The purpose of the knowledge in the Business Case Theme is “to provide a structure to judge whether the Business Case is desirable, viable, achievable and worth the continued investment that is made during the project”. You could also say the Business Case theme provides a mechanism to judge whether the project is and remains desirable and achievable.
Let us look at that statement again and break it up.
- Provide a structure: Provide guidelines to follow.
- Desirable: Determine if this product is really needed (benefits v. dis-benefits).
- Viable: Is it possible to do? Are we capable of delivering?
- Achievable: Is it possible to deliver the benefit?
- Worth the continued investment: If not, then the project must be stopped.
- 1 Business Justification
- 2 What does a Business Case do for the project?
- 3 How to best describe what you get from a project
- 4 The path to creating the Business Case
- 5 The Benefits Review Plan
- 6 The Contents of a Business Case
- 7 Reference
“Business Justification” is a popular term in a number of methods and is now used by PRINCE2. Business Justification means that there is a valid business reason for doing the project and it remains valid throughout the project. If the Business Case becomes invalid during the project, then the project should be shut down. Continued business justification is also one of the 7 principles of PRINCE2.
What does a Business Case do for the project?
The Business Case gathers the information to allow the management to judge if a project is desirable, viable and achievable, and therefore worthwhile to invest in. The Business Case is normally developed at the start of the project unless it is provided by Corporate or Programme Management. Once created, it is then maintained throughout the life of the project. A good question to ask here is “Why is the Business Case maintained and what does this mean?”
Let me give you an example to explain this. Your company will invest €100,000 in a Sales application and it expects to have a return on its investment in 20 months due to reduction of two administrative persons, as less administrative work is required. The clients will be able to order and view all account information online and don’t need to call as often. So as you can see, this sounds like a good project.
However, 3 months into the project, you find out the following: Two of your bigger clients don’t wish to use Web-based applications in their purchasing department, so you will need to keep one admin person. The return on your investment (ROI) will change, therefore, as it will take 32 months instead of 20 to recoup the cost of the project. The Business Case needs to be updated with this information.
As the Project Manager, you want to show that the project is still worth doing (if you think it is), but you will recommend to the Project Board to stop the project if not.
As you can see then, the Project Manager is constantly asking “Is the continued investment in this project still worthwhile?”
PRINCE2 assumes that there will be a customer who is requesting a product, who will pay for the product and will perhaps use the product. PRINCE2 also assumes a Supplier who will produce the product. Both the customer and supplier can exist within the same company (two different departments), or the supplier can be external.
How to best describe what you get from a project
PRINCE2 uses the terms “Output, Outcome and Benefits.” These terms help to describe what we get from a project:
- Question to uncover Output: What is the product that will be delivered by the project?
- Question to uncover Outcome: What can the users do better with this product?
- Question to uncover Benefits: List the measurable improvements of using this product.
The path to creating the Business Case
The Business Case is developed in the Initiation Stage and maintained during the project. The Business Case is first verified by the Project Board so that the project can start. It is then verified at key decision points during the project, such as at the end of each stage.
There are 4 steps to create the Business Case. They are:
- Develop: Develop the Business Case.
- Verify: Verify the Business Case.
- Maintain: Maintain the Business Case.
- Confirm the Benefits: These are defined in the Benefits Review Plan.
Step 1: Develop (Create) the Business Case
The Executive is responsible for creating the Business Case, but it can be written by others or with help from others. For example, the Executive might involve a person from the financial department to assist with the financial information.
- Before the project starts: The Project Mandate document usually contains an outline of the Business Case and will explain the reasons why the project is needed.
- Pre-Project (Starting Up a Project process): The Business Case information is taken from the project mandate and copied to the outline Business Case. It will be part of the Project Brief.
- Initiating a Project process: The outline Business Case is extended into the Business Case document usually by the Executive, with help from other people, and it becomes part of the Project Initiation Documentation.
Step 2: Verify the Business Case
What does verify the Business Case mean?
It means to determine whether the Business Case is worthwhile.
This verification is done at a number of points in the project by the Project Board.
Question: Where do you think would be good points in the project for the Project Board to Verify the Business Case (to see if the Business Case is worthwhile)?
