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

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

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”

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

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.”

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

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

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”

Analysis of 25 major public investment projects 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

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

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”

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”

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

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?

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

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

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

Thank you Any Questions or Comments?