Writing a business case
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This document is a presentation on writing business cases. It was presented by Venkadesh Narayanan from Fhyzics to the IIBA Chennai Chapter. The presentation provides an overview of key components of a business case, including defining the problem, analyzing costs and benefits, identifying risks, and presenting the analysis in a business case report structure. It emphasizes that a business case should demonstrate value to stakeholders and use metrics like net present value, return on investment, and benefit-cost ratio to evaluate investment options.
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Writing a Business Case
EEPTM of International Institute of Business Analysis [IIBA®], Canada
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Presenter
Venkadesh Narayanan, BSME, MBA, CBAP®, PMI-PBA®, CBPP®, CPRE-FL
Principal Consultant
Former Indian Civil Servant [IRAS 2001 Batch]
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Writing a business case
- 1. www.fhyzics.com | cs@fhyzics.com | 900-304-9000 | 900-305-9000 | 900-306-9000 Writing a Business Case EEPTM of International Institute of Business Analysis [IIBA®], Canada Download “Fhyzics” app from Google Play or App Store Presenter Venkadesh Narayanan, BSME, MBA, CBAP®, PMI-PBA®, CBPP®, CPRE-FL Principal Consultant Former Indian Civil Servant [IRAS 2001 Batch] LinkedIn Profile This webinar is brought to you by IIBA® Chennai Chapter 29-Oct-15
- 2. Thank You Note Mr. Kannan Santhanam President IIBA® - Chennai Chapter
- 3. BA-TODAY.COM The Business Analysis Magazine
- 4. Knowledge Areas Foundation Chapters GaNeCaSA PRABaSCo PCDC VaVePOSA PQRST VaPeTOPA 5 6 4 6 5 6 56-46-56 = 32 Tasks BABOK® V2 Overview
- 6. Define Business Need Assess Capability Gaps Determine Solution Approach Define Solution Scope Define Business Case BABOK® V-2 : Enterprise Analysis
- 8. Setting The Stage At the end of this session, 1. You will become a master in writing business cases 2. In any business case presentations you will be the winner
- 9. Setting The Stage At the end of this session, 1. You will become a master in writing business cases 2. In any business case presentations you will be the winner But you will learn the necessary ingredients of a BC Not the question of winning or losing
- 10. Setting The Stage Template Creativity Pragmatic Pragmatic: dealing with the problems that exist in a specific situation in a reasonable and logical way instead of depending on ideas and theories - http://www.merriam-webster.com Document Process People
- 11. The BC Writer's Mind Set Cost + Risks Benefits + Risks
- 12. Direction for the Organization When one sets himself on a wrong road, It is not possible to reach the right destination At least not at optimal cost!
- 13. A 2009 survey of information technology-related investment success by the Standish Group shows that 44 percent of all projects are somewhat challenged; while they may be completed and operational, they may be over budget, not on time, or providing fewer features and functions than originally specified. Twenty- four percent of projects get cancelled somewhere during their lifecycle, leaving the corporation with no results but only costs. These percentages are certainly improved from 1995, where 53 percent were challenged and 31 percent cancelled, but it still only leaves a success rate of less than one third. Various other studies over the past 30 years have confirmed this picture. Survey from Standish Group
- 14. Capacity Vs. Capability Scenarios Capability Capacity Decision 1 No NA Go ahead 2 Yes No Go ahead 3 Yes Yes Return
- 15. KIN Phone from Microsoft – A Case
- 16. KIN Phone from Microsoft • In order to support the younger market to use the social networking sites Microsoft designed KIN phones. • After a two-year development project, they were manufactured by Sharp and sold through Verizon Wireless in USA. • After just 2 months in the market in the first half of 2010, Microsoft pulled the plug. It is rumoured that only 503 phones were actually sold. Also the overall project costs of designing, producing and marketing the KIN phone were reported to be around US$1 billion.
- 17. KIN Phone from Microsoft • The failure can probably be attributed to tough competition, which made a new entry difficult. • Many people never even heard about the KIN phone, showing a lack of marketing and suggesting also a lack of senior management support. • Reports also indicate that the phone lacked some basic function required by users (such as calendar or the ability to run games). • The high cost of the data and texting plans may also have been a factor.
- 18. Definition of a Business Case Business Case describes a document delivering a cost-benefit justification for an investment proposition; it may also be called a benefit analysis, a ROI study, a payback investigation, or a value finder.
