The meaning of a feasibility analysis varies depending on the context. In research and development (R&D) fields, a feasibility analysis is performed to determine whether an intervention is appropriate or not for testing. Colloquially, feasibility is used when scrutinising an idea, asking: “can it work?”. In a business sense, a feasibility analysis centres on evaluating various options for achieving growth. Business leaders often ask the following questions when evaluating potential opportunities to grow their businesses:

• Could we introduce this new product line? Is there a market for it, and how big is the potential?
• Could we take our existing offering into a new or adjacent market?
• What is the business case for this new venture? Should we build it ourselves or buy an existing entity with the required capabilities?

Over the years, we’ve come to understand that while the appropriate level of detail in assessing the feasibility of the opportunity varies, ultimately, the assessment should leave you feeling comfortable that you can make an informed strategic decision. A feasibility analysis, in its simplest form, is a tool that uses decision criteria to evaluate an opportunity as it progresses through various go/no-go stage gates. It is designed to identify the most critical questions relevant to the specific opportunity. The allocation of scarce resources carries a high responsibility – a feasibility analysis helps in weighing up the variables and trade-offs of the opportunity.

As businesses have unique attributes and priorities and are pursuing different types of opportunities, the analysis must be specific to their considerations. A helpful starting point for a feasibility analysis is identifying the most important variables to consider when deciding whether to pursue an opportunity. The high-level framework below introduces some typical considerations in a feasibility analysis.

The framework applies internal and external lenses to the business across four different components to generate the critical variables for consideration:

• Market feasibility: Will the opportunity have an overall appeal to the industry and target market?
• Operational feasibility: Can we successfully execute the opportunity?
• Financial feasibility: Is this opportunity likely profitable, and is the investment within our risk appetite?
• Technical feasibility: Do we have the required technical capabilities (people, processes, systems) to successfully capitalise on the opportunity?

Once the questions are generated, themes should begin to emerge. We often find at this point that it is useful to cluster and prioritise the most important considerations. As an example, a client of ours was evaluating whether they could outsource certain functions in their insurance value chain. We analysed the relevant areas of their value chain across the four feasibility lenses and found several emergent themes that clearly focused on the financial and operational feasibility of outsourcing. These were clustered into five critical considerations, specific to their business:

• Current operating model: Is this function currently in-house or already outsourced?
• Group investment: How much investment is required to execute this and was there appetite in the division for this investment?
• Regulator oversight: Are there significant barriers presented by regulators that would prevent outsourcing activities?
• Group allocated cost uplift: How much cost savings would the business as a whole experience if this division were outsourced?
• Experience in outsourcing: Has the division previously been outsourced? (This would significantly increase the turnaround time and effectiveness in restructuring the division)

It is important to note that complex questions – those that instil a sense of discomfort or of which team members have conflicting views – are usually the factors that require a deeper analysis. This can be a full-blown cost-benefit analysis across the organisation or a simple check with a team member, but in all cases should ascertain the benefits and risks, ideally providing hard data on which the team can align on and hopefully reach a consensus.

The answers to the critical questions can now be viewed and grouped according to the outcome. The culmination of this process generates a data-based, strategic view on which the key decisions can be based. Additionally, the process will identify the risks associated with the opportunity and can be listed and ranked according to likelihood and impact. These are necessary to present the complete view to the decision-maker.

Below is a simplified output of a feasibility analysis conducted for the client described above. The decision to be made in this case was whether to proceed to selecting outsourcing partners for any of the four divisions. While some feasibility considerations indicated a positive potential for outsourcing, two of the divisions were excluded from consideration due to measures different to outsourcing already being taken to streamline the activities. In this case, if any red measures were present, the entire division could not be outsourced. The first two divisions proceeded to the partner selection phase.