Business case

Business case
A business case captures the reasoning for initiating a project or task. Many projects, but not all, are initiated by using a business case. It is often presented in a well-structured written document, but may also come in the form of a short verbal agreement or presentation. The logic of the business case is that, whenever resources such as money or effort are consumed, they should be in support of a specific business need. An example could be that a software upgrade might improve system performance, but the "business case" is that better performance would improve customer satisfaction, require less task processing time, or reduce system maintenance costs. A compelling business case adequately captures both the quantifiable and non-quantifiable characteristics of a proposed project. According to the Project Management Institute, a business case is a "value proposition for a proposed project that may include financial and nonfinancial benefit."
Business cases can range from comprehensive and highly structured, as required by formal project management methodologies, to informal and brief. Information included in a formal business case could be the background of the project, the expected business benefits, the options considered (with reasons for rejecting or carrying forward each option), the expected costs of the project, a gap analysis and the expected risks. Consideration should also be given to the option of doing nothing including the costs and risks of inactivity. From this information, the justification for the project is derived.
Reasons for creating a business case
Business cases are created to help decision-makers ensure that:
the proposed initiative will have value and relative priority compared to alternative initiatives based on the objectives and expected benefits laid out in the business case.
the performance indicators found in the business case are identified to be used for proactive realization of the business and behavioral change.
Development and approval process
Business process
Business process design
The business case process should be designed to be:
adaptable – tailored to the size and risk of the proposal
consistent – the same basic business issues are addressed by every project
business oriented – concerned with the business capabilities and impact, rather than having a technical focus
comprehensive – includes all factors relevant to a complete evaluation
understandable – the contents are clearly relevant, logical and, although demanding, are simple to complete and evaluate
measurable – all key aspects can be quantified so their achievement can be tracked and measured
transparent – key elements can be justified directly
accountable – accountability and commitments for the delivery of benefits and management of costs are clear.
Components of a business case report
A good business case report brings confidence and accountability into the field of making investment decisions. It is a compilation of all information collected during enterprise analysis and the business case process. The key objective is to provide evidence and justification for continuing with the investment proposition.
A business case can include details such as strategic alignment, return on investments, risk exposure assessment, feasibility study, expected Key Performance Indicators, evaluations and alternative measures.
Strategic alignment
Feasibility study
Key performance indicators
Example of a business case report structure
Here is an example of a report structure for a business case:
Preface
Table of contents
Executive briefing
Recommendation
Summary of results
Decision to be taken
Introduction
Business drivers
Scope
Financial metrics
Analysis
Assumptions
Cash flow statement (net present value, etc.)
Costs
Benefits
Risk
Strategic options
Opportunity costs
Conclusion, recommendation, and next steps
Appendix
Review and approval
At various stages in the project, the business case should be reviewed to ensure that:
The justification is still valid,
The project will deliver the solution to the business need.
The result of a review may be the termination or amendment of the project. The business case may also be subject to amendment if the review concludes that the business need has abated or changed, this will have a knock on effect on the project.
Public sector projects
Many public sector projects are now required to justify their need through a business case. In the public sector, the business case is argued in terms of Cost–benefit analysis, which may include both financial and non-financial cost and benefits. This allows the business to take into account societal and environmental benefits, allowing a more comprehensive understanding of economic impacts.
See also
Business plan
Project charter
Case competition
Innovation
Optimism bias
Planning fallacy
Reference class forecasting
Win-win
Notes
References
Bentley, C.: Practical Prince2 (The Stationery Office), .
Five elements to include in a compelling business case
Messner, W.: Making the Compelling Business Case. Decision-Making Techniques for Successful Business Growth. Houndmills: Palgrave Macmillan, 2013 (book companion website)
OGC Guidance and templates on 'Business Case'
Schaltegger, S. & Wagner, M. (Eds.): Managing the Business Case for Sustainability. The Integration of Social things, and Economic Performance. Sheffield: Greenleaf, 2006
External links
Business Case article in PRINCE2 wiki
Project management
Evaluation methods
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