Business cases, the project fundamentals
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The document outlines the importance of a business case in project management, emphasizing that it answers the fundamental question of 'why' a project is being pursued. Key components include benefits, outcomes, outputs, costs, risks, and the project's capability to deliver products, with guidelines on creating and updating the business case throughout the project lifecycle. It highlights the roles of various stakeholders in developing the business case and the necessity for ongoing assessment to ensure continued project viability.
Business cases, the project fundamentals
- 1. Business cases – the project fundamentals, by Richard Lampitt What is a business case and why on earth is it so integral to the world of project management? It is the foundations with which our project is built and as the complexities and costs increase, so does the importance of the business case. You will find it in every facet of the project, risk and programme management world. Whether this a bespoke ‘Better Business Cases™’ course outlining the 5 case model or a component of PRINCE2®, MSP® and MoR®. In fact, any best practice project or programme method. There is no escaping its fundamental importance. It’s quite simple…every business case should answer and document the basic, yet fundamental question - “WHY are we doing this project”? The business case is key to answering this question and no project should start, or continue, unless the WHY is sufficiently justified and backed up by a sound and continuing business investment. But where do you start to capture such information? Who should be involved in the input of such information? What should happen to the business case once it’s been created? These are common questions which people ask us and without the right information, projects often muddle along as simply a means without an end. Key components of a business case The end result of a project and in turn the business case, should be focussed on generating outcomes, changes in circumstances, changes in real-world behaviour. This should lead to measurable improvements. What you need to check • Benefits – what are they and how they should be mapped, from the outcomes the project is aiming to achieve. • Outcomes – they will be derived from using the products (outputs) the project is aiming to deliver. • Products (outputs) - that they are capable of generating the outcomes and consequently the benefits. • Costs – make sure the investment of delivering the project is not outweighing the benefits to be gained from that investment. • Risks – ensure that the risks of doing the project are not outweighing the benefits. • Project – finally, the project itself must have the capability, capacity and means of delivering the products. If any of these are not deemed to be the case, then the project should be redirected or perhaps even stopped. The business case should include sufficient information to be able to answer these fundamental questions. The information should include: TRAINING PROFESSIONALS
- 2. What should happen to the business case information during the project? The business case will be created and approved at the beginning of the project, but once the project is underway the information should be updated if certain project circumstances change, i.e. the project costs, timescales, benefits and major risks could all increase or decrease. If the business case is not updated to reflect such changes in circumstances, then the ‘executive’ will not be in a position to assess whether the project is still viable. The current baselined version of the business case should remain unchanged. However, a new version should be created and the necessary changes applied. Previous versions should be archived to assist with assessing on-going project performance and overall performance at the end of the project. The following is a summary of the business case development path. At the beginning of the project During start-up, the executive role is responsible for creating the ‘outline’ business case, but often assisted by the project manager. You should involve other people to help input to its creation. For example, the ‘senior user(s)’ is responsible for specifying the desired benefits and other people (such as business analysts), can help with identifying the business requirements and finance staff can help with collating the investment appraisal information. During initiation, the project manager is responsible for taking the outline business case and extending it into a detailed business case. The detailed business case will include the estimated project cost and timescale and the investment appraisal. During initiation, it is likely that further benefits and major risks can be identified whilst planning the project. This additional information is included in the business case. During the project At the end of each stage, the project manager is responsible for updating the business case to reflect the new forecast cost and timescales of delivering the project, changes in forecast benefits, major risks and any external factors which could affect the business justification for doing the project. The project board (the executive in particular) will review the updated business case at the end of each stage to check that the project is still justified. I.e. that the project costs and/or risks don’t outweigh the benefits, that the project remains aligned with business objectives and that it is still going to deliver value for money. Whilst work is in progress during each stage, the project manager should assess what impact any issues and risks would have on the business case and escalate any adverse effects to the project board for their attention. At the end of the project At the end of the project, the first version of the business case is reviewed to compare the original planned time. The cost and benefits are assessed against the final version of the business case to help gauge project performance and identify any lessons to be learned for future similar project investments. I.e. what differences are there between planned and actuals for costs, timescales and benefits, and assessing why it’s any different. Key take outs 1. A business case answers the fundamental question ‘why do we need this project?’ 2. What are the key components of a business case? 3. Who initiates and develops the business case? 4. What happens to a business case at the start, during and end of a project? • Reasons for doing the project - an explanation of the historical and/or current business problem/need/opportunity. • Business options - explanation of the ‘do nothing’, ‘do the minimum’ and ‘do something’ options to address the problem/need/opportunity and a synopsis of the chosen business option. • Expected benefits - the improvements expected, expressed in a quantified and measurable way. Benefits can be both financial and non-financial. • Costs - a summary of the project costs including any ongoing operational and maintenance costs related to the products being created. You must include the funding arrangements for both of these. • Timescales - the key start and completion dates of the project and how long the project is expected to take. Also include when benefits are expected to accrue and the period over which the benefits are expected to last. • Major risks - the major threat-related risks which would significantly weaken and/or invalidate the business case.