How to Build a Compelling Business Case?
- 1. BUILDING A BUSINESS CASE How to Build a Compelling Business Case By using Business Model Canvas riikka tanner
- 2. INTRODUCTION Have you ever been in a situation where you have wanted to create something which requires funding from someone else? Maybe funding for a new development program or trying to sell an idea to a potential customer? We need to build a case to prove our point, to lay out the benefits and perceived value and compare those benefits against the costs. In short, we need to learn how to build a compelling business case. I have used a fantastic tool the Business Model Canvas by Alexander Osterwalder and Yves Pigneur and converted it to reflect a typical business case requirements. It works because it has all the elements a great business case requires and it will help you concisely design your plan into a one page canvas. I will walk you through the elements of traditional Business Model Canvas from a business case perspective. The outcome you should be able to document either by using this power point as a template or on a one page canvas, which also works as your executive summary. Go get’em! B U I L D I N G A B U S I N E S S C A S E
- 3. HOW TO WRITE A GOOD ONE? When you are starting a new project, you need to understand the proposed business change, the benefits and how to communicate those to the business. The purpose of the business case is communication so make it as clear as possible, keep it interesting and minimize jargon (pay special attention to three letter abbreaviations). You have a chance to describe your vision of the future and demonstrate the value and benefits your project brings to the business. Good business case should only contain enough information to help executive management's decision making. It is not a full blown project plan but it needs to have enough details so the decision can be made, should the project go forward. B U I L D I N G A B U S I N E S S C A S E
- 4. CUSTOMER SEGMENTS Customer needs should always be your starting point. Start with a strong understanding of your customer needs and build the rest of your case around that. Start by asking for whom are we trying to create value? We may have multiple customer segments with very different needs and wants. As an organisation, you need to be able to make the decision of which segments you will serve and which will be ignored (for now). Customer here should be understood as a broad concept including also potential internal customers within your organization. S T A R T W H E R E I T M A T T E R S
- 5. VALUE PROPOSITION B U I L D I N G A C O M P E L L I N G What value are we delivering for the customer? What are the needs and ´jobs to be done` that our project will help solve? For each and every case there should be a customer-specific value proposition. Build customer centricity by addressing any external drivers, business objectives and internal challenges specific to this case, for this customer. Be clear on the benefits your solution provides and instead of features, focus on the outcomes your solution provides. Clearly connect your value to your customer's challenges and objectives. Start building compelling value propositions by using the value proposition model on the next page.
- 6. BUSINESS DRIVERS MOVEMENT METRICS Determine the primary business reasons for your solution. These include usually words such as operating costs, turnaround time, customer retention, profit margins, market share, time to market, lifetime customer value, employee turnover etc. Great value proposition always conveys movement. You will recognize it in these verbs: increase, cut, improve, strenghten, enhance, eliminate, minimize, accelerate, reduce, save, maximize to name a few. Adding metrics makes the value proposition stronger. Use specifics such as time frame, monetary value, percentages to become more believable. V A L U E P R O P O S I T I O N M O D E L
- 7. KEY PARTNERS For your business case it is important to identify and describe all the key stakeholders whether internal (Finance, IT, HR, Marketing, Sales) or external such as partners and suppliers. Identifying internal stakeholders is vital as you need to be able to point out impact on any current operations with your pursued changes but also to be able to determine wether you have the organizational capability to deliver the project outcomes. I D E N T I F Y I N G
- 8. KEY ACTIVITIES D E F I N I N G Y O U R What are the key activities required for you to deliver your value proposition? For example if your are building a new software enabled service, this would include building a platform, software development, building maintenance and support organization, training or re-skilling existing employees, potentially hire new expertise, designing go-to-market plans, communications just to name a few. For business case purposes this is also where more detailed descriptions of the project are needed in form of a project plan or project definition. The scope and extent of that plan depends on the scope of the pursued investment.
