Business Case Essentials Final

The Business Case is the Driving Force of the Project

David Whelbourn – Director of Government Services PMOMurray Lambert – Asst. Director Risk & Benefits Realization

New Brunswick Government Services

Business Case Essentials

Government Services PMO

Learning Objectives• Why a Business Case?

• Learn the three stages in building of the business case as it evolves

• Understand the five key aspects that the business case should cover

• Understand how the ongoing viability of the project is monitored against the Business Case


Government Services • Shared Service Organization providing services to both

Government and the citizen. • Comprised of:

– Service New Brunswick– New Brunswick Internal Shared Services Agency– Dept. Government Services

• Purpose– Drive down cost of service delivery– Service Excellence– Client first focus

• NBISA created April 2010– Delivered $29.6 Million quantitative savings in 3 years– Being held up as a model for other Government Shared Services


Why Should you listen? • The Business Case:

– A framework for planning and management of business change

– It outlines the overall business benefits that justify the investment that is used to obtain management approval

• Confucius believed there are three was to acquire wisdom:– Reflection – the Noblest– Imitation – the Easiest– Experience – the Bitterest

SITUATIONAL ANALYSIS

The Challenges in Building The Business Case

New Brunswick Internal Services Agency

A Poorly Understood Business Case Is the Biggest Obstacle to Project Success

What Are the Biggest Obstacles to Project Success?Joint Study on Project Success - Gartner and Partners - 2012

37%

13%12%

11%

9%

7%11%

Cost/Business case /ROI not understood

Technical Issues

Executive Buy-in/Adoption/Change Management

Agreeing on Common Processes

Size/Scale/Complexity

Resources / People

Other


Learning Objective #1

• Without a Clear agreed upon criteria for, and a description of, what Project Success looks like, it is a challenge to show that your project has been successful in delivering the goals or objectives expected of it.


Business Case Challenges

• Business cases are often shelved once approved.

• Little or no involvement or ongoing commitment from stakeholders.

• Focus on technology, rather than on the needed changes in business processes and people that will achieve the benefit.

• Don't quantify all potential benefits, who will achieve them and how they will be measured.

• Aren't aligned with corporate plans, objectives, and strategies

• Create a solid business case process and use it.

• Get business executives involved and accountable for defining and tracking value.

• Ensure the business case is in business terms and focuses on the problems solved and not just the technology.

• Measure and demonstrate value. Tracking value requires metrics and measurements.

• Ensure effective governance is in place.

The Problem: The Solution:


Barriers to an Effective Business Case Process

Politics and Silos Apathy Lack of

Accountability

Tools Lack of Credibility Time

Resource Availability

Technical Complexity Lack of Value


Barriers to an Effective Business Case Process

Politics and Silos Apathy Lack of

Accountability

Tools Lack of Credibility Time

Resource Availability

Technical Complexity Lack of Value


Overcoming the Barriers• Breaking down Silos

– External Environment – client demands– Organization Structure – incompatible objectives– Internal Sub-cultures – them and us

• based on knowledge, skills, learning & group experiences.

• Overcoming Apathy– Create engagement, excitement, interest and ownership– Involve stakeholders in planning and outcomes

• Creating Accountability– Provide Tools for success– Clear expectations, create relationships– Ownership of outcomes/results at all levels– Well defined roles and responsibilities– Reflect on Outcomes / Results - feedback

COST BENEFIT ANALYSIS

Overcoming the Barriers

Identifying the Outcome – Benefit Realization


Costs• The business case author should be able to

explain how every item in the costing spreadsheet was created. – They should own the costing's personally.

• Two sets of costs– Implementation Costs

• Labour• Hardware, Software• Travel and Training

– Ongoing Support Costs – typically 25% of the implementation costs• Labour• Depreciation/Amortization• HW and SW Maintenance• Other (E.g., Telecom)


Benefits• Definition:

– 'an outcome of change which is perceived as positive by a stakeholder'

• The purpose of quantifying benefits is to reach the right decision.