- 19. One Sentence Business Case In order to improve ___________ we are doing __________ , Which is worth __________ and can be measured by ______ . Business pain point Proposed investment Net present value Bottom-up metrics
- 20. Business Case Impact & Process Business Case Box Selected Rejected Correct Investment Excellent Benefits Opportunity Lost Wrong Investment Disaster Risk Avoided Understand Analyse Costs Discover benefits Evaluate Present Measure
- 21. Questions to Stakeholders 1. What goals and priorities does the stakeholder have? 2. What past experience does the stakeholder have with similar investments? 3. How can the stakeholder benefit from the investment? 4. What expectations about the project does the stakeholder have? 5. What input is required from the stakeholder during the business case phase and during implementation? 6. What questions and doubts does the stakeholder have about the suggested investment?
- 22. Main Components of a Business Case StrategicFlexibilityOptions
- 24. Cost Types Hidden Costs – come up after the investment is approval and were not thought about during the initial business case. Knock-on Costs – are often underestimated when changes in one part of the organization have effects on other parts of the organization. Soft Costs – (e.g. productivity decrease during transition) are difficult to estimate; but they are directly attributable to the investment.
- 25. Cost Types Sunk Costs – have irreversibly been incurred before the investment idea came up; not to be included into the business case. General Overhead Costs – are typically not included, as a business case builds on marginal costs and benefits. Opportunity Costs – are related to missing other mutually exclusive investments. Should be mentioned in the business case, but must not be included in NPV calculation.
- 26. Cost Types Sunk Costs General Overhead Costs Opportunity Costs Hidden Costs Knock-on Costs Soft Costs Always to be included into NPV calculation of business case Not to be included into NPV calculation of business case
- 27. Investment Characteristics By Scope Response Option Large and Small Must-do Diversi…n Expansion Cost- Saving R&D or Corn- seed Independent investments By dependency Mutually exclusive investments Contingent investments
- 28. Time Value of Money A dollar today is worth more than a dollar tomorrow $100 $110 $121
- 29. Time Value of Money Future Value Function FV = x * (1 + r)n x – denotes the investment value r – denotes the interest rate n – denotes the number of future periods
- 30. Benefit Taxonomy
- 31. Features vs. Benefit • Feature only represents an element of functionality • Benefit relates to the business outcome • Feature is what we use and benefit is what we get • Feature and benefit have cause-and-effect relationship • Feature yields the benefits • Features need not have to be part of the business case • But benefits must be listed in the business case
- 32. Return on Investment (ROI) 𝑹𝑶𝑰 = 𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐧𝐞𝐭 𝐩𝐫𝐨𝐟𝐢𝐭𝐬 𝐨𝐟 𝒊𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕 𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐛𝐨𝐨𝐤 𝐯𝐚𝐥𝐮𝐞 𝐨𝐟 𝒊𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕
- 33. Profitability Index (PI) 𝑷𝑰 = 𝑵𝒆𝒕 𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆 𝑼𝒑𝒇𝒓𝒐𝒏𝒕 𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕
- 34. Benefit-Cost Ratio (BCR) 𝑩𝑪𝑹 = 𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑽𝒂𝒍𝒖𝒆 𝑼𝒑𝒇𝒓𝒐𝒏𝒕 𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕
- 35. Hazards & Risk Fortuna – The Roman goddess of randomness Hazards are things that can go wrong and cause harm to the investment project. Risk is the chance, that the investment project could be harmed by a hazard. Risk Identification | Assessment | Treatment Business Risks | Financial Risks Technical Risks | Implementation Risks
- 36. Structure of a Business Case Report Preface Table of Contents Executive Briefing Recommendation | Summary of Results | Decision to be Taken Introduction Business Drivers | Scope | Financial Metrics Analysis Assumptions | NPV-CF Statement Costs | Benefits | Risks Strategic Options | Opportunity Costs Conclusion
- 38. www.fhyzics.com | cs@fhyzics.com | 900-304-9000 | 900-305-9000 | 900-306-9000 Thank You 28/10/2015 V1.0 This webinar is brought to you by IIBA® Chennai Chapter You can download this presentation from our BLOG at http://bacourse.com/blog You can access this recorded presentation from IIBA® Chennai Chapter’s YouTube Channel