The hallmark of successful companies is their ability to understand their own business drivers and cost levers, and objectively review and improve upon their business models. Although there are many potential business objectives and project opportunities, each company has constraints such as resources and time in pursuing and developing these opportunities.
The business case has become the most effective tool for mining those specific projects that can deliver the highest potential value and business success—while eliminating those projects that offer marginal benefits. Although there are many strategies for business case development, following are some field-proven guidelines that will help business case owners identify and construct viable business cases that are both approvable and sustainable, and are more likely to achieve stakeholder support.
Factors for a Successful Business Case
  Understand the Business Drivers and Develop Assumptions
- Perform an initial high level business requirements study. This essential first step will help a business case owner narrow the focus to those projects that have the best chance of getting approved, continue to pass through quarterly and yearly budget reviews, and maintain approval through subsequent funding cycles.
- Identify the relevant business drivers, which will vary by project (e.g., quick payback or significant net present value.). These will form the objective criteria by which the business case will be evaluated by itself and in relation to others. Business drivers must be clearly understood, articulated, and supported at the outset.
- Produce the most realistic portrayal of the business. Assumptions generally become the critical mechanism for creating these portrayals, but they are often the most neglected part of the business case. The best business cases identify assumptions and then answer in concise terms the following simple questions...
- Who is impacted and who benefits?
- What is the payback?
- When will the organization realize the benefits?
- Where will it be implemented?
- Why should the organization embrace the change?
Documenting the calculations behind an assumption is essential. Not doing so can open all subsequent analysis to unwarranted criticism.
Keep in mind, executives responsible for delivery, who also must approve business cases, are usually very cautious and conservative when it comes to cost savings forecasts. Because expense dollars are sometimes taken before the project is delivered, the executive has to accept on faith that the business case will deliver as promised.
Validation from several data points (studies, volume data, historical data, interviews, time and motion studies, etc.) typically proves invaluable when defending a business case.
 Identify Key Stakeholders Early
- Obtain a true executive sponsor. It is critical for a business case to have a true executive sponsor, one who has the clout and respect to stand up before an executive committee and ardently defend the business case. Without this, the business case stands a higher likelihood of failing to receive approval.
- Involve members of the sponsoring organization. Developing a good business case and economic evaluation model requires planning and involvement from members of the sponsoring organization. Spend time with stakeholders within the sponsoring organization to seek their ideas, fold them in, and get their agreement on the approach.
- Secure key influencers and decision makers. Often, a business case gets close to completion only to discover that the final decision maker has yet to be interviewed. Identify and involve everyone who has stakeholder interest very early in the process. Identify the stakeholders primarily impacted by this business case. Identify the key influencer of the business case, as well as the person who truly has bottom line responsibility for sign off. Uncover all of their key concerns and get the answers to their concerns built into the business case.
- Think upstream and downstream. A business case must be very clear about which groups and individuals are impacted in the whole process throughout the entire organization. Although a project saves time in one area, it may be adding time or work somewhere else. For example, by eliminating the input of specific data entry in the provisioning process, it may save 10 minutes per order, but if the billing department takes 15 minutes per order to enter the data downstream, the business case is in trouble.
- Recognize that all stakeholders or sponsoring organizations might not be interested in creating a business case. Usually the stakeholders who participate are the ones who have a future in the reorganization. Those who don’t may try to undermine the success of the business case. If the sponsoring organization is reluctant to develop a business case, this may indicate political agendas and other obstacles to creating buy-in further along in the process.
 Plan on Developing Increasingly Detailed Business Case Versions
- The business case is an evolving document. A business case is not the kind of document that you write one morning and consider finished. The full business case impacts many people and undergoes continuous review and change. Gaining consensus on the scope and high-level overview of the business case before the detailed business case is even written, will save time and help increase the chances of approval.
Begin by crafting a set of high level business requirements prior to business case development, pursue further high level investigation, and only then develop the information into an outline with costs which can then be turned into a full, detailed business case with confirmed information.
- Iterations usually are the result of new scenarios. Stakeholders often want to look at a large number of options in order to build their own confidence. They want to fully understand trade-offs and ensure they are making the right decision. You must be able to recognize the difference between the need to explore additional scenarios and stakeholder indecision.
- Plan on multiple iterations. A useful rule of thumb is that for every stakeholder group, you will go through at least three iterations. Two dozen iterations for a single business case is not uncommon, some of which can result in major financial changes. Typically, stakeholder group input is solicited first and then financial groups are involved for validation and verification. Each group views the business case through a different lens.
- Try to keep the 80/20 rule (Pareto Principle) in mind. Business case benefits will be continually “skinnied” down through the course of the review process. The business case owner must be able to recognize the point at which a business case becomes a losing proposition, and the efforts in pushing it forward are not justified by the potential value of doing so.
- Keep focused. The nature of a business case is to become more focused (tighter scope) over time, as detailed planning information becomes known through identification of specific projects, benefit calculations, cost components, and the functionality/capability release timeline.
- Very rarely do the net benefits of a business case increase. As executives review the document, they tend to be more conservative and back off from original assumptions. Baseline data helps to validate the actual costs and maintain the potential savings in your business case.
