Insights - MetaPM

Business Case – The Art and Science of Decision Making

Written by MetaPM Team | Nov 29, 2017 3:18:15 PM

We all make decisions at some stage of our life that can vary from moving to a new city, choosing a new car, buying a house or even choosing the right life partner. In all these decisions, we review the value we get from the investment we make. The value can be a financial gain or happiness or comfort or any other parameter we choose, and the investment can be financial, time or efforts.
However, in the commercial world, the art science of decision making for big investment involves deep thinking. A business has a goal and vision to be fulfilled, supported by the right strategy. With the constraints of time, talent and finance, the decisions are made based on the most valuable investment to achieve the goals.

A business case is a tool to identify the value realised from an investment. A good business case must address the below parameters:

  1. CONTEXT – the business case must provide the background information of the problem or the opportunity to be addressed. It must explain the root cause and impact of the problem on the current situation or the reason to tap a new opportunity. If the problem is not related to support the current strategy, it is most likely considered as a low priority.
  2. CLARITY – the business case must clarify that the problem the options to address the problem. It also needs to provide clarity on how the proposed solution will address the root cause of the problem.
  3. JUSTIFICATION – the business case must justify the investment in solving the problem it involves the detailed analysis of the cost, benefits, return on investment and payback period of the investment. It should also provide any risks, the leadership must be aware of. The degree of detail included in the Business Case should be appropriate to the size and complexity of the proposal.

Also, keep it in mind, the rejection of a business case doesn’t mean, the executive team don’t perceive the problem or believe in the opportunity but based on the information, they see more value in investing the limited fund somewhere else than this one. Your job is to help the executive team make the right decision.

Developing the Business Case?
In PRINCE2, the Business Case is developed at the beginning of the project and maintained throughout the life of the project, being formally verified by the Project Board at each key decision point, such as End Stage Assessments, and confirmed throughout the life of the project.
Often, little detail is available when the first version of the Business Case is documented. For example, a project to address process changes may also require supporting software changes however the cost and extent of the software development will not be known until detailed business requirements are developed and analysed.
The Business Case is at the centre of any impact assessment of risks, issues and changes by asking the question: how will this risk, issue or change affect the viability of the Business Case and the business objectives and benefits being sought.
This diagram represents the development path for the Business Case:

Business Case Diagram, PRINCE2® 2009, AXELOS Limited 

In this context:

  • Develop means getting the right information upon which decisions can be made
  • Verify means assessing whether the project is (still) worthwhile
  • Maintain means to update the Business Case with actual costs and benefits and current forecasts for costs and benefits
  • Confirm means assessing whether the intended benefits have been (or will be) realised. Confirming benefits will mostly take place post-project.

Types of Business Cases
The reasons for undertaking projects vary enormously and are largely driven by their environment. The nature of the project will determine the objectives that will be used to verify the desirability of the project and later to confirm that the project’s products met the objectives. Such objectives will be measured differently depending on the type of project. For example:

  • Compulsory project – i.e. Maybe required by legislation, i.e. Change in the OH&S Act etc…
  • Not-for-profit project – i.e. Maybe measured against non-financial benefits i.e. Increase in holistic service delivery to constituents.
  • Evolving project – i.e. This is where you do not know what / where you may end up – “unknown unknown!”
  • Customer / supplier project – Typical project where we have a customer and a supplier contractual arrangement – and will more often be based on financial benefits.
  • Multi-organisation project – i.e. A joint project across organisations i.e. MYKI ticketing project in Victoria.

Regardless of the type of measure in place – the basic question of remains, whether the anticipated benefits are more desirable, viable and achievable? Or are there other options available?

Looking to implement a business case for an upcoming project? Try using MetaPM’s Business Case Template.
Download MetaPM’s Business Case Template here
Or get in touch with MetaPM’s Associate-Director of Business Analysis and Business Case Capability Lead, Rohit Sayal at  rsayal@metapm.com.au or on 1800 800 436 to discuss how MetaPM can assist with your next Business Case.