Business Case Development for Business and IT Professionals. Sherry Pate, PMP

Transcription

1 Business Case Development for Business and IT Professionals Sherry Pate, PMP

2 What is a Business Case? The business case makes the case for change that is justified in terms of costs and benefits. Essentially it s a form of gap analysis, which describes the organization s current status versus the desired status and how the organization can achieve its goals. 2

3 Making & Supporting the Case What is the problem or opportunity? What is the proposed solution? What is the expected value or result?

4 What Purpose Does a Business Case Serve? The main purpose is to transform the vision into economic terms so that an organization can make an accurate assessment of the return on investment. Expected revenue versus expected costs 4

5 Why is a Business Case Needed Many projects are requested; few can be funded Good decisions require good information Decision makers rely on expert advice for good information

6 The Business Case Will Answer Questions Like Why should we do this project? What is the solution to the problem? How much do we think it will cost? How long do we think it will take? What alternatives do we have? How will we measure success? 6

7 Who Creates a Business Case? Business Owner Subject Matter Expert (SME) with organizational knowledge Project Manager Business Analyst Program Manager Project Management Office 7

8 Elements of a Business Case Problem statement Background Business objectives Alternatives Scope Current and future process Assumptions Risks Value proposition Action Plan

9 Problem Statement Projects are typically undertaken to solve a particular business problem or opportunity. Examples: Changes to vision, strategy or objectives Introduction of new competing products Organizational growth or expansion Automation of manual processes 9

10 Background Once the problem or the opportunity has been identified, it s important to understand and describe why it has arisen. What has caused the need for change? What will be required to solve the problem? All proposed projects should be associated with a business objective. 10

11 Problem to Proposed Solution Business Problem to Proposed Solution: What must change? What will the proposed solution accomplish? What are the expected benefits? What will be the end result? What must improve to solve the problem? What is the measurable impact to the business? 11

12 Solution & Business Objective Decrease expenses or overhead Retain existing customers Improve productivity Improve time to market Attract new customers Increase revenue Increase customer satisfaction 12

13 Top Benefits and New Features List the top benefits: Specific cost / overhead reductions Productivity improvements List the major features: Reporting Data mining A consolidated data warehouse

14 Alternatives What other options are there to implement the proposed solution? Example: Build Buy Do nothing 14

15 Scope Define the scope of the work that must be performed to deliver the product, service or results to meet the business objectives in enough detail to later prepare high-level time and cost estimates. Staff Hardware Software Facilities 15

16 Current and Future Process What organizational processes will the proposed solution affect? What departments will be affected? Will external partners or clients be impacted? 16

17 Assumptions Despite the old advice about the adverse effects of making assumptions, when defining the scope, assumptions usually must be made, but then validated and corrected later if they are false. Better to always replace assumptions with questions. 17

18 Risks What is a Risk: A risk is an uncertain event. We don t know if it will or will not happen. What key risks could impact the project? What are the risks if we don t do the project? 18

19 Value Proposition How does this project financially compare to others? How will the organization financially benefit from the program/project? Not necessarily a substitute for solid management judgment. 19

20 Many Ways to Measure Benefits & Costs 20

21 Return on Investment (ROI) Return on investment (ROI) is the ratio of money gained or lost on an investment relative to the amount of money invested. Does NOT indicate whether the project investment will be a good one or that the implemented results will be successful ROI = (Gain from Investment Cost of Investment) Cost of Investment 21

22 Return on Investment (ROI) Example If an investment of $100,000 is made and, over the life of the deliverable, the investment results in additional income and/or anticipated savings of $150,000, then the ROI would be 50%. 50% = $150,000 Profit - $100,00 Cost A Good Investment! $100,000 Cost 22

23 Action Plan What are the specific action steps towards the recommended approach? What deliverables will be accomplished within the first phase? How will major challenges be addressed What will be the major milestones? 23

24 Business Case Tips Understand your company s strengths, weaknesses, strategies and goals Tie the project to the organizations strategic goals (increased productivity, time to market, etc.) Always tie the project to business results / objectives

25 Business Case Tips (Continued) Numbers are not always the entire story Assumptions can always be challenged Recognize that different persons within the organization will have different needs, concerns and agendas. Information provided in each section should be brief or as extensive as needed.

26 Business Case Tips (Continued) A good business case will boil down complex and disparate information into a defendable decision. Expect that executive management will ask direct and difficult questions. Your business case should attempt to answer those questions in advance.

27 Choices Need Good Information 27

28 Thank You! We will begin the Q&A momentarily

29 How to Claim Your PDU Go to ccrs.pmi.org/ Search for ASPE as a Registered Education Provider. Our number is 2161 At the bottom of our details page, select See Provider s Activities Find the activity code stated by the moderator during the presentation: WS The seminars are Category 3 for one PDU. Beginning March 1, 2011, they will be Category A