PMI-Montréal project management blog
A business case? What for? Or the importance of a good business caseAuthor : Henri-Jean Bonnis
In this article, we will try to demystify the business case by telling you what it can be used for and how to structure one.
What is a business case?
A business case should offer reasons to implement an idea or a project. It needs to be a point of reference before, during and after the project. It establishes a project’s tangible and intangible objectives, from what to why. It becomes a guide to refer to throughout the project, and it allows you to evaluate the results of the project after its completion.
Why write a business case?
Writing a business case is part of best corporate practice. It determines the value a project will bring to a company. In it, you must answer the following questions: what, who, for whom, why how, when and at what price.
What's the current situation in terms of project success?
Statistics from The Standish Group and other statistical databases:
- Project success rate: 28%
- Average cost over-run: 45%
- Average time over-run: 63%
- Average shortfall in requirements: 33%
Because of these depressing statistics, many management consulting firms (ex: McKinsey and BCG) and NPOs (ex: Brightline Initiative) have analyzed the most common causes of project failure. Here they are:
- Lack of clear link to the organization’s key strategic priorities
- Lack of clear senior management ownership and leadership
- Lack of effective engagement with stakeholders
- Lack of skills and proven approach to project and risk management
- Project not broken down into manageable steps
- Evaluation of proposals linked to initial price rather than longer term value for money
- Lack of understanding of and contact with suppliers
- Lack of effective integration between the client, supplier and supply chain
5 key questions to ask when beginning a project
Before or when beginning a project, it is vital to ask yourself the following questions in order to give yourself the best chances of success:
- Is there a compelling case for change?
- Does the recommended option optimize the invested value?
- Is the potential deal achievable and attractive to the market place?
- Is the spending proposal affordable?
- How will the proposal be delivered successfully?
To simplify things for you, here is a business case model that addresses these five fundamental questions: the Five Case Model. It consists of five distinct parts, each of which addresses one question:
- Strategic case
This part needs to demonstrate the project’s alignment with the company’s corporate strategy. You need to develop a strong case for change and clearly explain the underlying logic.
- Economic case
This part needs to demonstrate all the options that were considered. It must also recommend the option that presents the best value for the project’s costs and risks.
- Commercial case
This part needs to demonstrate that suppliers can deliver the necessary goods and services in a cost-effective way.
It should also contain potential contractual arrangements for goods and services.
- Financial case
This part needs to demonstrate that the company can afford to undertake the project: a realistic cost-benefit analysis for the full duration of the investment.
At this stage, you can mention your sources of financing.
- Management case
This part needs to demonstrate that the conditions for success are met. It can include the governing structures, plans, resources, the change management strategy and the post-mortem evaluation, among other things.
Important elements to remember:
- This document can evolve as the project progresses
- It is used to prioritize projects in a portfolio
- You should be able to stop a project at any time
- It should be created in collaboration with
- Finance for the profitability analyses and profit management
- Procurement for the contracts
- Other departments that will be affected
Finally, a good business case is not an end unto itself. You need to sell your plan, whether it’s to your superiors, your clients or your associates. I strongly recommend that you educate yourself on this subject as well.
For advice on pitching a project, seek out the PMI-Montréal community. Their conferences and events are packed with concrete ways to help you improve your business case and your pitch.
- The art of the pitch, by Guy Kawasaki: https://guykawasaki.com/the-art-of-the-pitch/
- Better Business Case: https://apmg-international.com/product/better-business-cases