Business case

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Short description: Document providing reasoning for a project

A business case captures the reasoning for initiating a project or task.[1] Many projects, but not all, are initiated by using a business case.[2] It is often presented in a well-structured written document,[3] but may also come in the form of a short verbal agreement or presentation. The logic of the business case is that, whenever resources such as money or effort are consumed, they should be in support of a specific business need.[2] An example could be that a software upgrade might improve system performance, but the "business case" is that better performance would improve customer satisfaction, require less task processing time, or reduce system maintenance costs. A compelling business case adequately captures both the quantifiable and non-quantifiable characteristics of a proposed project. According to the Project Management Institute, a business case is a "value proposition for a proposed project that may include financial and nonfinancial benefit."[4]

Business cases can range from comprehensive and highly structured, as required by formal project management methodologies, to informal and brief. Information included in a formal business case could be the background of the project, the expected business benefits,[5] the options considered (with reasons for rejecting or carrying forward each option), the expected costs of the project, a gap analysis and the expected risks. Consideration should also be given to the option of doing nothing including the costs and risks of inactivity. From this information, the justification for the project is derived.

Reasons for creating a business case

Business cases are created to help decision-makers ensure that:

  • the proposed initiative will have value[6] and relative priority compared to alternative initiatives based on the objectives and expected benefits laid out in the business case.

Development and approval process

Business process

This section is an excerpt from Business process[ edit ]

Business process design

The business case process should be designed to be:

  • adaptable – tailored to the size and risk[2] of the proposal
  • consistent – the same basic business issues are addressed by every project
  • business oriented – concerned with the business capabilities and impact, rather than having a technical focus
  • comprehensive – includes all factors relevant[7] to a complete evaluation
  • understandable – the contents are clearly relevant, logical and, although demanding, are simple to complete and evaluate
  • measurable – all key aspects can be quantified so their achievement can be tracked and measured
  • transparent – key elements can be justified directly
  • accountable – accountability and commitments for the delivery of benefits and management of costs are clear.

Components of a business case report

A good business case report brings confidence and accountability into the field of making investment decisions. It is a compilation of all information collected during enterprise analysis and the business case process. The key objective is to provide evidence and justification for continuing with the investment proposition.

A business case can include details such as strategic alignment, return on investments, risk exposure assessment, feasibility study, expected Key Performance Indicators, evaluations and alternative measures.[8][9]

Strategic alignment

This section is an excerpt from Strategic alignment[ edit ]

Feasibility study

This section is an excerpt from Feasibility study[ edit ]

A feasibility study is an assessment of the practicality of a project or system. A feasibility study aims to objectively and rationally uncover the strengths and weaknesses of an existing business or proposed venture, opportunities and threats present in the natural environment, the resources required to carry through, and ultimately the prospects for success.[10][11][12] In its simplest terms, the two criteria to judge feasibility are cost required and value to be attained.[13]

A well-designed feasibility study should provide a historical background of the business or project, a description of the product or service, accounting statements, details of the operations and management, marketing research and policies, financial data, legal requirements and tax obligations.[10] Generally, feasibility studies precede technical development and project implementation. A feasibility study evaluates the project's potential for success; therefore, perceived objectivity is an important factor in the credibility of the study for potential investors and lending institutions.[citation needed][14] It must therefore be conducted with an objective, unbiased approach to provide information upon which decisions can be based.[citation needed]

Key performance indicators

This section is an excerpt from Performance indicator[ edit ]

Example of a business case report structure

Here is an example of a report structure for a business case:[15]

  • Preface
  • Table of contents
  • Executive briefing
    • Recommendation
    • Summary of results
    • Decision to be taken
  • Introduction
  • Analysis
  • Conclusion, recommendation, and next steps
  • Appendix

Review and approval

At various stages in the project, the business case should be reviewed to ensure that:

  • The justification is still valid,
  • The project will deliver the solution to the business need.

