The UK has over 900 public sector organisations, with each typically planning and procuring around 10 key investments every year. As vast amounts of money are being invested around the country on new projects, a number of questions arise: How can we ensure value for money? How can we ensure we have selected the correct course of action? How can we ensure these investments are justified?
The answer lies in the business case. Business cases should provide scrutiny, ensuring that what is proposed is:
- The right sort of investment
- Affordable, desirable and viable
- Offering value for money for shareholders and/or customers
The problem is, the importance of business cases is often undervalued and not given sufficient resources or funding. This has led to underestimated costs, inflated budgets and missed deadlines. In the worst of cases, it leads to project failure, as requirements are not met, and business value is not delivered.
We can see examples of poor business case planning in many major public sector projects: the Channel Tunnel’s costs were underestimated by 80%, London’s Jubilee line extension was underestimated by £1.4 billion and the project duration understated by 2 years, and the Scottish Parliament Building was delivered 10 times over budget and 3 years late.
A research paper in 2007 entitled ‘Building Better Business Cases for IT Investments’ looked at how over 100 European organisations developed their business cases and how these approaches were related to overall success in investments. Although producing business cases was a normal and expected process, the findings suggested that they were often of poor quality.
65% of respondents expressed dissatisfaction with their inability to identify all benefits and 69% stated inadequacies in the ‘true’ value of the benefits which were included. Furthermore, benefits were often exaggerated or un-achievable in the first place, and there was a lack of understanding of the business change needed to achieve the benefits. Business cases which were focused on financial or efficiency savings tended to be less successful, which was a problem because financial benefits were often the only thing senior management was interested in.
So what makes a successful business case? The authors recommend that business cases should include a ‘wide range’ of benefit types and recognize ‘all possible’ benefits. This includes ‘soft’ or ‘subjective’ benefits, which are more appealing to stakeholders and which often return greater commitment from those delivering the projects.
Author: Stuart Armstrong
Account Manager: Chloe De Glanville
Original post: http://blog.apmg-international.com/the-importance-of-a-good-business-case/