- Express the true stakeholder impacts. The tendency for most business case owners is to focus on building financial models to support their case. Unfortunately, this is often at the expense of expressing the business case in language that relates business imperatives directly to stakeholder interests. Telling stakeholders that an initiative will “save 10 minutes per order”, might be met with universal acceptance. Telling them the initiative will “eliminate 10 clerks” from their department might have a dramatically different effect. While both statements are true, the second one better illustrates the true impact from the stakeholders’ perspective.
 Obtain Up-Front Agreement on the Baseline Forecast to Prevent Future Confusion
- Translate into realistic financial savings. The easiest task associated with a business case is the textual description of what a business case aims to accomplish. The difficult part is translating objectives into realistic financial savings. Make sure to establish the baseline and inputs for the economic model to calculate, and communicate the expected value to the organization. Typically, this can include analysis, assessment, expert opinions, field measurements, site observations, time and motion studies, historical systematic data, volume measurements, etc.
- Determine current and future states. Benefits are calculated as the difference between future projected saving and baseline costs. If there is no agreed upon baseline, there is no agreement regarding potential future benefits. What does the future look like? What needs to change in current processes or people? What is needed to get there? Why does it make sense to the organization today?
- Secure agreement up front from all interested parties on baseline forecasts. Often, for various reasons, different groups will not or are unable to provide complete information on savings or initial spend. Minimizing these information gaps will minimize the impact on later iterations of the business case.
 Document All Assumptions and Create an Audit Trail for Research and Analysis
- Don’t overlook the value of assumption. The heart and soul of business case development is a series of assumptions, which are made before funding information is available. Assumptions address a myriad of issues (e.g., the average time saved per person in this transaction is 10 minutes.). When the funding becomes clearer, variables will shift and assumptions will inevitably need to change. Business cases that have made accurate assumptions are much easier to adapt to new funding requirements.
- Make sure to get stakeholders to agree on the assumptions. Clearly document your assumptions and gain support for the underlying details. The validation process will often challenge the assumptions you make (e.g., this person produces on average x number of widgets... would you agree that the average time saved per person is 10 minutes?). If agreed upon, this assumption becomes a reference point that can be sustained all the way through the approval process until the project is funded.
- Implement a careful audit trail for documenting input and assumption sources. This prevents much rework down the road. Having the source of an input or assumption at the project team’s fingertips enables the team to manage the model during many rounds of edits, review session challenges, changes in assumptions, and “what if” analysis scenarios.
- Develop multiple sources. Always try to get a subject matter expert to confirm or sign off on the information provided, and find backup wherever and whenever you can. Use multiple techniques to obtain information (e.g., interviews, direct observation, surveys, etc.).
 Establish General Criteria for Determining How and When to Distribute Business Case Updates
- Cross-functional teamwork is essential. The teams architecting the solution and the teams drafting the business case need to work together to ensure consistent development and interaction.
- Establish a logical update schedule for distributing business case changes to members of these teams. Providing multiple revisions in a day, for example, might cause confusion. Modularize the business case so only the revised sections of the business case need to be reissued, saving time and effort.
- Distribution criteria includes:
- When key milestones are reached (e.g., at the end of stages or at commit points).
- Whenever the projected benefits or funding requirements change outside of a set
tolerance (e.g., when net benefits change more than five percent).
- Whenever additional potential risks are identified that could change the projected
benefits more than a set tolerance.
- Communicate across the organization. Many companies have both a financial group that approves the dollars of a business case, and an executive group that has to determine whether the business case makes sense for the business. It is useful to keep all groups apprised of progress through status updates to executives, peers, and subject matter experts working on the project, with specific messaging geared to their core level of interest.
- Create the economic evaluation model with an eye toward presentation. Most executives don’t really care to review “down to the minute” savings calculations. Generally consider producing a business case on two levels—a detailed level that runs all the financials as well as an executive summary that presents the savings into easily understood calculations. Individuals will refer back to the model during each major funding cycle to determine their budget levels, force impacts, etc.
Conclusion
Business case owners often have limited time and resources to satisfy the numerous business imperatives placed upon them. Being able to recognize and develop only the viable business cases that are the most approvable and sustainable will reduce effort up front and alleviate rework down the road. A development structure that incorporates solid up-front planning, the inclusion of key stakeholders, and a defined development process will help insure ongoing success of those business cases that are pursued.
Doing so is no simple task. It not only requires a thorough understanding of all the affected stakeholders, but also an intimate understanding of their motivations and their needs. In addition, the business case owner must be diligent in collecting, validating, and presenting accurate information in such a way that builds enduring credibility and trust for the life-cycle of the project. Doing so will make them an invaluable contributor while helping the organization maintain its competitive advantage.
 About the Author
Sean M. Hagarty, Director of MATRIX Project Solutions, has over the years written and implemented many successful business cases for clients in many industries. At MATRIX Project Solutions, Sean manages client business development and project delivery. Previously, he worked for five years at Accenture LLC (Communications and High Tech) as a Client Engagement Partner; and prior to that for more than eight years at EDS (Corporate Information Systems) in various management and engineering positions. He has expertise in CRM, Call Center Strategy and Technology, Service Provisioning, Construction and Engineering, Service Activation, and Order Management. Contact Sean at 800-522-0001 or at Sean_Hagarty@MatrixResources.com.
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