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The Case for a Business Case

The Case for a Business Case. Peter Langley Value Management Specific Interest Group p.langley@leedsmet.ac.uk. Business Case (Benefits). PMP (Success Criteria). Operation. Product. Termination. Final reports PPR Success Criteria. End of product life. Concept. Definition.

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The Case for a Business Case

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  1. The Case for a Business Case Peter Langley Value Management Specific Interest Group p.langley@leedsmet.ac.uk

  2. Business Case (Benefits) PMP (Success Criteria) Operation Product Termination Final reports PPR Success Criteria End of product life Concept Definition Project & Product Life Cycles Implementation Handover & Closeout Benefits

  3. Obsession with TCQ “There is little corporate pressure being applied on benefits realisation – the focus remains on delivery to a fixed cost irrespective of the outcome” Public sector Board level quote in Moorhouse / Financial Times 2009 survey “The Benefits of Organisational Change”

  4. Benefits Un-realisation • “The project focus is on creating the business case to get the budget approved, then emphasis is on delivery on time and to budget” • “Benefits identification is treated as a mechanism to get funding, but there is no effort in the realisation of these benefits” • “Many gateway reviewers don’t understand benefits so this is an area that is glossed over” Active Benefits Realisation Survey – Steve Jenner 2009

  5. Benefits and Business Case • Moorhouse 2009 – “Only 20% of respondents believe their organisations succeed in consistently delivering the planned benefits of change.” • Standish Chaos report 2009 – “24% of projects were cancelled prior to completion or delivered and never used.”

  6. Business Case (Benefits) PMP (Success Criteria) Operation Product Termination Final reports PPR Success Criteria End of product life Concept Definition Project & Product Life Cycles Implementation Handover & Closeout Benefits

  7. Common Causes of Project FailureNAO/ OGC • 1. Lack of clear link between the project and the organisations key strategic priorities, including agreed measures of success • 6. Evaluation of proposals driven by initial price rather than long term value for money

  8. Alignment with Company Strategy • Moorhouse 2009 “Many organisations (44%) appear to determine required benefits in a bottom up way rather than through top down alignment with strategic goals”

  9. Norwegian research Analysis of 25 major public investment projects • 16 Alternative concepts not scrutinised • 14 Lack of realistic objectives & justification • 14 Not relevant in relation to needs or market • 10 Tactical under estimation of costs • 9 Perverse incentives – benefits without liability • 7 Tactical splitting & sequencing of project • 6 Tactical over estimation of needs & benefits • 6 Under estimation of future operational costs Knut Samset 2008 www.concept.ntnu.no

  10. Problems with Business Cases • Moorhouse 2009 “Business cases are normally used but only as a paper exercise, they have very little substance. Dashboards are skewed to demonstrate success rather than used to drive improvement” Executive, Telecoms

  11. Why do Business Cases go wrong? • OGC 2009 “Over half of SRO’s are in their first SRO role… Lack of relevant experience, combined with regular turnover adds unnecessary risk…” • Collis & Rukstad, Harvard Business Review 2008 “It’s a dirty little secret: Most executives cannot articulate the objective, scope and advantage of their business in a simple statement. If they can’t, neither can anyone else”

  12. Political Dimension • Jenner 2009 “projects are started in response to a political commitment so the task becomes one of finding sufficient benefits to justify the chosen solution” • “Benefits .. seem to be plucked from the air” • Flyvbjerg 2009 “… perverse incentives that encourage promoters to underestimate costs and overestimate benefits …” “Survival of the Unfittest”

  13. Not all bad news!! • There are also some examples of good practice. Business cases that contain; • Clear link to company strategy • Clear reasons for doing the project • Clear and numerate benefits together with how they will be achieved • Key risks

  14. Your Turn!! • What “war stories” do you have (and are willing to share), both good and bad? • What should be included in a business case?

  15. Key Aspects of Risk Management • Based on probability (uncertainty or likelihood) and consequence (effect or impact) • Must have a context • Must have scales which are related to that context • Opportunities as well as Threats

  16. Stakeholders Requirements (cost, time, quality, functionality) Business Case (Benefits – sponsor) Money Time Satisfaction of Needs Value = Use of Resources

  17. A Portfolio Method • Assess risk to strategy before and after investment • Assess cost of standard solution • Calculate movement of risk per unit cost • Agree any mitigating factors • Place potential projects in priority order and actively manage

  18. Thank youAny Questions or Comments?

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