The result of a review may be the termination or amendment of the project.[16] The business case may also be subject to amendment if the review concludes that the business need has abated or changed,[2] this will have a knock on effect[17] on the project.

Public sector projects

Many public sector projects are now required to justify their need through a business case. In the public sector, the business case is argued in terms of Cost–benefit analysis, which may include both financial and non-financial cost and benefits.[18] This allows the business to take into account societal and environmental benefits, allowing a more comprehensive understanding of economic impacts.

See also

Notes

  1. ↑ Project Management Institute 2021, §Appendix X3.2 The PMO Value Proposition - Why have one?.
  2. ↑ 2.0 2.1 2.2 2.3 Project Management Institute 2021, §3.4 Focus on Value.
  3. ↑ Project Management Institute 2021, §2.6.1 Delivery of Value.
  4. ↑ Project Management Institute 2021, §Glossary Section 3. Definitions.
  5. ↑ Project Management Institute 2021, §4.6.1 Strategy Artifacts.
  6. ↑ Project Management Institute 2021, Section 3.4 Focus on Value.
  7. ↑ Project Management Institute 2021, §2.7.1.2 Effective Metrics.
  8. ↑ Project Management Institute 2021, §3.4 Strategy Artifacts.
  9. ↑ Tamang, Suman. "Business Case Study of Yahoo: The Rise and Fall". https://moneysifu.com/business-case-study-of-yahoo/. 
  10. ↑ 10.0 10.1 Justis, R. T. & Kreigsmann, B. (1979). The feasibility study as a tool for venture analysis. Business Journal of Small Business Management 17 (1) 35-42.
  11. ↑ Georgakellos, D. A. & Marcis, A. M. (2009). Application of the semantic learning approach in the feasibility studies preparation training process. Information Systems Management 26 (3) 231-240.
  12. ↑ McLeod, Sam (2021-12-01). "Feasibility studies for novel and complex projects: Principles synthesised through an integrative review" (in en). Project Leadership and Society 2: 100022. doi:10.1016/j.plas.2021.100022. 
  13. ↑ Young, G. I. M. (1970). Feasibility studies. Appraisal Journal 38 (3) 376-383.
  14. ↑ Feasibility studies as a tool for successful co-operative business enterprises "(A case study of the importance of Feasibility students to co-operative investment)". https://www.grossarchive.com/project/1796/FEASIBILITY-STUDIES-AS-A-TOOL-FOR-SUCCESSFUL-COPERATIVE-BUSINESS-INTERPRISES--A-CASE-STUDY-OF-THE-IMPORTANCE-OF-FEASIBILITY-STUDENTS-TO-CO-OPERATIVE-INVESTMENT-.html. 
  15. ↑ Source: Messner, W.: More on Making the Compelling Business Case GloBus Research, accessed: 5 May 2013 and Messner, W. (2013): Making the Compelling Business Case. Houndmills: Palgrave Macmillan.
  16. ↑ Project Management Institute 2021, §3.4 The Tailoring Process.
  17. ↑ Project Management Institute 2021, §2.8.3 Complexity.
  18. ↑ Project Management Institute 2021, §4.4.1 Data Gathering and Analysis.

References

  • Bentley, C.: Practical Prince2 (The Stationery Office), ISBN:0-11-702853-3.
  • Messner, W.: Making the Compelling Business Case. Decision-Making Techniques for Successful Business Growth. Houndmills: Palgrave Macmillan, 2013 (book companion website)
  • Project Management Institute (2021). A guide to the project management body of knowledge (PMBOK guide). Project Management Institute (7th ed.). Newtown Square, PA. ISBN 978-1-62825-664-2. 
  • Schaltegger, S. & Wagner, M. (Eds.): Managing the Business Case for Sustainability. The Integration of Social things, and Economic Performance. Sheffield: Greenleaf, 2006

External links

ru:Технико-экономическое обоснование



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