A short business case

Projects need (ongoing) economic justification. It is a good idea to create so-called business cases. In practice, however, there are problems: either no business case is created at all or the document is so big that no one can prove it. Then we have the problem that they are often not correct. In this article, I propose a short form on one page to start the next steps.

There is a version of this article in German language.

What is the purpose of a business case?

For me, business cases have a very practical purpose: they should prevent an organization from starting too many projects at the same time. Many projects are started with great enthusiasm and starve over time because other projects are somehow also important. This approach significantly delays the delivery of value and frustrates everyone involved. If a project generates great value, it should be (successfully) completed as quickly as possible.

So the value of business cases lies not in the single document, but in all the cases for projects that are planned next. If we know that we always take on too much, we can use the business cases to decide what to focus on. It would be practical to present the most important information on one page.

What do we need in a business case?

We are at an early stage. We shouldn't spend too much time preparing a business case if we're not sure whether we're going to do the project at all. There is still a lot of uncertainty in this situation:

• We know too few details about the solution.
• Therefore, we can neither calculate the costs nor the benefits in concrete terms.

But we do know other things:

• We know why we need the project.
• We know which business processes are affected.
• We can estimate the ranges of costs and benefits.

We prepare this information on one page. With a little preparation, the team can complete this in just a few hours.

An initial business case could be described by the following information:

• Title: What do we call the project?
• Goals: What do we actually want to achieve? The goal is never to build a specific technical solution. Projects create organizational skills. How can we describe these? What are the performance requirements?
• Options: Even if we have a preferred solution, we should still think about other options. What other simple and complex solutions can we also use to achieve the goal? Otherwise, we run the risk of choosing the wrong solution and not seeing any alternatives.
• Benefits: Before we go into the costs, we should look at the benefits. Benefits could be additional revenue, avoided cost or improved quality. We only get the benefit if we permanently change our business processes. What changes will bring us the benefits? We don't need perfect and discrete figures. Ranges are often good enough.
• Costs: Where do one-time or permanent costs arise that we need to finance? In what order of magnitude?
• Investment strategy: If there is a high level of uncertainty, it is reasonable not to spend all the money at once. We can consider individual steps through which we buy knowledge. For example, instead of spending EUR 2 million straight away, we can divide the project into phases: What can we do with EUR 10,000 to build an initial solution to see if the solution is any good? In the next step, we could invest EUR 100,000 and then EUR 200,000. If the first step shows that there is no practical solution, we have only lost 10,000 EUR (instead of 2 million). After the second step, we would only have lost EUR 110,000 and so on. So what are sensible intermediate steps for learning?
• Pay back strategy: Projects are not approved, they are financed. Whoever gives money expects a benefit at some point. In which steps do we deliver the benefit? Benefits can be money (more sales or lower costs). It can also be features that others have been waiting for a long time. When will the money arrive at the earliest? When will the next person get something?

We can collect this information on a DIN A3 page or on a flip chart.

Template for a one-page business case

What are the advantages of this format?

When we decide on the next projects, we can compare all ideas more easily. We have had the following experiences with this template:

• Something like an economic justification document is being drawn up.
• It took less time than everyone had expected.
• If you force yourself to think about several possible solutions, you will come up with even better ones. By asking clever questions, you can quickly find out what is actually at stake.
• If you think about an investment and repayment strategy in advance, you can plan the project better. We can plan the technical implementation so that we can see or show something earlier.
• If we invest cautiously, we can define termination conditions or learning objectives. Bad projects should be stopped at an early stage.
• In the past, managers looked for the mistakes in the business cases. With this format, they guide their employees and come up with new ideas by asking good questions. 

Does this template replace classic business cases? Probably not. They are a good source for the next version of the business case. They encourage learning and help those involved to formulate the next questions.

If you want to delve deeper into the topic of business cases, you will find good suggestions in these books:

• Ward, John ; Daniel, Elizabeth: Benefits Management : How to Increase the Business Value of Your IT Projects. New York: John Wiley & Sons, 2012. https://onlinelibrary.wiley.com/doi/book/10.1002/9781119208242
  
• Hubbard, Douglas W.: How to Measure Anything : Finding the Value of Intangibles in Business. New York: John Wiley & Sons, 2010. https://hubbardresearch.com/publications/how-to-measure-anything-book/
  
• Alleman, Glen: Performance-Based Project Management : Increasing the Probablility of Project Success. New York: Amacom, 2014. https://www.oreilly.com/library/view/performance-based-project-management/9780814433300/
  
• Flyvbjerg, Bent ; Gardner, Dan: How Big Things Get Done : The Surprising Factors That Determine the Fate of Every Project, from Home Renovations to Space Exploration and Everything In Between. New York: Crown, 2023. https://www.penguinrandomhouse.ca/books/672118/how-big-things-get-done-by-bent-flyvbjerg-and-dan-gardner/9780771098437