A business case
captures the reasoning for initiating a project
A project in business and science is typically defined as a collaborative enterprise, frequently involving research or design, that is carefully planned to achieve a particular aim. Projects can be further defined as temporary rather than permanent social systems that are constituted by teams...
or task. It is often presented in a well-structured written document, but may also sometimes come in the form of a short verbal argument or presentation. The logic
In philosophy, Logic is the formal systematic study of the principles of valid inference and correct reasoning. Logic is used in most intellectual activities, but is studied primarily in the disciplines of philosophy, mathematics, semantics, and computer science...
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
Customer satisfaction, a term frequently used in marketing, is a measure of how products and services supplied by a company meet or surpass customer expectation...
, require less task processing time, or reduce system maintenance costs. A compelling business case adequately captures both the quantifiable and unquantifiable characteristics of a proposed project.
Business cases can range from comprehensive and highly structured, as required by formal project management
Project management is the discipline of planning, organizing, securing, and managing resources to achieve specific goals. A project is a temporary endeavor with a defined beginning and end , undertaken to meet unique goals and objectives, typically to bring about beneficial change or added value...
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
In business and economics, gap analysis is a tool that helps companies compare actual performance with potential performance. At its core are two questions: "Where are we?" and "Where do we want to be?" If a company or organization does not make the best use of current resources, or forgoes...
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. Note that it is not the job of the project manager
A project manager is a professional in the field of project management. Project managers can have the responsibility of the planning, execution, and closing of any project, typically relating to construction industry, architecture, computer networking, telecommunications or software...
to build the business case, this task is usually the responsibility of stakeholders and sponsors.
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.
Formal business cases
Formal business cases are evaluated to ensure:
- the investment has value and importance
- the project will be properly managed
- the firm has the capability to deliver the benefits
- the firm’s dedicated resources are working on the highest value opportunities
- projects with inter-dependencies are undertaken in the optimum sequence.
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 - accountabilities and commitments for the delivery of benefits and management of costs are clear.
The principal purposes of the formal business case process are:
- introduce a way of thinking that causes people with the authority to recommend projects to firstly consider their value, risk and relative priority as a fundamental element of submitting the project proposal
- require those proposing a project to justify its value to the firm and to self-cull any proposals that are not of demonstrable value
- enable management to determine if the project proposed is of value to the business and achievable compared to the relative merits of alternative proposals.
- enable management to objectively measure the subsequent achievement of the business case’s benefits.
Generating a business case
Generation of the business case should not be mechanical. Indeed, the case must demonstrate that the issues have been thought through, the full benefits will be realized on time, any technical aspects have been thoroughly evaluated and cost, and track and measure their achievement.
A business case should contain some or all of the following information types (depending on the size, timing, scale and availability of information):
- Reference - project name/reference, origins/background/current state
- Context - business objectives/opportunities, business strategic alignment (priority)
- Value proposition - desired business outcomes, outcomes roadmap, business benefits (by outcome), quantified benefits value, costs/ROI financial scenarios, risks/costs of not proceeding, project risks (to project, benefits and business)
- Focus - problem/solution scope, assumptions/constraints, options identified/evaluated, size, scale and complexity assessment
- Deliverables - outcomes, deliverables and benefits planned, organizational areas impacted (internally and externally), key stakeholders, dependencies
- Workload - approach, phase/stage definitions (project (change) activities, technical delivery activities, workload estimate/breakdown, project plan and schedule, critical path)
- Required resources - project leadership team, project governance team, team resources, funding
- Commitments (required) - Ppoject controls, reporting processes, deliverables schedule, financial budget/schedule
Public sector projects
Many public sector
The public sector, sometimes referred to as the state sector, is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.Examples of public sector activity range...
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, for example, societal benefits.
- Business plan
A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals....
-Academia and education:* Campaign for Science and Engineering , a non-profit organization which promotes science and engineering research in the UK* Case analysis, division of a problem into separate cases...
- Case competition
In a case competition, participants compete for the best solution to a business case study under time pressure. Most often it is a competition at university level, but on occasions also held at other levels. The case competition is an event in which business teams deliver business presentations,...
Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...
- Optimism bias
Optimism bias is the demonstrated systematic tendency for people to be overly optimistic about the outcome of planned actions. This includes over-estimating the likelihood of positive events and under-estimating the likelihood of negative events. Along with the illusion of control and illusory...
- Planning fallacy
The planning fallacy is a tendency for people and organizations to underestimate how long they will need to complete a task, even when they have experience of similar tasks over-running. The term was first proposed in a 1979 paper by Daniel Kahneman and Amos Tversky...
- Reference class forecasting
Reference class forecasting is the method of predicting the future, through looking at similar past situations and their outcomes.Reference class forcasting predicts the outcome of a planned action based on actual outcomes in a reference class of similar actions to that being forecast. The theories...