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Building a Compelling Business Case
Ken FulmerInformation Workplace Solutions
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Learning Presentation Objectives
• 1. Understand the executive perspective about a business case – what makes one compelling?
• 2. How to prepare a business case – the basic methodology.
• 3. Understand how to use the business case throughout the project lifecycle.
• 4. Understand how a business case ties into the process of Benefits Realization.
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Most business cases do not clearly define investment benefits
Percentage of CIOs with no process to evaluate IT investment against business strategy
Percentage of CIOs who don’t compare actual IT project's benefits to original targets
Percentage of CIOs who do not track financial metrics after making an investment decision
51%
68%
74%
Data: Gartner Group
80%Percentage of CIOs who say lack of financial skills makes quantifying IT benefits difficult?
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Why are Executives Frustrated with IT Projects
• Many projects fail to achieve expected value
• Legacy of ROI business cases that are: unrealistically high unknowingly low or unconvincing
• Feeling of broken promises
• Projects often proceed even when the business case falls
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Reasons for weak Business Cases
BusinessCase
BusinessCase
Lack stakeholder involvement and commitment
Focus on technology, not people and process
Don’t identify all potential benefits
Lack alignment with business objectives
Ignore major risks and mitigation strategy
Don’t clearly and credibly document the facts
Aren’t leveraged
Aren’t focused on achieving benefits
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What most executives expect is a business case process that is...
• Driven by the Business and collaborative
• Recognizes stakeholder issues and gains buy-in
• Focused on Business Outcomes and Change
• Able to STOP a project that no longer has value!
Brilliant and convincing
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Executives think about strategy and outcomes for the business
• An organization’s strategy:– Sets the vision, or framework for desired
accomplishments, with associated timeframes– Defines how benefits will be quantified and
measured– Provides the link between project output and
delivered benefits – aka – Better Business Outcomes!!!
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What makes a business case compelling?
TraditionalBusinessCase
Rational investmentdecision
Describes investmentopportunity
Helps managementdecide
CompellingBusinessCase
• Describes investment opportunity
• Helps management decide
Owned by the business Drives Results Drives Subsequent Work Considers Risk
Gets ProvenResults
+
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Sample IT Project Process
Initiation
Genesis
Execution
Controlling
ValueAchievement
Planning
Close-out
Business Case review and elaboration / confirmation at each Approval Stage gate
Multiple Reviews-Per milestone
Benefits Realization Verified
Pre- Deployment Review
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Genesis Phase
• Problem and Solution Options• Current Situation and Do Nothing Case• Identify and Evaluate Options
• Business Case – Feasibility • Business – Strategic, Market, Economics• Technical – Architecture, Security, Tech Options• Financial – ROI, Budgets• Impact Assessment – Organization, Customers, Suppliers, Partners• Risks – Business, Project, External, Internal Ops
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Ensure each stakeholder is involved in the Business Case development process
Chief financial officer
Project manager
Business unit managers/Stakeholders
Investment committee
Chief information officer
Portfolio management
committeeChief technology
officer
Executive Sponsor
(Number/type of stakeholder based on organizational size/complexity)
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Project Types & Economic Targets
1. Distinctive Business Line ROI Economic Case
2. Enabling Technology Benefits Attribution
Example Business Intelligence see next slide
to calculate
3. Infrastructure Depreciation Replacement
4. Regulatory Requirement Pork-Barrel Avoidance
TYPE Method
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Benefit Attribution
• Select several areas and projects and do an assessment of potential benefit• Have users establish a range of potential benefits (best guess - +/- 100%)• Have owner assign a % of that benefit which is attributable to having the
new capability• Take Composite of average benefit X Attribution = Derived Benefit
Attribution - in example below = 9.5 is the sum of the Derived Benefits
Project Benefit Range % Attribution Derived Benefit
“A” 10-20 20% 3
“B” 50-80 10 6.5
Total 60-100 ---- 9.5
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Search exhaustively for potential benefitsand establish metrics for each UP FRONT
Improve workforce efficiency
Increase span of control
Develop process experts
Centralize customer service
Improve partner relations
People Process Product
Reduce transaction processing times
Eliminate non-value added tasks
Minimize errors/rework Standardize processes Implement self- service Implement best
practices
Increase reliability and quality
Reduce complexity Lower future
development costs
Reduce Inventory
Warranty Costs
Increase future scalability, flexibility and agility Technology Costs or Appeal Decrease facilities and management costs
Infrastructure
Business
Improve Market position/share
Create new revenue sources
Shorten product development
Enable premium pricing
React faster to business change
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Benefits beyond ROI measures
• Beyond Financial Gain – tie to Strategy Objectives • Competitive Necessity• Market Demand• Vendor / Industry Standards Changes• Improves Quality or ties to strategic program (such as Six Sigma)
• Strategic Relevance is the second major factor to weight on Benefits• Assign weighting to degree of clarity and fit to the enterprise strategy• Benefit Attribution concepts
• If no ROI or direct strategic relevance –• Meet Regulatory Standards – such as air quality• Legal Requirements – such as email record keeping or file retentions• Ensure business continuity – such as implementing new software if old is not supported
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Intangible BenefitsCan be more emotional – less
Measurable
• Company Reputation • Customer retention and customer satisfaction• Social Commitment• Better Management Information• Better Job Satisfaction• Cost Avoidance
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Brilliant business cases give decision makers all the information they need
BusinessCase
Business Case Table of Contents Executive summary Opportunity/problem definition Options Considered – include do nothing Recommended solution Define Success Criteria & Measurement Impact Assessment – by Stakeholder Cost Benefit Analysis - Risk Assessment Financial analyses - summary Implementation approach/timeline for Business Case
– Value Achievement – Benefits Realization Plan
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Tips on Packaging the presentation
Package for the audience
Executive Summary (two to three pages)
Business language, not technical terms
Financials in the enterprise’s standard format
Body + Appendices for supporting detail
Convincing – use stories & graphics18
Sample Sunoco Presentation - How to Read the ROI Slides
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Description:
ProcessesProcess As-Is To-Be ROI
Impact
SunocoDealer/Franchise Price Notifications
POS Email Portal L
Coastal Dealer Price Notifications
Fax Portal L
Distributor/Rack Price Notifications
DTN Portal L
Co-Op/Optima Price Notifications
Fax Portal L
Dealer/Franchise Price Surveys
Manual/Phone Portal H
Co-Optima Price Surveys Fax Portal H
Rack Price Surveys OPIS OPIS NA
SunocoNet Implementation
Estimated ROI
Channels Impacted: Dealer/Franchise Distributor Co-Op Optima Internal
A brief description of the process area and key areas of expected ROI will appear here.
