Slide 4.1

4E1 Project Management

Project Feasibility

Slide 4.2

Lecture Objectives

At the end of this lecture you should understand:

What is involved in a feasibility study

Feasibility dimensions, questions and checklists

How different managers view potential projects

Tools used in feasibility studies

What can go wrong

Slide 4.3

Feasibility: Overview

Why?

Assessed under several headings• Technical, logistical, …

• Financial, commercial, …

• Political, environmental, ethical, …

Tools• Prototypes, simulation, modelling

• Market research, focus groups

Slide 4.4

Some that didn’t make it…

The Bristol Brabazon

The Advanced Passenger TrainThe Ford Edsel

New Coke

Guinness Light

Feasibility Studies Matter!

Slide 4.5

Technical Feasibility: Questions

Classic questions• Can it be done (better)?

• Should it be done?

How novel? How risky?

Challenges/showstoppers• New technology, materials, environment, performance level, project scale, …

Time, resources, skills needed

Slide 4.6

Financial Feasibility: Questions

How much will it cost?• Can we afford it?

• Ongoing maintenance costs?

What is our financial capacity from:

• free cash flow?

• raising capital?

• recruiting partners?

Reduce costs?• Avoid large outlays by

leasing or renting?

Are other projects/needs competing for funds?

• Capital rationing

Implications for gearing?

Overall financial risk?• Financial stress testing

Slide 4.7

Commercial Feasibility: Questions

Technical• Is project technically

feasible?

• Technical risks?

Project• Will project meet its

targets/objectives?

• Likely to finish on time?

• Is this the best project of those on offer?

Internal implications• For staff?

• For existing products/ ongoing projects?

External factors• Environmental

implications?

• What external activities does project depend on?

• Will market be right for this building/road/product?

Slide 4.8

Political Feasibility: Questions

Parties• Who is behind project?

• What is their motivation?

• Who are stakeholders?

Is this an all-round win? • If not, who will lose?

• Might they try to stop the project?

• How strong a position are they in?

Risks: how might the project be

• Delayed?

• De-railed?

• Sabotaged?

Measures• Steps to bring ‘spoilers’ on

board?

• Trade-offs in buying off the opposition?

Slide 4.9

Five Views of a Project (ME)

TheEngineer’s

View

Marketing’sView

The Accountant’s

View

Personnel’sView

Other Views

ProposedProject

Slide 4.10

Engineer’s View

Technical focus• People, materials, time

required

Impact• Likely disruption

• Learning curve

• Safety

Requirements• Energy, equipment,

resource availability

Dangers• Over-optimism

• Underestimate costs

• Lack of awareness of organisational issues

• Political naivety

Slide 4.11

Marketing’s View

Consumer needs/reaction• Size of market

• Market risk

Implications• Time to market

• Marketing effort/ positioning

• Impact on product line

• Customer safety

Planning• Product life cycle

• Spin-off possibilities

Dangers• Over-selling

• Poor understanding of technical problems/risks

• Piling on the pressure

• Lack of concern for financial implications

Slide 4.12

The Accountant’s View

Scale and likely cost

Profitability• Return on investment

Impact on cash flow• Other cash needs

Financing mechanisms

Financial risk

Control mechanisms/ease of control

Dangers:• Poor under-

standing of technical issues

• Too narrow a view of business implications

• “Cheese paring”

Slide 4.13

Personnel’s View

Skills & training• Availability of skills

required

• Training required

• Knowledge transfer

Recruitment• Additional staff

• Hiring temporary staff

• Contractors – legal issues

Impact on working conditions

Industrial relations issues

Dangers:• Poor understanding

of skills required

• Lack of technical understanding

Slide 4.14

Some Other Potential Problems

External• Regulatory matters

• Competitor behaviour

• Patents

• Security

• Image

• Impact on suppliers

• Business risk

Internal• Managerial capacity

• Technology risk

• Plan B

Dangers:• Politics

• Competition for resources

All of the above are compounded when a project crosses national boundaries. Why?

Slide 4.15

Tools

Prototypes

Models• Iconic

• Analogue

• Symbolic

Simulation• Powerful tool

• Wide scope

Modelling• Engineering

• Financial

• Forecasting

Market research

Common sense

Slide 4.16

Feasibility Checklists

Useful for feasibility or planning

Industry/context-specific

Slide 4.17

Feasibility Checklist ExtractAvailability of utilities

• Electrical power• Potable water• Other water• Sewerage• Other services

Transport• Existing roads• Possible problems

(e.g. low bridges)• Nearest railhead• Nearest seaport• Nearest commercial airport• Nearest airstrip• Local transport insurance

Physical conditions• Seismic situation• Temperature range• Rainfall & humidity• Wind forces and direction• Dust• Barometric pressure• Site plans and survey• Soil investigation/requirements

Local conditions• Local manufacturing capacity• Local sources of bulk material• Local plant hire• Site safety and security• Local human resources

Slide 4.18

Summary: Key Points

Feasibility studies are common• Especially if novelty, large scale and/or risk

• Many aspects to feasibility - not just technical

There are various tools to help

Different parties have different perspectives• The object is to get everybody on board

Even after all this, things can still go wrong