• Use easy to understand categories to group them:– Cost Reduction

• Operational Savings– Resulting operational efficiencies – productivity improvements

• Opportunity Saving– The opportunity to make future savings due to the establishing of the

project. The project as an enabler– Cost Avoidance

• Costs avoided due to implementation of the project– Revenue Generation

• Increased income from new sales


Three tiers of BenefitsQualitativ

e (we

must do it)Soft Dollars

(Value-based, Driven by Business Metrics)

Hard Dollars (Direct Bottom Line Benefits)

Strategic Risk

FinanceView

ROIPrioritization


Often the reverse is trueHard Dolla

rs (Direct Bottom

Line Benefits

)Soft Dollars (Value-based, Driven by

Business Metrics)

Qualitative (we must do it)

Strategic Risk

FinanceView

ROIPrioritization

BUILDING THE BUSINESS CASE

Overcoming the Barriers

Identifying the Accountabilities


Three Stages – Progressive Elaboration

PreliminaryTo confirm strategic fit and business need• Document the alignment with

strategic objectives• Make a case for change• Identify the funding options• Identify Benefits/outcomes• Identify prior decisions• Outline how the project will be

set up and managed• Identify High Level Risks• Decision: is the case

compelling enoughTypically no more than one or two pages

Outline

Identify assumptions to support the preferred way forward•Preferred option identified•Outline Implementation Plan•Indicative costs, benefits•Detailed analysis of affordability and funding gaps•Including procurement strategy, where applicable•Decision: Can this project be managedVariable length depending on the scale of the project

Full Business CaseValidated assumptions to support the investment decision • Detailed cost benefit analysis• Detailed Implementation Plan• Detailed Risk Analysis• Affordability and funding issues

resolved• Recommendation• Decision: Is the project

affordablevariable length depending on the scale of the project

Each stage is an iteration of the process


Five Key Aspects of the Business Case1. Alignment

The Strategic Case

• Case for change, business outcomes • Business Value• Strategic Fit, Technical Fit

2. Options Appraisal The Economic Case

• Core of the business case• High Level Cost Benefit Analysis• Optimizes value for money• Include “do nothing” option

3. Affordability The Financial Case

• Investment theme, Funding Options• Ballpark estimates• Financial Return, Cash flow etc.

4. Commercial aspects The Commercial Case

• Sourcing options, Procurement approach• Commercially viable

5. Achievability The Management Case

• Oversight• High level plans: Implementation, Operational…• Risk and mitigation actions

STAKEHOLDERS

WHO, WHAT, WHY

Creating Engagement and Ownership


Identify Stakeholders - Example Stakeholder Primary responsibilities of the stakeholderVice President Professional Services

Increase billable revenue, maximize resource utilization rates, ensure customer satisfaction, streamline billing and collections.

Line of Business (LOB) Manager Execute projects and deliver services effectively and profitably.For an Internal IT OrganizationVice President PMO Implement enterprise wide project management best practices; launch

process improvement initiatives.CIO Provide IT services to the rest of the company; manage IT assets and

resources.For a Generic OrganizationCOO Ensure efficient day-to-day operations, cost control, and investment in

long-term strategic projects that improve operational execution.CFO Financial reporting, establish corporate governance and effective internal

controls, and ensure compliance with accounting regulations, streamlined billing and collections for a professional services firm.

CEO Define the company's strategy, build long-term value usually by profitable revenue growth, and drive initiatives that result in a competitive advantage.

Vice President Human Resources Ensure compliance with labour laws and an efficient payroll and leave management system, plan hiring and training based on resource pool's current skill set, work load, and future demand.

Employees Maximize their billable hours


Define Desired Outcomes• Use Structured Interviews

Stakeholders Desired OutcomesCIO, Director of PMO I want to reduce the number and cost of failed

projects.

CIO, CEO I want to reduce the number of non-strategic projects.

COO I want to reduce the amount of time spent on overhead tasks.

I want to control and reduce costs.

CFO I want to reduce my days sales outstanding.

I want improved forecasting.

Vice President Professional Services

I want to reduce unbillable work and late projects.

I want to have good margins on fixed bid projects.

I want to reduce or eliminate revenue leakage.

I want to improve resource utilization.

Vice President HR, Resource Manager

I want to reduce resource overload.

I want to increase productivity.

I want to reduce employee attrition.

