business cases and benefits management
TRANSCRIPT
Business Cases and Benefits Management
Alan McSweeney
April 12, 2023 2
Objectives
• Why is Benefits management an important competency for organisations?
• What is a Business case, how do you write one?
• How should the Business case and Benefits be
measured and managed during the project’s delivery?
• Some differing perspectives…..
April 12, 2023 3
Scope
• Draws on experience in providing services to Financial services and Corporate clients investing in Information Technology projects.
April 12, 2023 4
Hints and tips on Mountain Climbing, not a guide to Climbing Mountains…
April 12, 2023 5
Project Outcomes
• 2004 Standish Group Report http://www.standishgroup.com/− 29% projects succeeded (delivered on time, on
budget, with required features and functions)− 53% are challenged (late, over budget and /or with
less than the required features and functions)− 8% have failed (cancelled prior to completion or
delivered and never used)− Failures cost an estimated US$145 billion
April 12, 2023 6
Benefits Approach
• How do we pick the winning investments?• How do we ensure that we are getting value
from these investments and know that we are doing so?− Benefits do not just happen with delivery− Benefits rarely happen according to plan− Benefits realisation is a process that must be
managed like any other business process
April 12, 2023 7
Four Questions
• 1. Are we doing the right thing?− (Re)definition of business, program alignment
• 2. Are we doing them the right way?− Organisational structure, program integration
• 3. Are we getting them done well?− Organisational capability, support structure
• 4. Are we getting the benefits?− Proactive management of benefits realisation
process as a whole
April 12, 2023 8
Four Questions
2. Are we doing
them the right way?
3. Are we getting them done well?
4. Are we getting the benefits?
1. Are we doing the
right thing?
Alignment
Integration Capability/Efficiency
Benefits
April 12, 2023 9
Benefits Management
• A process of organising and managing such that potential benefits are actually realised
• Benefits Management means maximising the benefits from projects, changes and initiatives
April 12, 2023 10
What is a Benefit?
•Improve•Increase•Reduce•Eliminate•Stop
• The value placed by a stakeholder on the performance improvement or new capability resulting from an outcome
• Benefits are identified by asking stakeholders to articulate how they believe they (or the people they represent) will experience the value of the outcome, i.e. stakeholders answer the question “what’s in it for me?”
April 12, 2023 11
Benefits Analysis
• What benefits do we want / could we get?• Identify benefits• Link to business objectives• Link to enablers• For each benefit:
− How can you measure it− Can we quantify it− Is there a financial value?
April 12, 2023 12
Benefits Realisation Planning for Programmes
• A set of activities to design and plan an integrated change programme to deliver quality and value benefits to patients, staff and local communities
• Benefit realisation IS NOT only about whether the project delivered things on time to budget, etc.
• Identifying benefits will not make them happen− Preparation− Objectives and Outcomes− Benefits and Measures− Validation and Completion− Support, Manage and Update
April 12, 2023 13
Benefits Realisation Management Process
Develop/updatebusiness case;
time-phased cost,benefit flows;plans
Performto plans
Benefitsbeing
realised?
Assumptionsstill valid?
Determine corrective actions
Yes
Yes
NoNo
April 12, 2023 14
Benefits Management Challenge
• Technology driven• Value for MONEY• Expenditure proposal• Loose linkage to business
need• IT implementation plan• Business manager as on-
looker• Large set of unfocussed
functionality• Stakeholder “subject to”• Trained in technology• Do a technology project audit
• Benefits driven• VALUE for money• Business case• Integration with business
drivers• Change management plan• Business manager involved
and in control• IT investment sufficient to do
the job• Stakeholders “involved in”• Education in exploiting.• Obtain business benefit then
review
April 12, 2023 15
A Benefits Driven Approach Will …
• … Allow you to:− Build the case for your investment− Forecast benefits and business impact− Identify key business changes− Gain buy-in to the project from all participants− Identify early wins and prioritise the application
portfolio− Reduce risk by having better understanding of
expected outcomes and barriers to success
April 12, 2023 16
Silver Bullets
• 60-80% of projects do not deliver benefits• Success is usually measured in terms of
delivery time and cost• Is the system in use or useful is rarely
examined• Failure = Blame = Bad Press = Punishment
April 12, 2023 17
• Lots of projects become disconnected from the business need, processes and people that created them
• Benefits Management reconnects project to benefits
• Structured approach that will− Make the link between the enablers and the
organisation’s strategic objectives− Build the case for investment− Gain buy-in to the project from all participants− Maximise the benefit from investment
April 12, 2023 18
The Why: A Benefits Led Approach to Project Selection…
• Is a critical success factor for organisations who are seeking to obtain best in class performance− Assuming that you assess/understand your market
position relative to market…
• Aligns the delivery of change with business objectives and strategy− Assuming there is an agreed strategy to align with…
April 12, 2023 19
The Why: A Benefits Led Approach to Project Selection…
• Enables decisions to be made around portfolio management and prioritisation− Not who shouts loudest…
• Creates a culture of accountability and measurement in service delivery.− Or gives the Business back control over the portfolio
of projects…
April 12, 2023 20
• High performing companies are 50% more likely to use analytic information strategically
33%
23%
77%
40%
36%
65%
8%
23%
Have significant decision-support/analytical
capabilities
Value Analytical insights to a very large
extent
Have above average analytical capability
within industry
Use analytics across their entire
organization
Source: Competing on Analytics, Thomas Davenport
Best in Class Performance: the Evidence….
