Business case

The business case document compiles essential information enabling organisational management to assess whether investing in a project is justified, especially when compared with other potential projects or requirements. According to the PRINCE2 manual, “the business case gathers information to allow management to judge if a project is desirable, viable, and achievable.” let’s explore these concepts:

Justification

The business case gathers the information to allow the organisation’s management to judge if a project is worthwhile to invest in, and they can also compare it with other requirements and ideas.

• Desirable: Does the product genuinely fulfill a need? Evaluate benefits versus dis-benefits.
• Viable: Is it feasible to implement the project successfully? Do we have the necessary capability and resources?
• Achievable: Can we realistically deliver the anticipated benefits?

The term “business justification” is frequently used across various methodologies, including PRINCE2, indicating that there must be a valid business reason for initiating the project. This justification must remain valid throughout the project’s duration. Hence, the project board should regularly verify its validity, especially at the end of each stage, by asking: “Is the business case still valid?”

Responsibilities

The project executive is accountable for creating the business case, typically assisted by the project manager. Initially created at the project’s inception, it is actively maintained throughout by the project manager.

Additional notes regarding the business case:

• An ‘outline business case’ document is drafted by the project manager during the ‘starting up a project’ process and refined further during the ‘initiating a project’ process.
• The directing a project process includes formal approval of the business case.
• The controlling a stage process uses the business case to evaluate the impacts of identified issues and risks by asking: “How does this issue impact the business case?”
• The managing a stage boundary process regularly reviews and updates the business case at the end of each management stage.
• The business case receives its final update during the closing a project process.

Sources

A business case typically includes:

• Reasons and justification for undertaking the project
• Estimated costs and timescales
• Benefits and dis-benefits (provided by the senior user)
• Overview of project risks

The business case is derived from the following sources:

• Project mandate and project brief: provide the foundational reasons and justification for initiating the project.
• Project plan: supplies estimated project costs and timescales.
• Senior user: contributes expected benefits and anticipated dis-benefits of the project.
• Project executive: ensures the project offers value for money by evaluating aspects such as return on investment (ROI) and alignment with organisational strategy.
• Risk register: offers an overview and analysis of major project risks.

Format

The business case can take a number of formats, including a document, spreadsheet or presentation slides. Tip: keep it simple!

Quality criteria

Consider the following quality criteria for the business case:

• The reasons for initiating the project must align with business level (corporate) strategy, not personal or pet projects.
• The business case must align consistently with the project plan.
• Benefits must be clearly identified, realistic, and justifiable to avoid overstating or exaggeration.
• Clearly outline how the benefits will be realized to ensure accuracy and accountability.
• Define explicitly what constitutes a successful outcome for the project.
• Clearly identify the preferred business option and justify why it is superior compared to alternative options.
• The project executive must clearly specify how the required funding will be secured.
• Include both financial and non-financial criteria (such as strategic alignment and reasons for the project).
• Account comprehensively for operational and maintenance costs and risks, in addition to project-related costs and risks.
• When applicable, adhere to organizational accounting standards (e.g., break-even analysis and cash flow conventions).
• Clearly state major project risks and proposed responses, sourced from the risk register.

Outputs, outcomes, and benefits

PRINCE2 uses the terms “output, outcome, and benefits” to clearly articulate what a project delivers and its impacts. understanding these terms and their distinctions helps ensure clear communication and effective project management.

Rather than abstract definitions, consider these targeted questions to clarify each concept:

• Output question: What product will the project deliver?
• Outcome question: How will users benefit practically or functionally from using this product?
• Benefits question: What measurable improvements will result from using this product?

Definitions:

• Outputs: The tangible products created by the project, also known as specialist products. These products are directly delivered and utilized by end users.
• Outcomes: Outcomes represent the practical changes or improvements experienced by users when utilizing the project’s outputs. PRINCE2 describes outcomes as the results of change derived from using the project’s outputs.
• Benefits: Benefits are measurable improvements stemming from outcomes, perceived as valuable by stakeholders. Benefits often materialize after the project’s completion, sometimes significantly later, although some benefits can occur during the project’s lifecycle.

Technique

PRINCE2 uses a four-step technique for business case management: develop, check, maintain, and confirm. If the organization has its own procedure, it can be used instead, but this should be documented in the project initiation documentation. The business case is first developed as an outline and then in detail at the start of the project. It is reviewed and updated throughout the project, with the project board checking it at key decision points, like stage boundaries, and confirming benefits over time.

• Develop: Explore options and gather information for investment decisions.
• Check: Assess whether the project is still worthwhile.
• Maintain: Keep the business case updated with actual progress and current forecasts, including forecast benefits.
• Confirm: Assess if the intended benefits have been or will be realized. Confirmation mostly happens after the project ends, though some benefits may be realized during the project when products are delivered.

Step 1: Develop

The project mandate initiates the project. It is used to develop the initial business justification, which is documented in the outline business case as part of the project brief. The project board approves the project brief when authorizing project initiation. The outline business case is refined into a full business case during project initiation and approved by the project board.

