Building a Project’s Business Case

January 8, 2009 | Author: PM Hut | Filed under: Project Management Best Practices

Building a Project’s Business Case
By ExecutiveBrief Staff

Forward-looking project managers realize that to avoid failure, they should build the business case for their projects by getting intimately knowledgeable about the reasons why sponsors approved their projects.

Too many projects get the axe because of the lack of business cases that justify their existence. When project sponsors begin to see projects only in terms of costs instead of potential rewards, there are higher chances that the projects would be canceled.

It is not the job of the project manager to build the business case. Ideally, project stakeholders and sponsors evaluate the business value and possible ROI from a project. If the project is seen in terms of generating income or reducing cost, the project will have the green light. This is the situation in the ideal world, but this scenario happens a lot less than one would like to believe.

Forward-looking project managers realize that to avoid failure, they should build the business case for their projects by getting intimately knowledgeable about the reasons why sponsors approved their projects. A project manager should work closely with clients, sponsors and other stakeholders, and ask the following questions:

What problems should the project address?

By interviewing project sponsors, the project manager can determine their goals and discuss the issues that the project would solve. In addition to project sponsors, the ones who are dealing with the issues at the workplace, perhaps on a daily basis, are a good source of ideas about the extent and many facets of the problem. Looking at day-to-day challenges from end-users’ point of view enables the project manager to get a better handle of the requirements of the project in terms of design and technical upgrades, as well as in terms of how it will solve end-user problems.

What are the strategic goals of the project?

Is it an easier system? Increased productivity? Better networking? Conversion to a marketable product? No matter what it the goals are, they must also come from and supported by the end-users.  At the end of the day, it will all boil down to the business value of the project. And by business value, it means cost reduction, better productivity, and the possibility of selling the product or service to the wider public.  Make sure that the goals are clear and the project’s objectives must reflect these goals.

What are the project’s basic requirements and what can end-users live without?

Aside from building the requirements based on the needs of its users, the project manager should also build the projects’ technical and design requirements and ask what bells and whistles it should have. The project may have a lot of feature that do not have business justifications, resulting in features that took too long to build.  Separating needs from fluff allows the project manager to formulate requirements, identify scope, and allocate resources that are important in creating a working version of the project. The quicker the iteration, the better the chances are of project survival.

What is the project’s ROI?

Even at the early stage of the project, it is possible to envision ballpark ROI figures. Because all projects incur costs, a project manager should have a fair idea of when investments will be recovered and generate positive cash flow.

© ExecutiveBrief 2008

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5 people have left comments

Help me out here. Why is it or should it be the responsibility of the PROJECT MANAGER to make the business case?

What happened to the project sponsor? Assuming PMI’s most recent definition of project sponsor is valid, “the person or group who provides financing” and who “garners support from senior management and promotes the benefits the project will bring”, shouldn’t the responsibility be on the person who initiated the project in the first place be the more logical person to be held accountable for justifying the business case?

Now, I am not saying that the Project Sponsor is or should be totally divorced from this process. Clearly, the project manager can and should be responsible, along with the project team, to provide both qualitative and quantitative input, but to hold the PM responsible for making the business case seems to me to be at best a conflict of interest.

BR,
Dr. PDG, Jakarta

Dr. Paul D Giammalvo wrote on January 8, 2009 - 9:32 pm | Visit Link

I agree with Dr. Giammalvo that the responsibility for defining the project’s business case doesn’t lie solely with the PM. That said, I would argue that, realistically, a well-defined business case with concrete, measurable business objectives has been a rarity in my experience. I would be more than happy to have my PM (or any other member of the team) help get those objectives defined.

Too often, I find that the business case is something of little value, like “decrease costs” or “get more customers/users”. Without specific, quantifiable objectives, assessing project success is just a matter of perspective.

In my daily work, I hold the Product Manager or Business Analyst responsible for tracing requirements to concrete business objectives. While the PdM/BA may not DEFINE them, he or she must make sure that they are in place in order to complete the project’s requirements. Getting good business objectives is usually tricky, but it pays off immensely when trying to set scope and make prioritization decisions.

Mike Alexander wrote on January 19, 2009 - 4:26 pm | Visit Link

Should we develop the Business Case and have it approved before working on the Project Charter or should it be the other way around? Personally I think the Charter should be developed only after the Business Case is built and approved because the Business Case justifies the project and authorizes the needed funding and resources.

David Lui wrote on April 14, 2009 - 1:58 pm | Visit Link

[...] Business Case will contain information weighing project cost and risk against the business benefits. Put simply, [...]

Project Risk and Risk Management - PM Hut wrote on January 20, 2010 - 11:22 pm | Visit Link

It’s the Business Analysis that creates the Business Case.

Bob wrote on October 25, 2010 - 8:35 pm | Visit Link

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