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The Case for a Business Case Peter Langley Value Management Specific Interest Group

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Presentation on theme: "The Case for a Business Case Peter Langley Value Management Specific Interest Group"— Presentation transcript:

1 The Case for a Business Case Peter Langley Value Management Specific Interest Group

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

7 Common Causes of Project Failure NAO/ 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

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

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 you Any Questions or Comments?


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