BuildingBuilding Accurate Accurate Credible Credible

&& Compelling Compelling

Business Cases Business Cases

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Why do Business Cases Fail? Why do Business Cases Fail? Not considered strategicNot considered strategic Too much weight on soft benefitsToo much weight on soft benefits Risks / mitigations not consideredRisks / mitigations not considered Alternative approaches not evaluatedAlternative approaches not evaluated Errors in Business CaseErrors in Business Case Wrong solution or solution-drivenWrong solution or solution-driven

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Business Case ProcessBusiness Case Process1.

Problem Analysis“Case for Action”

2.Identify

Alternative Solutions

3.Evaluate

Alternatives

4.Structure

Business Case

Business Case ProcessBusiness Case Process1.

Problem Analysis“Case for Action”

2.Identify

Alternative Solutions

3.Evaluate

Alternatives

4.Structure

Business Case

Problem AnalysisProblem AnalysisCase for Action Case for Action

Create clear problem / opportunity Create clear problem / opportunity definitiondefinition

Why resolve? Why resolve? Is it strategically aligned?Is it strategically aligned? Is it financially justified?Is it financially justified? The “safety / regulatory” mythThe “safety / regulatory” myth

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Problem AnalysisProblem AnalysisCase for Action Case for Action

How much is it worth to solve?How much is it worth to solve?

How much of the problem needs to be solved?How much of the problem needs to be solved? Consider costs, benefits, time, riskConsider costs, benefits, time, risk Model entire Risk RangeModel entire Risk Range

Problem: Lowest through Likely to Highest CostsProblem: Lowest through Likely to Highest Costs Opportunity: Lowest through Likely BenefitsOpportunity: Lowest through Likely Benefits

Cost & benefits adjusted for time, risk / Cost & benefits adjusted for time, risk / probabilitiesprobabilities

Time-based: Payback, ROI, NPV, IRRTime-based: Payback, ROI, NPV, IRR Risk-adjusted: PVP, ANPVRisk-adjusted: PVP, ANPV Sensitivity analysisSensitivity analysis

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Problem AnalysisProblem AnalysisNon-Economic (soft) caseNon-Economic (soft) case

Economics leads – others support the caseEconomics leads – others support the case Try to quantifyTry to quantify Keep tryingKeep trying Distinguish features from benefitsDistinguish features from benefits Consider: Consider:

Regulatory – cost of non-complianceRegulatory – cost of non-compliance Safety – historical hard costs / estimates helpSafety – historical hard costs / estimates help Improved Business positioning – estimate $Improved Business positioning – estimate $ Customer satisfaction – estimate valueCustomer satisfaction – estimate value

Try again – don’t be afraid to estimateTry again – don’t be afraid to estimate

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Case for ActionCase for ActionEstimationEstimation

““Estimation is concerned with the Estimation is concerned with the prediction of uncertainties. It is more prediction of uncertainties. It is more dignified than fortune-telling, though dignified than fortune-telling, though

not always more accurate”not always more accurate”

…….unknown.unknown

KGW Consultants Ltd

Business Case ProcessBusiness Case Process1.

Problem Analysis“Case for Action”

2.Identify

Alternative Solutions

3.Evaluate

Alternatives

4.Structure

Business Case

Identify AlternativesIdentify Alternatives Brainstorm multiple alternativesBrainstorm multiple alternatives

““Do-nothing”Do-nothing” ““Shut down”Shut down” Partial solutionsPartial solutions Full solutionsFull solutions

KGW Consultants Ltd

Business Case ProcessBusiness Case Process1.

Problem Analysis“Case for Action”

2.Identify

Alternative Solutions

3.Evaluate

Alternatives

4.Structure

Business Case

Evaluate the AlternativesEvaluate the Alternatives

How long is it feasible? Buy time?How long is it feasible? Buy time? Strategic implicationsStrategic implications Consider probability of successful Consider probability of successful

outcomeoutcome Good enough?Good enough?

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Evaluate the AlternativesEvaluate the Alternatives

Differentiate the solutions:Differentiate the solutions: EconomicsEconomics

Cost & timeCost & time RiskRisk

How well does it align with strategy?How well does it align with strategy? Opportunity costs?Opportunity costs? ExtrasExtras

Compare / Eliminate based on problem Compare / Eliminate based on problem analysis constraintsanalysis constraints

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EconomicsEconomics

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(000,000’s)(000,000’s) Problem Alt 1 Alt 2 Alt 3

Mtnce costs NPV $1.6$1.6

Labour costs NPV $0.2$0.2

Solution cost NPV $1.8$1.8 $0.6$0.6 $0.5$0.5Lost revenues due to solution NPV $0.4$0.4Funds already spent $1.6$1.6Partial solution adjustment $1.3$1.3 $1.4$1.4

Totals $1.8$1.8 $2.2$2.2 $1.9$1.9 $1.9$1.9

Business Case ProcessBusiness Case Process1.

Problem Analysis“Case for Action”

2.Identify

Alternative Solutions

3.Evaluate

Alternatives

4.Structure

Business Case

Build Case OutlineBuild Case Outline

Build outline to suit purposeBuild outline to suit purpose Consider:Consider:

Executive SummaryExecutive Summary Problem DefinitionProblem Definition AlternativesAlternatives RisksRisks Financial CaseFinancial Case Soft CaseSoft Case RecommendationsRecommendations Post-project Audit PlanPost-project Audit Plan

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Structure & PresentationStructure & PresentationKey PointsKey Points

Use plain englishUse plain english NEVER use corporate or industry specific acronymsNEVER use corporate or industry specific acronyms Consider future readers (shareholders, auditors, etc)Consider future readers (shareholders, auditors, etc)

Lead with an economic caseLead with an economic case Identify the funding sourceIdentify the funding source Avoid head count benefits (use ABC)Avoid head count benefits (use ABC) Understand the corporate selection criteriaUnderstand the corporate selection criteria Show recommendation pros & consShow recommendation pros & cons Know your audience / structure Know your audience / structure

appropriatelyappropriately Pre-position your casePre-position your case Know when to foldKnow when to fold

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Questions?Questions?

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Success Equation Success Equation

Start with: Start with: A recognized quantifiable strategic problem or A recognized quantifiable strategic problem or

opportunityopportunity

+ Alternative Analysis+ Alternative Analysis+ Compelling Economics+ Compelling Economics+ Credible Pre-sold Supporters+ Credible Pre-sold Supporters+ Identified Funding Source+ Identified Funding Source

All in a clear, concise, convincing caseAll in a clear, concise, convincing case

= An Approved Project!= An Approved Project!

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HandoutsHandouts

MondayMondayatat

www.kgw-www.kgw-consultants.comconsultants.com

KGW Consultants Ltd