Employees We want to minimize administration tasks / overhead. We want to create an improved work environment

Ask for a short interview (20 minutes).

Primarily ask about what business issues (not data issues) are of key importance to them (identify the pain)

Ask about the desired outcomes

Plan the interview (set questions)

Link these answers to tangible savings from the proposed investment.


Define Stakeholder Value MatrixWhy Buy Articulate a specific reason to your company as to why it

needs to buy a solution.

Business Issue Explain the specific needs to address, the problems to solve.

Desired Outcome Describe the expected outcome of buying a solution.

Stakeholder Pain Chain

Identify the stakeholders who have this business issue and will benefit from the expected outcome.

SolutionIntroduce the specific features or modules of Project Workforce Management that will produce the desired outcome.

CategoryAssign a category to this business issue. There are three categories to choose from: Cost reduction (operational or opportunity savings), cost avoidance, or revenue increase.

Value Metric Summarize all of the above information into a single value statement.


Value Matrix for Service Organization WHY BUY BUSINESS ISSUES DESIRED OUTCOME STAKEHOLDER

PAIN CHAIN SOLUTION CATEGORY VALUE METRIC

I want to have best practices for project delivery.

It costs too much not to standardize project delivery.

I want to reduce my cost per project and improve my productivity.

COO, CFO, Vice President

Professional Services

Workflow system, project templates

Reduce cost, increase revenue

Cost per project, revenue per employee

I need more accurate billing.

We are losing money on work we should be billing.

I want to reduce or eliminate revenue leakage.



Time and billing solution with support for billing and rate dependencies

Increase revenue Maximize revenue per consultant per client

I need to improve my time on billing projects.

We want to recognize our revenue sooner.

I want to reduce my days sales outstanding. Controller, CFO

Multiclient invoicing, workflow invoice approval, online review

Reduce cost Borrowing cost

I need to get timely reports on my projects.

It can cause delays in projects, and cost us more money on bad projects.

I want to reduce unbillable work and late projects.



Real-time cost and billing rate engine, reporting

Avoid cost Budget overruns, losing customers

I need to report on my employees project work.

I want them to be working on billable projects.

I want to increase billable (productive) projects.

CFO, Vice President Services

Utilization reports Increase revenue Margin per project, revenue per employee

I want to know my skill inventory.

It is costly not to have the right people on the right projects.

I want to reduce resource gap (skills), overload, and underutilization.

COO, Vice President Professional

Services

Workforce planning, reporting

Increase revenue, reduce cost

Revenue per employee, human capital

I want to measure project performance.

I want to know the profitability of each project.

I want to eliminate nonperforming projects.

COO, Vice President Professional

Services

Project reports, dashboards

Increase revenue, reduce cost

Margins, human capital


Select Metrics and Baseline Management by objective works—if you know the objectives. Ninety percent of the time you don't. —Peter Drucker

• Operating Metrics– Comparing how you are achieving your objectives today against how you are

going to achieve in the future – Vision of a different operating model

• Financial Metrics– Value over time period– ROI / SROI (social return on investment)– Payback period

• For the selected metrics, – Establish current baselines (snapshot for post project comparison)– Identify causal chain descriptions

• The capabilities of the proposed solution • How those capabilities relate to the overall objectives of the initiative • How those capabilities could affect the selected metrics


Making the Case for ChangeBuild it by answering five Questions

1. Why are we doing this project from a business perspective?

2. What will change when the project is completed?

3. What will happen if we don't complete this project successfully?

4. What are the benefits of doing this project to us, our customers and the business?

5. What will we need to do differently?


Options to achieve outcomes• Identify Potential options to meet the needs

– Brainstorm with business users and technology providers– Review other jurisdictions / organizations– Literature review for the problem domain

• Define Cost / Benefit Analysis for each option– Implementation and Ongoing annual costs

• Focus on Business Results not solution features

• Map Attractiveness against Achievability

• Always include a “do nothing option”

Trustworthy business cases explain future business value logically and convincingly


Options Appraisal Steps• Identify the future operating model• Focus on Business Results not solution features1. Focus on project outcomes

• These are factored in the financial analysis – stops double counting2. Exclude money benefits