Pricing Module: Rack Price and Pump Price Components. Anticipate some modification.
Integration with Sunoco legacy pricing systems required.
Price Surveys: Utilize SunocoNet Online Form Functionality. Medium complexity to interface with legacy system (vs. email to form recipient)
Process Est. Annual Savings
Eliminate DTN for Pricing $XX.XX
Eliminate Fax for Pricing/Surveys $XX.XX
Eliminate POS email for Pricing $XX.XX
Eliminate Survey Data-Entry $XX.XX
Total $XX.XXBusiness Impact
Customer
Sunoco
Low Med. High Complexity/Phase
M/1
Indicates which channels are impacted by the processes. Also indicates whether Sunoco is impacted (Internal).
Indicates which channels are impacted by the processes. Also indicates whether Sunoco is impacted (Internal).
Discusses some of the key technical approaches/issues for integrating SunocoNet to support the identified processes..
Discusses some of the key technical approaches/issues for integrating SunocoNet to support the identified processes..
This area indicates the key processes identified during the ROI assessment and interviews. Indicated are the current As-Is process and the To-Be process. ROI Impact is shown as Low-High (H,M,L). High ROI is >$50,000 in annual savings, Medium is defined as $25,000-$49,000 and Low ROI is <$25,000 in annual savings.
This area indicates the key processes identified during the ROI assessment and interviews. Indicated are the current As-Is process and the To-Be process. ROI Impact is shown as Low-High (H,M,L). High ROI is >$50,000 in annual savings, Medium is defined as $25,000-$49,000 and Low ROI is <$25,000 in annual savings.
Shows the relative amount of business change impact on the customer (Dealer/Franchisee, Distributor) and Sunoco. This is based on subjective industry experience.
Shows the relative amount of business change impact on the customer (Dealer/Franchisee, Distributor) and Sunoco. This is based on subjective industry experience.
Indicates the integration complexity (Low-High) and the planned implementation phase.
Indicates the integration complexity (Low-High) and the planned implementation phase.
This area shows the tangible ROI annual savings by process area.
This area shows the tangible ROI annual savings by process area.
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Use the business case to guide project execution
Project timeline
Scope change
Schedule/cost trade-off
Phase review
Phase review
Change to the business environment
Change in management structure
Portfolio re-prioritization
Phase review
Risk assessment/mitigation
Schedule/cost/scope trade-off
Execution
BusinessCase
BusinessCase
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Harvesting Benefits – Value
• Value Achievement – Realizing Benefits after the Project
• Governance Process should include ownership of Post Project
• Create a plan during project close-out for benefits realization
• Establish benefits measurements up front and review
• Post Audit Review should be done by non-project staff (Team)
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Benefits Realization
• A process that ensures project benefits are realized as anticipated
- Intended benefits are identified at the project proposal stage
• Cost Benefit Analysis with timeframes
• “Benefit Owner” is responsible for benefit
– Ends with post-implementation measurement to see if the project delivery matched expectations
• Business case is intended to fit within the Benefits Realization Process
• It is all about getting “Better Business Outcomes”
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Recommendations
Develop business cases collaboratively with all the stakeholders
Carefully document business cases so they are clear, concise, credible, connected to business objectives and cognizant of risks
Create a Benefits Realization Model – ROI, Strategic Fit, Risk, and Impact are typical components.
Leverage the business case throughout the project life cycle to achieve the payoff – progressively elaborate benefits and costs as the project learns them.
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QUESTIONS & Comments
• Ken Fulmer• Former CTO – Sunoco, Inc• Former CIO – Delek, US • Principal – Information Workplace Solutions, Inc.• Current – Vice-Chair, IIBA Board of Directors• [email protected]
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