit.

The real difficulty comes in calculating the financial benefits as you are often operating in a vacuum. It is extremely difficult to even calculate productivity savings let alone the reduction of staff costs. It is more difficult to assess the financial benefit of improved customer service or a potential increase in market share or intangible benefits such as improved competitiveness.

Many management experts still apply the Pareto principle or the 80 20 rule when gathering management information: that is 20 percent of your time is used to obtain 80 percent of the information needed to make your decision. Therefore, it may not be cost beneficial or even possible, in a reasonable amount of time, to get to the 100 per cent certainty that you have gathered all the facts to make an objective decision.

Business managers, therefore, are acting more often than not upon sound judgement, instinct and intuition as much as the evidence gathered from facts. When assessing the business case experience, common sense and hard headed thinking are needed. Unfortunately most of this cannot be learnt from a text book or a prescribed list of procedures. You have to have the courage to trust your own judgement and operate fearlessly.

The decision makers must include business managers and clear thinkers who are able to critically examine all financial and operational proposals and tangible or intangible benefits. The decision makers must weed out understated costs and overstated benefits. They should also consider the implications of cost and time over runs.

Doing feasibility studies to recommend the most beneficial approach have been the most interesting and most difficult tasks that I have attempted in my career.