When you know you need a business case, the temptation is to begin looking for business costs and business benefits immediately. That is the first step on the road to meaningless results. Unless the case design is complete, costs and benefits do not exist.
Costs and benefits exist only by design!
Reaching objectives has value. Business Benefits and Costs are best defined in terms of business objectives.
That isn't always what people in a hurry want to hear. Sometimes there's a real sense of urgency. The financial justification or the ROI really does have to be finished yesterday or else heads will roll. "Never mind the academic niceties: this thing has to get done!" I receive calls from business people who start by telling me they are building a business case for this or that proposal, or decision. Invariably they ask immediately "Which benefits should I include?" "Which costs belong in the case?" The best answer at that point is: "Wait! You've got the cart before the horse. First you have to design the case."
The fact is that two different analysts can each build a case for a the same proposed action, and they can deliver two sets of results (projected costs and benefits) that are very different, yet both are "correct." The two analysts simply worked to different design plans.
For more on business case costs and benefits please see the articles on business benefits and total cost of ownership. For more examples see Business Case Essentials.
A Statement of Costs and Benefits Doctrine
Many people have the idea that once the proposed action or decision is known ("Server system upgrade," "Environmental protection proposal," or "Training site selection"), the costs and benefits are properties of nature out there waiting to be measured--like the temperature outdoors or the height of Mt. Everest. Here, however, is a fundamental truth for all but the very simplest of business case projects:
Costs and benefits do not exist--they are not defined--until you design the case.
You can take it as a statement of business case doctrine. That is why two different case designs can be "correct" yet produce different results. The reasons for this can be explained in the context of the 6D Business Case Framework, the focus of our business case seminars and books such as Business Case Essentials.
Design follows Definition. Everything Else Depends on Design
Case building begins with case definition. "Define" in fact stands as the first stage in the 6D Business Case Development Framework. Cases are built for many different subjects and many different reasons, but almost all are defined by two things: a proposed action, and a statement of business objectives to be addressed by the action.
When these two points are articulated clearly, and agreed, the case is defined.
Only when the definition is in place can the design step begin. Case design ultimately determines which costs and which benefits belong in the case, but on the way to that point the case builder free to structure design elements in many different ways. Different case builders may differ, for instance in their statements of design elements such as:
- The boundaries and scope of the case (whose costs and whose benefits are covered, over what time period).
- Scenario design and financial metrics that address the questions the case is supposed to answer.
- A cost model to provide the rules for which costs belong in the case and which do not.
- A benefits rationale, legitimizing benefits for the case and methods used to assign value to them (including non financial benefits).
Without these design elements, a hundred different analysts can come up with a hundred different business case results and no one knows which to believe. It's not clear if the results answer the questions that motivated the case analysis in the first place.
In a nutshell these design elements are the "rules" for deciding what goes into the case and what does not, the basis for legitimizing benefits, and the only way to know with confidence that different proposed actions are compared fairly. Without them, there is no way to answer the questions posed earlier: Which costs, and which benefits belong in this case? Without them, there is no way of knowing what the case results mean
Take Action!
Learn and practice proven methods for building your cases at a Building the Business Case Seminar. Learn more about business case design from one of our books, the Business Case Guide, or the most frequently cited business case authority in print, Business Case Essentials.
By Marty Schmidt. Copyright © 2004-2016.
Published by Solution Matrix Limited.
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