feasibility analysis feasibility analysis

CHAPTER 3 • FEASIBILITY ANALYSIS 85
Organizational Feasibility Analysis
Organizational feasibility analysis is conducted to determine whether a proposed
business has sufficient management expertise, organizational competence, and resources
to successfully launch its business. There are two primary issues to consider in this area:
management prowess and resource sufficiency.
Management Prowess. A firm should candidly evaluate the prowess, or ability, of its
management team. Because this requires detailed introspection, the entrepreneur must
complete a self-assessment. Two of the most important factors in this area are the passion
that the solo entrepreneur or the management team has for the business idea and the extent
to which the management team or solo entrepreneur understands the markets in which the
firm will participate. 30 There are no practical substitutes for strengths in these areas. 31
Although financing, for example, is important, it is not as important as passion for the
business and knowledge of the customer. Scott Cook, the founder of Intuit, makes this point:
9. Describe the purpose of
organizational feasibility
analysis and list the two
primary issues to consider
in this area.
Financing is really not the most important issue. If you have a great business, know
your customer, and know that what you are doing is superior to what’s on the market—
that’s what it takes to win. But if you have a lousy business idea, financing won’t turn
it into a good one. Getting money is a necessary requirement, but I really wouldn’t
focus on the financing. I would focus on knowing the customer cold. 32
An example of a company that suffered by having a management team that was unfamiliar
with the industry it entered is illustrated in the “What Went Wrong?” feature in Chapter 9.
The feature focuses on an Internet start-up named Garden.com, which was launched in 1995
to sell gardening supplies on the Internet. None of Garden.com’s three founders had any experience
in garden retailing, nor were they knowledgeable gardeners. The firm failed after losing
many millions of dollars of its investors’ money.
Several other factors should be considered regarding management prowess. Managers
with extensive professional and social networks have an advantage in that they are able to
reach out to colleagues and friends to help them plug experience or knowledge gaps.
In addition, a potential new venture should have an idea of the type of new-venture team
that it can assemble. A new-venture team is the group of founders, key employees, and
advisers that either manage or help manage a new business in its start-up years. If the
founder or founders of a new venture have identified several individuals they believe will
join the firm after it is launched and these individuals are highly capable, that knowledge
lends credibility to the organizational feasibility of the potential venture. The same rationale
applies for highly capable people who a new venture believes would be willing to join
its board of directors or board of advisers.
Resource Sufficiency. The second area of organizational feasibility analysis is to
determine whether the potential new venture has sufficient resources to move forward
to successfully develop a product or service idea. The focus in organizational feasibility
analysis should be on nonfinancial resources, in that financial feasibility is considered
separately. Several areas should be examined, including the availability of office space, the
quality of the labor pool in the area where the business will be located, and the possibility of
obtaining intellectual property protection on key aspects of the new business (intellectual
property is discussed in detail in Chapter 12). Some start-ups are able to minimize their
initial facility expenses and gain access to resources that they wouldn’t have access
to otherwise by locating themselves in a community- or university-sponsored business
incubator.
One resource sufficiency issue that new firms should consider is their proximity to similar
firms. There are well-known clusters of high-tech firms, for example, in the Silicon
Valley of California, on Route 128 around Boston, and in the Cambridge region in the United
Kingdom. Clusters arise because they increase the productivity of the firms participating
in them. Because these firms are located near one another, it is easy for their employees to