• Determine value for money, map benefits of the option to benefits sought

3. Map the outputs of the options to the benefits of the project

• Identify corporate priorities and strategic direction, weigh the benefits against each other4. Weighting and scoring

• Drop any options which fail to deliver critical benefits. 5. Review the substance

• By Attractiveness & Achievability, relates only to non-financial benefits6. Rank the options

• All the way through this process, use engagement to build ownership

7. Validate your workings with stakeholders


Business Case Table of Contents

1. Executive Summary 2. Current Situation 3. Project Overview 4. Project Justification 5. Risks 6. Financial Summary 7. Option Analysis / Alternatives 8. Recommendation

Develop, Verify and Maintain … then Confirm Benefits…

Confirmbenefits

Verify outlineBusiness Case

Develop Business Case

Pre-project

Initiationstage

Subsequent delivery stage(s) Final delivery stage

Confirmbenefits

Confirmbenefits

Post-project

Verify detailedBusiness Case

Verify updatedBusiness Case

Maintain Business Case

©Crown Copyright 2009 Reproduced under licence from OGC

QUALITY ASSURANCE

Trustworthy business cases explain future business value logically and convincingly.


Fit for Purpose Quality Criteria - 1

• Is the business need clearly stated?

• Are the drivers for change clearly identified?

• Have the benefits been clearly identified?

• Are the reasons for and benefits of the project consistent with the organization’s strategy?

• Is it clear what will define a successful outcome, how this will be achieved and measured?

• Does it provide evidence that all options have been explored, in addition to consideration of alternative sourcing and technical options?

• Is it clear what the preferred option is, and why it is the preferred option?

• Is it clear what will happen to the business if the project is not undertaken?

• Have credible people been engaged in the analysis?


Fit for Purpose Quality Criteria - 2

• Does it document an investment decision to maximize the possibility of project success?

• Does it justifies costs, quantitative and qualitative benefits and clarifies risk assumptions?

• Has the human, financial, and time resources that will be needed to deliver the solution been identified?

• Where an external procurement is being recommended, is it clear what the sourcing option is and why this is the preferred sourcing option?

• Is it clear how the necessary funding will be put in place?

• Demonstrates that a provider has the capability to deliver success?

• Are the risks faced by the project explicitly stated?

• Have the plans/mitigation strategies for addressing those risks been explicitly stated?

• Have any dependent projects or other business cases been identified?


In Closing• Lack of a solid business case is the No. 1 obstacle to

project success — poor understanding, could be the wrong project

• Develop a consistent business case process that gives decision makers the right information

• Ensure the business case is driving accountability for all costs, not just implementation

• Get the business involved and accountable for benefits

• Don't shelve the business case after approval — track implementation costs, ongoing costs and benefits


Learning Objectives Why a Business Case Understand the five key aspects that the

business case should cover Learn the three stages in building of the

business case as it evolves Understand how the ongoing viability of the

project is monitored against the Business Case.


Additional Resources• www.skillsNB.ca

– Writing a Business Case course (comm_01_a02_bs_enus)• Books

– Making the business case – proposals that succeed for projects that work• by Ian Gambles

– The Business Case Guide—Using Val IT 2.0– http://

www.isaca.org/Knowledge-Center/Research/ResearchDeliverables/Pages/The-Business-Case-Guide-Using-Val-IT-20.aspx

• by ISACA (Information Systems Audit and Control Association)

– Making Technology Investments Profitable: ROI Roadmap from Business Case to Value Realization, Second Edition

• by Jack M. Keen

• Treasury board of Canada– Business Case Guide (free download pdf)– http://www.tbs-sct.gc.ca/emf-cag/business-rentabilisation/bcg-gar/bcg-gartb-eng.asp

http://www.skillsnb.ca/

http://www.isaca.org/Knowledge-Center/Research/ResearchDeliverables/Pages/The-Business-Case-Guide-Using-Val-IT-20.aspx



http://www.tbs-sct.gc.ca/emf-cag/business-rentabilisation/bcg-gar/bcg-gartb-eng.asp

http://www.tbs-sct.gc.ca/emf-cag/business-rentabilisation/bcg-gar/bcg-gartb-eng.asp


Questions

Documents

Business Case Essentials Final