May 4, 2012

PM0011 [Project Planning & Scheduling] Set2 Q5

Question 5: What is a business case? List the business related questions answered using a business case.


Answer:
A business case captures the reasoning for initiating a project or task. It is often presented in a well-structured written document, but may also sometimes come in the form of a short verbal argument 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. 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 unquantifiable characteristics of a proposed project.

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, the options considered (with reasons for rejecting or carrying forward each option), and the expected cost 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. Note that it is not the job of the Project Manager to build the business case; this task is usually the responsibility of stakeholders and sponsors.

Developing a Business Case:

A successful enterprise produces products, provides service, and completes business strategy related projects, programs and portfolios to maximize accrued benefits. Enterprises address their need for growth and change by creating strategic business initiative to modify the enterprises or create and modify its process or products. The enterprise business strategy, which is determined at the executive management level, drives the development of the supporting strategic initiatives and objectives. Thus executive management must be responsible for developing and planning business strategy initiatives and related business objectives.

The first management action in the strategic planning process is executive development and set of strategies that support the enterprise vision / mission. The next step is to create a list of strategies that describes executive management purpose and scope for each strategy. The final step in business strategy development planning and a key factor in their successful planning, development and implementation of strategic initiatives is developing and demanding the strategic business plan and initiatives that will be adopted to achieve the vision / mission during the business cycle covered by the document.

It may include, where practicable, the business objectives and related benefits to be achieved. 
Business case documents significantly increase the probability of accomplishing the enterprises business strategies by documenting each strategy in one or more cases. A business case articulates the intent and desired benefits of a specific strategy in a feasibility study format. Each business case provides the bases for authorizing further project planning activities, so that an adequate definition of the intent of each strategy initiative and supporting objectives can be developed.

The purposes of the business case are to:
  • If the official document by which the results of the business analysis of a proposed business opportunity or identified threat are communicated within the enterprise. 
  • Document the market, technical, operational and financial analysis for the initiatives. 
  • Serve as an initial basis for prioritization of the initiative, including its funding and the allocation of other resources. 
  • Provide the parameters for measuring how well the initiative was accomplished. 
  • Get the mile stone by which the initiative will be tracked. 
  • Established accountability and documentation for the benefits being proposed. 


The business case answers the following business related questions:
  • How did the initiative come about? 
  • What is the opportunity / treat / issue improvement being addressed? 
  • Why in clear and concise terms, is the initiative necessary? 
  • What is the desired product, service or result? 
  • What are the benefits to the enterprise and its customers? 
  • What are the qualitative benefits, such as customer satisfaction, strategic value cycle time improvements? 
  • What are the linkages to the enterprise’s vision, mission and value drivers ( that is mental , quality, efficiency) 
  • Why will the initiative succeed? 
  • What must be invested to get the desired product, service, result or benefit? 
  • What are the expected incremental productions or operational costs for the new or modified product, service, or production process? 
  • What are the proposed spending reductions, revenue improvements or profit improvements related to justify the initiative? 
  • What is the enterprises capital to successfully implement the initiative while meeting financial objectives? 
  • What other factors materially impact the potential success of the initiative such as additional services, required efficiencies, minimum or maximum quantities required product quality and development objectives? 
  • What are the concerns, issues and risks? 
  • What are the parameters and criteria used for prioritizing the initiative with respect to other business strategic initiatives? 
  • What is the exit strategy if the strategic initiative is not delivering the desired return or investment? 

The business case document provides a common basis and format for supplying information required for both business and project – business management planning. The basic information includes the strategic initiatives, identification and description.

In most commercial businesses, completing a Business Case (project management forms) is the first step towards initiating a project.


The Business Case justifies the start-up of the project and describes the:
  • Business problem (or opportunity) that currently exists in the business 
  • Alternative options for delivering a solution to resolve the problem 
  • Benefits and costs associated with each alternative solution 
  • Recommended solution for approval 

The first step in creating a Business Case is to identify the business problem (or opportunity) that results in a need for a project. Alternative solutions are listed and, based on each solution's individual merits, a preferred solution is recommended. The last step taken when creating a Business Case is to define a plan for the implementation of the agreed solution. At some point during or after the creation of the Business Case, it may be necessary to undertake a Feasibility Study to ensure that the solutions identified can feasibly be implemented. This is available in your project management forms. 

Once the Business Case has been documented, it is presented to a Project Sponsor for approval. The Project Sponsor oversees the project at a strategic level. They authorize the project to proceed, allocate funding from their budget, and ensure that project objectives are achieved by participating in Phase Reviews. Creating a detailed Business Case is a critical step in the Project Lifecycle, as it provides the basis upon which the project is initiated. Throughout the project, the Business Case is referred to frequently to ensure that the project is on track. For instance, it is used in a:
  • Phase Review to ensure that current project costs and benefits are in line with original projections.
  • Project Closure Report to ensure that the project has achieved all the criteria required to close the project.
  • Post Implementation Review to measure the extent to which the project has achieved its stated objectives.

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