Tip: Project Board decision points. Project Board verification points:
- Verification Point 1: At the end of the Starting Up a Project (Pre-Project) process.
- Verification Point 2: At the end of the Initiation Stage.
- Verification Point 3: At the start of each new delivery stage.
- Other verification points are anywhere the Business Case is updated or reviewed. Example: The Project Manager will check for continued business justification during the Stage Boundary process. In other words, the Business Case is used to justify the continuing viability of the project.
The Executive is responsible for ensuring that the project is value for money and is aligned with the corporate objectives, and also for assuring other stakeholders that the project remains viable. So, the Executive is the accountable person for the project, not the Project Manager.
Step 3: Maintain the Business Case
What is meant by Maintain the Business Case?
Maintain the Business Case refers to keeping the Business Case up to date (living document) to reflect what is happening in the project. It may be done when assessing Risks or Issues, or at the end of a stage. For example, some of the typical changes can be an increase or reduction in cost, new information on a risk, etc.
So, when is a good time to update the Business Case during the project? A good time to update the Business Case is at the end of every stage, as you will have the true cost of the last stage, and perhaps even the updated cost of the next stage, along with any information on issues and risks.
Step 4: Confirm the Benefits
Benefits are identified and written down at the start of the project in the document The Benefits Review Plan and the Business Case. For each benefit, you must include how the benefit will be measured and when this benefit will be realized. This information is placed in the Benefits Review Plan.
Example of measurable: X% reduction in costs, X% increase in profits
Benefits are usually realized after the project is closed, but some can be realized during the project. The step Confirm the Benefits checks to see if expected benefits have been realized.
The Benefits Review Plan
The purpose of the Benefits Review Plan is to identify the benefits and most importantly, to select how the benefits can be measured. In other words, the Benefits Review Plan is used to plan the assessment of benefits. You can then compare the new results to the current situation, so the current situation becomes the baseline.
The purpose of the Benefits Review Plan is to:
- Define clearly how to measure the benefits.
- Define the activities required to measure the expected project's benefits.
The Benefits Review Plan must include information on the expected timeline for these benefits. The Project Manager creates it in the Initiation Stage. The Senior User is responsible for specifying the benefits and realizing the benefits.
Why should the Senior User be responsible for specifying and realizing the benefits?
The Senior User represents the users who are asking for a new product so they should be able to describe the expected benefits. These benefit descriptions should show that the project is value for money (worth the investment).
The Senior User is then responsible for using the product to achieve the benefits, and they become more accountable to the Corporate or Program Environment. This will also ensure their continued commitment during and after the project.
1) Created by Project Manager in the Initiation stage
2) Information is provided by the Senior User
3) Project Board approves the Benefits Review Plan
4) Check the realised benefits at the end of each stage
5) Plan the Benefits Review after the project (post project)
6) Check for realised benefits (post project)
The Contents of a Business Case
The Business Case should describe the reasons for the project and include information on the estimated costs, risks and expected benefits. The Business Case contains the following parts:
- Executive Summary: A short overview of the Business Case for upper management
- Reasons: Reasons for doing the project (comes from project mandate)
- Business Options: PRINCE2 teaches that there are always three options to consider concerning any investment. These are:
- Do nothing: it may seem a bit strange, but let me give you an example. Suppose we discover that the benefits of the Sales project will not be reached, as more than 66% of customers would never wish to order online and prefer to use the telephone. Then it is better that we do nothing. The “Do nothing” option should always be the first option, as the Project Board will compare the fact of doing nothing with other options put forward that would require investment.
- Do the minimum: this option would normally require a detailed Business Analysis showing costs, benefits, desire and viability.
- Do something: this option would normally require a detailed Business Analysis showing costs, benefits, desire and viability.
- Expected Benefits: List each benefit and how and when it can be measured.
- Expected Dis-Benefits: According to PRINCE2 a dis-benefit is an outcome that is seen as negative by one or more stakeholders. Another name might be a negative side effect. For example, with the online CRM application, 50% of the current sales support staff may have to look for a new job.
- Timescales: Project starts and ends, when benefits will be realized.
- Costs: Cost for project plus expected on-going maintenance costs after the project.
- Investment Appraisal: ROI information / calculation (costs v. benefits).
- Major Risks: A summary of the major risks (comes from Risk Register).