Business Case Competency: Are we There Yet? Cost/Benefit Newsletter 90

The Times are Still Changing

Many of the managers and other professionals who come to Building the Business Case seminars explain why they have come in terms like these:

"We can't afford to fund every new project or development proposal anymore. We have to find a better way to prioritize proposals, decide which to continue, and which to drop."
"Starting this year, any request for non-budgeted funds is non-starter without a strong business case behind it."
"My company now requires a business case in order to move from one stage of product development to the next."
New government policy says we have to have to produce a business case before going forward with major capital projects."

In brief, the business case is no longer optional in more and more places. The problem, however, is that requiring people to produce a business case, or asking for one, doesn't tell them what this means or how to build one. Everyone talks about the business case these days but surprisingly few people know what that means. Those who make statements like these know, they still have a need to build business case case competency.

Will The Wall Stand? Look for the Building Blocks.

When they get serious about building business case competency, many people discover for the first time that are no standards for business case structure and content, no universally agreed format or template, no single standard method for building compelling decision support or rock-solid accountability.

The good news, however, is that good business cases all have some characteristics in common. In our seminars and publications, we call these essential building blocks. The metaphor is that of the stone wall, made of blocks: Anyone passing the wall can see immediately if major blocks are missing, or if all the blocks are solid and in place. A missing block means the wall is weak and may not stand. Similarly, if you know something about the essential blocks that belong in a strong business case, and why, you'll know immediately whether or not a newly presented case is strong, and whether or not to trust it.

What is your own level of business case competency? The list below is a scorecard covering the most important "blocks" for the case. For the individual case builder, business case competency means being able to ...

Define the subject of the business case in both in terms of actions and business objectives.
People write cases to predict the consequences of action, but actions have value only when they contribute to important business objectives.
Use the purpose of the case to direct case design.
If you understand the case purpose, you know who will use the case, to support which decisions or plans, when they need it, and--most important--what information they need.
Create a cost model that sets the rules for which cost items belong in the case and which do not.
Without these "rules" you'll never know if you've covered all the relevant costs, included unnecessary costs, or compared different action scenarios fairly.
Develop a solid benefits rationale to legitimize all the important benefits for the case.
This is the logic that connects the action and its consequences with business objectives,
Assign financial value to benefits that are difficult quantify.
Real contributions to important strategic objectives deserve a place in the case, even when the benefits are first measured in non-financial terms.
Measure and reduce risk.
You will never remove all uncertainty for projected business results. You are predicting the future, after all. But you can reduce risk to a minimum and measure what remains.
Identify contingencies that must be managed.
The business case stands on a foundation built of assumptions. Important assumptions often include factors that must be managed to target levels in order to achieve predicted results.
Recommend action based on business objectives.
The business case should be more than a "crystal ball" prediction of what to expect. Recommendations based on the case should work as a roadmap and practical guide to reaching business objectives.

Business Case Competency. Are We There Yet?

One competent individual does not make a competent organization. Beyond the individual case builder, how does your organization score? For the organization, business case competency means...

A common understanding of business case terms and vocabulary.
Those who build cases and those who use them, alike, need to have the same understanding of terms like "cost model," "decision criteria," and "risk factor."
Established standards for what makes an acceptable business case.
If you require people to produce a business case, they have to have objective, testable criteria for acceptability. Otherwise, there will be little or now consistency from case to case, and there will be endless differences of opinion on whether a given report "is" or "is not" a business case.
Top down management support for good business case practice.
Top management must take a leading role in establishing and exercising real business case competency. This means providing the "carrots and sticks" to ensure good practice, as well as generous management attention.
Accessible Internal resources for case builders.
Case builders benefit from having access to example cases, important data (salaries, prices, productivity figures, standard costs, etc.), and internal resources (software tools and professional expertise, for instance).
A history of successful case building and usage...
Business case competency improves when the organization actually uses the business case as a management and control tool, throughout the life of the time period analyzed. This is the only effective way to improve costing and valuing methods, spread the common understanding of business case principles and language, and provide the incentive for good business case discipline.

Take action! Learn more about benefits in the business case, for those in business and for those in government, education and nonprofit organizations from the Business Case Guide. Learn and practice proven methods for building your cases at a "Building the Business Case" Seminar.

Marty Schmidt
8 May 2006
mschmidt@solutionmatrix.com
www.solutionmatrix.com