- 9. P R O J E C T D E F I N I T I O N BUSINESS OBJECTIVE MARKET ASSESSMENT RISK ASSESSMENT PROJECT APPROACH PURCHASING STRATEGY PROJECT ORGANIZATION What is your goal? What is needed to overcome the problem? How will the project support the business strategy? This section describes the financial and non- financial benefits in turn. The purpose is to explain WHY you need the project. Identifies potential solutions to the problem and describes them in enough detail for the reader to understand (may contain 3-5 options). Describes the work needed to deliver the business objective and identifies those business functions affected by the project. Describes what is included and what is excluded from the project. Outlining the plan with major deliverables.OUTLINE PLAN SCOPE, IMPACT AND INTER- DEPENDENCIES OPTION IDENTIFICATI ON AND SELECTION BENEFITS AND LIMITATIONS Thorough assessment of the business context and the marketplace where you operate. The risk assessment summarises the significant risks and opportunities and how those are managed. Project approach describes the HOW part. The way the project is done (inhouse / outsourced). Includes decisions on buying, leasing or outsourcing before purchasing and describes the purchasing process. Project organization describes roles and responsibilities in the project, how desisions will be made (governance) and how progress is reported.
- 10. KEY RESOURCES For the business case you need to identify the key resources that are needed for you to deliver your value proposition. These resources include any physical assets or intellectual property, human resources and financial means. It’s good to note that your value proposition will most likely require resources also after the initial delivery. Depending on the type of investment needed, there might be additional resource needs for maintaining relationships with customer segments through different channels. L I S T I N G ' E M A L L
- 11. CUSTOMER RELATIONSHIPS F I R S T T H I N G S F I R S T Going back and thinking about the customer segments we are targeting with the business case, it is also great to point out what is our stance towards these different segments. If for example, some customers are to be retained and others to be acquired, the approach is likely very different and you should be able to highlight key differences. When building customer interfacing services, there will become questions of how personalized your service will be ranging from highly personalized to fully automated service. For each segment the decision should be considered very carefully. Noting that this is not your standard business case template stuff, it still holds great value if you can already in your investment proposal point out the major differences between different customer segments as it has direct relation to customer risks.
- 12. CHANNELS Channels are vital as they describe how the organization communicates with and reaches its customer segments. It becomes even more important if you have multiple channels, both direct and indirect where to serve your customers. Channels are the basis for customer journey mapping, every customer touch point from raising awareness through evaluation phase to purchase and delivery, all the way to after sales support need to be considered individually. Great question to ask for example is that how are our channels integrated with our customer's routines? P I C K A N D C H O O S E Y O U R
- 13. COST STRUCTURE Identifying and calculating all costs associated with the project belongs here. Costs may vary from one-time costs to recurring costs, be fixed or variable in nature. Some costs go down as the output expands (economies of scale), others you can minimize by taking advantage of already existing operations (economies of scope) instead of having the need to establish everything from scratch. Costs section is usully the section under the most scrutiny. Numbers per se are not the point, nor fancy calculations the key is to be able to show your reasoning and how you have reached your numbers. Costs are by default always compared against the forecasted benefits but also against potential risks associated with the project. Traditional business model canvas doesn’t include risks but for business case building you need to be able to draw out alternative outcomes for the investment project. M A K I N G S U R E Y O U U N D E R S T A N D Y O U R
- 14. REVENUE STREAMS W E L L H E L L O , F I N A L L Y ! For what is it that our customers are willing to pay us for? Where does the revenue come from? What are the pricing models in play? What other business benefits besides increased revenue is there to be considered? If you are for example aiming at reducing working capital, how much will that save you in recurring costs and within what time frame? Are we improving quality or customer service and how is that likely to affect the top line growth? Is the business case aligned with company strategy and if so how? For each cost element you are requesting for, you should be able to point out the equivalent gain or business benefit. It is easy to overlook some of the business benefits which are typically considered as soft values (increased brand recognition, stonger employer brand) but those should definitely be included into your business case.
- 16. DOWNLOAD THE CANVAS And some other really cool design stuff from strategyzer.com A D D I T I O N A L R E S O U R C E S THE BUSINESS MODEL CANVAS HOW TO WRITE A BUSINESS CASE Learn how to use the canvas By reading the book "Business Model Generation" By Alexander Osterwalder and Yves Pigneur To get started check out for example this site: https://resources.workfront.com/project-management-blog/how-to-write-a-business-case-4- steps-to-a-perfect-business-case-template Pros can take a look at this one: http://implementconsultinggroup.com/media/1985/how-to-build-a-compelling-business-case.pdf
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