CQU Project Management education

Missing: one project business case

Adeline Teoh
July 6, 2011

If the business case were more tightly tethered to the value the project will bring to an organisation, rather than the cost of the running the project, not only will clients and project managers be able to justify the budget, it would optimise projects beyond a simple return on investment calculation, Simms argues.

His previous work with the Boston Consulting Group showed this clearly. “We ran a number of studies on where does the value go on projects and the biggest single destroyer was the business case, which missed so much of the value because it wasn’t focused. As soon as you have enough benefits for a positive ROI, you stop. Because that’s what the thing has been set up to do, justify funding. We invert that and say it’s actually all about identifying the benefits and how much it costs to deliver them.”

Attributing benefits in the business case

The TOP founders teach businesses to calculate the value attributable to project benefits. The key here is a transparent budget and a transparent financial model. Chapman says in many cases, numbers are made up to justify the project, which undermines the benefits that the project could attain if the business case were done properly.

“What we also teach people is that the whole point of having a clear transparent model for financial benefits is that you then start tracking [those benefits] as soon as you put your model together, even before you started the project,” she says.

“You want to check that the base data that you’ve done a projection for is accurate. You want to track that your financial model is going to track your inputs into the dollar outputs that you’re expecting, and you also use that model to drive action. So if you’re finding that something’s wrong and your projected dollar value is not going to give you what you want, then you want to take action while you still can rather than two years later when you come back to reconstruct it with a post-implementation review.”

This method of having benefits correspond with costs will assist with decision-making process, Chapman adds. Then transparency allows executives to see, firstly, whether the project is worth doing or, secondly, whether the project contains opportunities as yet unrealised.

“A lot of these projects do have ridiculous numbers and wouldn’t be justified otherwise, so you shouldn’t do them. But correspondingly we’ve also found situations where if you take people through this really structured process, the engineered thinking process, they find benefits,” says Chapman.

And opportunity is really the boat that so many organisations are missing, as there are so many projects that could trim scope and budget in some areas and focus on others where the benefits will be greater.

Chapman describes a “marginal project” that turned into a priority once the organisation realised what the project could do. “By the end of it the penny dropped and someone said, ‘If we could just get the customers to order the correct quantity, the correct price and the correct stock item we would reduce our returns from 10% of sales to less than 1%’. Well that was worth $50 million a year and they had never twigged that that was an opportunity.”

So what does your business case look like? If it looks anything like the project it has become, you’ll have no trouble realising the benefits. Case solved.

TOP is a 2011 Gartner Cool Vendor.

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Adeline Teoh
Adeline Teoh is the editor and publisher of ProjectManager.com.au. She has more than a decade of publishing experience in the fields of business and education, and has specialised in writing about project management since 2007.
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