There are three basic options for any investment:

• Do nothing differently
• Do the minimum
• Do more than the minimum

The “do nothing differently” option should always be the baseline for comparing the other options. Analyzing these options helps the project board and stakeholders decide which option offers the best value. It answers the question: Are the expected benefits more desirable, viable, and achievable than the other options?

At the start of the project, many options may be considered, but the number will be reduced for detailed evaluation. Even for “must-do” projects, exploring different options is necessary to select the most suitable one, based on viability, desirability, and achievability.

Step 2: Check

The business case should be regularly assessed for desirability, viability, and achievability. New risks or changes might justify switching options. It is refined and updated as project details become clearer. Continued business justification ensures business objectives and benefits can still be achieved.

The project board should check the business case:

• At the end of starting up to authorize project initiation
• At the end of initiating to authorize the project
• At the end of each stage to authorize the next stage
• When assessing an exception plan for revised stages

The project manager checks the business case:

• When assessing progress, risks, and issues to understand their impact
• At the end of the project, to assess performance and expected benefits
• When consulting stakeholders to check for changes in goals, like new sustainability objectives

Step 3: Maintain

Maintaining 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 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

The business layer reviews the business case in a post-project benefits review to check if the intended benefits were realized. During the project, benefits reviews occur at stage boundaries to ensure benefits are on track.

Note: Projects deliver outputs that lead to outcomes and benefits.

The senior user, who specifies the benefits, also confirms if the forecast benefits are achieved. Since many benefits appear after the project, the senior user should come from the impacted area. The benefits management approach ensures outcomes and benefits are realized. It is created at the initiation stage and approved by the project board, which may involve the business in benefits reviews beyond the project.

Measurable benefits should be confirmed by the senior user and reported by the project manager at the end stage and in the final project reports. If benefits are not realized, forecasts should be updated at stage boundaries.

Post-project benefits reviews hold the senior user accountable for realizing benefits and taking corrective actions. These reviews also assess the project product’s performance and provide lessons for future projects.

The project executive ensures benefits reviews are planned. After project closure, the responsibility shifts to the business (senior user), who will manage the reviews.

Contents

A business case clearly outlines the reasons for undertaking a project, including estimated costs, anticipated risks, and expected benefits. PRINCE2 provides a detailed product description for a business case in appendix A of its manual. A business case should typically include:

• Executive summary
  • A concise, reader-friendly overview highlighting key reasons, benefits, and the expected return on investment (ROI).
• Reasons
  • Clearly state why the project should proceed, referencing the project’s justification from the project mandate.
  • Initial reasons should be brief and can be expanded further during the initiation phase.
• Business options
  • PRINCE2 identifies three standard investment options: Do nothing, do minimum, and do something.
  • Do nothing: Always consider first as a baseline for comparison.
  • Do minimum / do something: These require detailed analyses of costs, benefits, feasibility, and viability.
• Expected benefits
  • Clearly describe each benefit, specifying how both tangible and intangible benefits will be measured and when.
  • Define tolerances for each benefit individually and collectively.
  • State any specific requirements for benefits realization.
  • Responsibility for identifying and monitoring benefits typically lies with the senior user, supported by designated benefit owners.
  • Detailed methods for measuring benefits are documented in the benefits management approach.
• Expected dis-benefits
  • Identify potential negative outcomes perceived by stakeholders.
  • Dis-benefits must be clearly defined, valued, and integrated into the investment appraisal.
  • Examples include temporary productivity losses during organizational mergers.
• Timescale
  • Provide details on project timelines, including project start and end dates, timing for benefits realization, and the projected payback period.
• Costs
  • Include comprehensive project cost details and anticipated ongoing operational and maintenance costs after project completion.
• Investment appraisal
  • Integrate information on costs and benefits to demonstrate the project’s overall value.
  • Use recognized appraisal techniques (e.g., net benefits, ROI, payback period, net present value) that align with organizational standards.
• Major risks
  • Summarize significant risks associated with the project.
  • Refer to the risk register for comprehensive risk details.
  • Clearly highlight key risks to aid project board decision-making based on costs, benefits, and associated risks.

Role & responsibilities

PRINCE2 defines seven key roles to manage a project. Below are their specific responsibilities related to the business case document:

• Business layer
  • Provide the project mandate and define standards for the business case.
  • Set project-level benefits tolerance.
  • Post-project: Hold the senior user accountable for post-project benefits and be accountable for the benefits management approach post-project.
• Project executive
  • Be accountable for the business case throughout the project.
  • Approve the benefits and sustainability management approaches.
  • Set stage-level benefits tolerance and secure project funding.
  • Ensure the project aligns with business objectives and remains desirable, viable, and achievable.
• Senior user
  • Specify the desired outcomes and benefits for business case approval.
  • Ensure the project delivers outcomes that generate expected benefits.
  • Confirm that expected benefits are realized.
• Senior supplier
  • Confirm products can be delivered within the expected costs.
• Project assurance
  • Ensure the project aligns with business objectives.
  • Advise on benefits and sustainability approaches.
  • Monitor project progress and external events for business case impacts.
  • Review changes to the project plan for impact on the business case.
• Project support
  • Maintain baseline and change control for the business case and related approaches.

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Written by Frank Turley.

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