Credibility is the key aspect of a compelling business case or indeed any business case. Too often they are recognised as pure works of fiction with inflated and improbable benefits positions, depressed costs and a blithe ignorance of the risks; it is little short of astonishing that so few people recognise and respect the value of a good business case. This article is aimed at the strategic business requirements when creating a compelling business case, you can read more about how to construct and write compelling business cases here.
ANALYSE THE SCENARIO
Even the term good business case is loaded and misunderstood which suggests the whole concept is. Many see the business case as a justification to spend money; it is tantamount to a ‘smash and grab raid’ on the corporate treasury and once those funds have been accessed the business case is cheerfully forgotten. Under such a construct a ‘good’ business case is one that allows you to get the funds regardless of its veracity – this is simply bad practice and overlooks the real purpose of the business cases.
The real purpose of a compelling business case is to assist in the making of sound decisions in the face of uncertainty. Whilst one of its frequent uses is to gauge the validity of investments it is, at heart, simply a decision making tool, and like any tool can be used appropriately or abused.
CLEARLY DEFINE THE BENEFITS
Once this is understood it is clear that a ‘good’ business case is not one that has a positive NPV or promises significant returns at low risk. It is one that accurately portrays, to the decision maker, the outlay that they must face if they are to secure the return that they seek and, crucially, the risk to both that outlay and return. Indeed, if you have understood this, a good business case is one that clearly tells you “don’t touch this with a barge-pole!” just as much as one that says “invest immediately!”
UNDERSTAND STRATEGIC ALIGNMENT WITH CORPORATE GOALS
So a compelling business case is not one that makes fanciful claims about a sunlit future or easy money and huge reward. It is one that has a realistic and credible perspective on the benefits or utility the choice offers and a clear line of sight as to how this benefit will be achieved and by whom (and if you really want it to compel these people must be positive contributors to that view). It must also portray an equally realistic and credible view of the cost and resources required to satisfy it; that is the estimates must faithfully portray the uncertainties and cover all aspects of cost (OPEX and CAPEX and also whole life costs).
IDENTIFY AND MAP KEY PERFORMANCE INDICATORS (KPI)
Even then it is not a compelling business case; for it must also accommodate a realistic and credible view of the risks. Even relatively mature business cases often have this as an Achilles’ heel, the focus is generally on cost risks (those that affect the delivery of the initiative and will therefore reflect on the budget). This must be represented but what is often more germane is the benefit and business risk (those risks that might lead to a failure of benefits or other adverse impacts on the business post-initiative).
ASSESS THE ECONOMIC RISK OF NO INVESTMENT
With all three aspects, cost, benefit and risk, appropriately addressed you have achieved a compelling business case – that is it will compel its reader to reach a sound and justifiable conclusion about what their next step should be! That might be to invest, but it equally might be to stop the initiative – either is a good decision if the business case has presented a clear and credible view to the decision maker and they have confidently made a choice; then the compelling business case has served its primary purpose.
There are, of course, multiple other uses for business cases and the mindset that supports them; CITI has over thirty years of experience in helping sponsors and their organisations to develop and enhance business case creation and use – what are your experiences? Would you like to discuss the use of business cases in your organisation?