PMI-Montréal project management blog

A business case? What for? Or the importance of a good business case

Author : 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.

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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:

  1. Lack of clear link to the organization’s key strategic priorities
  2. Lack of clear senior management ownership and leadership
  3. Lack of effective engagement with stakeholders
  4. Lack of skills and proven approach to project and risk management
  5. Project not broken down into manageable steps
  6. Evaluation of proposals linked to initial price rather than longer term value for money
  7. Lack of understanding of and contact with suppliers
  8. 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:

  1. Is there a compelling case for change? ​
  2. Does the recommended option optimize the invested value? ​
  3. Is the potential deal achievable and attractive to the market place? ​
  4. Is the spending proposal affordable? ​
  5. 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:

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

 

Henri-Jean Bonnis

President, PMI-Montréal 

 

References

 

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