Why are we doing this? Through the preparation and delivery of a business case, this important question can be answered, and the good idea is transformed into something that can be executed as a project. If the business case is well prepared it will provide the project with a clear direction from the project owner. What problem shall the project solve, what are the concrete benefits to be realized, how much can be invested, within what time frame shall the project be delivered and what risk profile is acceptable?
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Something new: It is the new product, service or solution that provides energy to the business case. What is the problem to be solved and what are the derived benefits: revenue, savings or other type of competitive advantages? Approach: If it shall be worth pursuing an idea the benefits must outweigh the costs. An approach must be explored and defined so it is possible to estimate what it will cost and how long time it will take. As with all types of planning it will often be required to run through multiple iterations before the right balance between benefits, costs and risk is found. Financial case: A strong financial business case is always a good argument to start a project, and in many cases a prerequisite to make an investment. It is however not always an easy task to qualify benefits in clear financial terms. Assumptions: As the business case is usually made before the actual project is started many things are not concrete yet, and therefore the business case must rely on assumptions. The longer the planning period the greater the uncertainty. A rewritten project management phrase says about the business case “the devil is in the assumptions” (ref 1). Pay attention to the underlying assumptions of a business case. Realism: Business cases tend to become biased towards an optimistic view. There is a tendency to overestimate benefits and underestimate costs and obstacles. Pay respect to the fact that projects are challenging. This fact is documented in many surveys pointing in the same direction -> 30 % of projects are stopped before launch, only 30% of projects deliver real benefits and 40% of projects experience budget overrun (ref 2). Ownership: Projects get executed because project owners have the passion and will to go all the way. Strong ownership is an important prerequisite for any project and it starts with ownership of the business case. Through the involvement in the development of the business case the project owner and other key stakeholders will build an understanding of their investment, the content, the dynamics and the risk profile. If the project is big enough ownership may involve more than the direct project owner including CEO and even the board. Plan to build the business case. Many companies have fixed standards and processes to be followed when building business cases and approving projects. Do not underestimate the time and effort that shall be invested in creating a strong business case and get it approved. Use the business case. A good business case is giving energy to a project. When a project is started the business case is setting the scene and is providing the direction. Especially during long projects where conditions will change business case updates or reviews will show if real value is being generated and whether the project is still worth pursuing. Benefits realization: It is tempting to believe that a new product or service is build so great that everything will run smoothly when it is delivered. In many cases this will not happen unless a focused implementation, sales and benefits realization effort is being made. 1. Marty J. Schmidt, 2002, The Business Case Guide – Second Edition, Solution Matrix 2. Bennet p. Lientz and Lee Larssen, 2006, Risk Management for IT Projects, Routledge |
| Activities |
| Establish a business case |
| Create plan for business case process |
| Define formal business case requirements |
| Establish business case documents |
| Document and review assumptions |
| Establish financial business case |
| Handle non-financial business case |
| Involve key stakeholders in business case process |
| Identify business case risks |
| Check business case tolerances |
| Get business case approved |
| Incorporate business case into project |
| Extract key information from business case |
| Incorporate business case into project definition |
| Verify that business case is realistic |
| Plan business case reviews during project |
| Establish benefits realization plan |
| Business case is missing: Review project |
| Define goals for the project |
| Risks |
| Unclear Business Case |
| Problem: Nobody knows whether the project is a good investment because there is no clear picture of costs, benefits and risks Consequence: The project may be pursued beyond financial reasoning and it may become difficult to steer the project since objectives are not well defined. |
| No or limited benefit realization |
| Problem: Due to changed conditions or priorities, difficult decisions, unrealistic expectations or other reasons, the gains or benefits in the business case are not being harvested Consequence: The business case is partly or fully being devastated |
| Disalignment between business case and project |
| Problem: Costs, benefits and risk profile may have changed since project initiation but business case has not been updated accordingly. Consequence: The project may be pursued beyond financial reasoning and important changes that can keep the project healthy is not initiated |
| Difficult to get the business case approved |
| Problem: Decision-makers will not approve the business case because it lacks financial justification, other things are considered more important, the case does not meet formal requirements or other reasons. Consequence: The project cannot be initiated or many iterations and much work is required to obtain business case approval |
| Unclear formal requirements for the business case |
| Problem: It is not clear how to create and document the business case and what criteria to meet in order to get the case approved Consequence: The business cases may not be approved due to missing format, content, or objective targets not being met. In addition, much time may be wasted in creating unnecessary documentation |
OBV Consulting ApS
Skovvej 5 DK-4180 Sorø
info@obvconsulting.dk
Ole Barkou Vilstrup
+45 61 62 73 12
obv@obvconsulting.dk
Good project knowledge base sets the scene for project management and provides an intro to its main disciplines. Get inspiration for project execution through action templates, risk lists, key figures and find inspirational guides on how to deal with typical challenges in projects. Read more