One of the key deliverables in the process of initiating a project managed using the PRINCE2 methodology is to create the business case document. A project in PRINCE2 is defined as ‘A management environment that is created for the purpose of delivering one or more business products according to a specified business case’.
What is a business case document? Why is it important to create one? What are the key decisions made using the business case document when initiating a project? How will the business case help in managing and controlling a project and in ensuring that the project continues to deliver business value? This article aims to address above questions.
Why create a Business Case document?
A business case is mainly used to document the justification for undertaking the project, based on the estimated cost of development and implementation against the risks and anticipated business benefits and savings to be gained. It is a justification for an investment based on the costs versus the anticipated business benefits of the solution option selected for implementation. The business case is a primary mechanism of project decision-making and is a means of assessing alternative and competing investment / solution options.
When should you create the Business Case document?
For organizations following PRINCE2, to get to the point of creating a business case document itself involves a big process. Requirement for projects arise from different sources. For example strategic level stakeholders may have strategic objectives that they wish to fulfill which may result in projects. Similarly tactical managers, functional managers and even operational staff may have problems that need to be resolved or business opportunities that they want to take advantage of which may result in projects. The context or the environment that they operate in and the stakeholders involved too may have an impact in creating requirements for new projects. A project mandate would first of all be generated once a business need such as above is identified.
The scope inclusions and exclusions of the project should be identified and will help identify solution options to meet such requirements. The initial group of individuals would then be generating solution options to solve the identified problems or opportunities. For each solution option a detailed feasibility study should be done along the four main feasibility study dimensions of operational feasibility, technical feasibility, time feasibility and cost-benefit feasibility. This would help the team identify the advantages and disadvantages of each solution option and help select the most suitable solution option. This analysis must also include an initial assessment of the cost, potential timelines and the risks involved.
Creating the Business Case and sections of the document
The business case documents the justification for undertaking the project, based on the estimated cost of development and implementation against the risks and anticipated business benefits and savings to be gained. The content for the document is based on the analysis explained above.
- The sections of a properly formulated business case are as listed below.
- Executive Summary – Summary of the content of the business case document including details about the organization, business problem / opportunity, key stakeholders, solution options evaluated and the solution option selected.
- Reasons for the project – Reasons as to why the project is needed including analysis of the current state, the future state and an identification of the gap.
- Solution options – The different solution options evaluated outlining the rejected solution options and detailing out the preferred solution option.
- Feasibility analysis – A summary of the feasibility analysis done on the identified solution options.
- Expected benefits for the selected solution option with explanations and assumptions.
- Expected disbenefits for the selected solution option with explanations.
- Summary of project costs taken from the project plan. If the project plan is not created yet it would be good to have an outline cost for the selected solution option.
- Investment appraisal – The organization may do an ROI, NPV, IRR analysis to ascertain the potential viability and benefits from the project.
- Risk analysis listing out a risk log with positive and negative risks along with risk mitigation strategies.
- Timescales – Outline execution plan that will be detailed out in the Project Initiation Document (PID).
Continual assessment of project progress using the Business Case
The business case document provides a blueprint based on which project progress can be monitored by the project manager and the project board. It provides a means for continuing to assess the viability of the project. In PRINCE2, the Project Board normally reviews the business case at the project initiation stage, end of each project stage, when any exceptions arise and at stage or project closure.
The business case would be the main input to create the Project Initiation Document (PID) for the selected solution option. Some teams put a summary of the business case findings as a section in the PID document itself and use it to make an elevator pitch to the business sponsor and other senior executives of the project board. Once the project is approved, the project manager is assigned and he would create the project charter document with key inputs from the business case.
The Project Manager and the Project Board will monitor the ongoing viability of the project against the business case. At the end of each stage or iteration the relevant stakeholders will sit together, evaluate the deliverables related to both the product and the process against the expected benefits identified in the business case to ascertain whether the business value set out to achieve is being met. Decisions to get the project back on track would thus be based on the baseline intentions defined in the business case. Finally, the business case is used to assess whether benefits are achieved when the project is delivered through a post implementation review.
The business case is not a constant. It may change multiple times during the lifetime of the project. Evaluation at the end of each iteration or stage will help the project team and the project board realizes that changes are required in terms of objectives, expected business value, scope or even timelines. Hence, the initial business case may become invalid and thus be required to be updated with the consensus of the key stakeholders.
The discussion above is just an introduction to the ocean of creating business case documents. Hope this will inspire you to further dive into this ocean.