Low Performers
High Performers
April 12, 2023 21
Benefits in Projects
• We invest in projects because of the perceived Benefits they bring
• The Benefits justify the project− Linked to Corporate Objectives & Priorities− Can be wide-ranging
• Statutory, Social, Economic…
− Often financial (but not exclusively)− Sometimes hard to measure
April 12, 2023 22
Financial Benefits
• Time saved, posts lost, costs avoided, costs reduced…− Calculate a £ figure− Work out timing (investment & saving)
• Payback (in years)− When Savings equal Investment
• NPV (Net Present Value)− A common measure of a project’s value− Cash flows adjusted for time they occur− Using a 5% discount rate
April 12, 2023 23
Non-financial Benefits
• Is this a Corporate priority?• Look for a performance measure
− BVPI− Other PI
• Measure− Value at start of project− Predicted value at end of project− Actual value at end of project
April 12, 2023 24
Organisation Development
• The four pillars of Change− Driven by the Customer− Improving our Performance− Learning & Developing− Optimising our Finances
• These describe the type of organisation we want to be
• Each project has to contribute
April 12, 2023 25
Later Benefits
• Project puts a capability in place− To be exploited by a later project
• Must link these projects− Is funding in place for later project?− Are we committed to later project?− If not, investment in first project may be wasted
April 12, 2023 26
Later Benefits
• Project delivers as expected− But Benefits only measurable later
• Need to link to process− What process?− The owner?− When and how to measure?
April 12, 2023 27
Realising Benefits
• Financial saving− Remove £ from next year’s budget− Saving included in formal budget setting process− Clarity about what was saved where
• Posts lost− At risk register
• Identify the staff affected, communicate− Process based on existing Council policies
• Consultation, redeploy, retrain … redundancy• Minimise redundancy costs
− Affects timing of realisation of Benefits
April 12, 2023 28
Tough Decisions
• Cost constraints− We must stay within this
• Headcount and Budget− We need to manage both
• May require restructuring− New ways of working may mean changes to some
organisation structures
April 12, 2023 29
Strategy Alignment to Change Management
Strategy
•Business Vision
•Strategy
•Goals and Objectives in a 3-5 Year Investment Plan
•Products and Services
•Annual Budget
Change
•Project and Programme Design
•Business Case
•Programmes and Portfolio Projects
•Benefits Management and Realisation
April 12, 2023 30
Prioritisation: Follow the Money
• All Project investment decisions should be based on a Financial justification.
April 12, 2023 31
Benefits Realisation Principles
• Benefits realisation is the pre-planning for, and ongoing management of benefits promised to be enabled by the successful implementation of a project
• Sound project management can only enable a business owner (program) to realize intended benefits
• Accountability for the realisation of intended benefits must rest with the business function, not with the IT project
April 12, 2023 32
Outcome Management
• What is an outcome?− An outcome (benefit) is the desired result of an initiative
undertaken to meet a need or solve a problem − Outcomes are final results supported by intermediate outcomes
(benefits milestones)
• Background− Outcome Management is focused on the outcomes or results
side of an initiative or program− Outcome Management methodology is based on internationally
recognized project and risk management techniques that has been refined
− Outcome Management is an evolving discipline
• Details− Cost benefit analysis is a subset of Outcome Management− Outcome Management is the potential link to existing tools or
other sources of performance indicators
April 12, 2023 33
Portfolio Prioritisation
• “One of the key contributors to poor IT investment performance is an unbalanced approach taken by executives at the project approval stage.
• Too often, the overriding emphasis is on quick payback or demands for the return on investment (ROI) to be demonstrated in financial terms.”− Gartner.
April 12, 2023 34
Business Accountability and measurement
• The Business is responsible for ensuring that the Investment made yields the return calculated.
April 12, 2023 35
Recap: Why do we need Business cases
• A Critical Success Factor• Ensuring Strategy alignment• Prioritisation• Accountability and Measurement
April 12, 2023 36
What is a Business case, how do you write one?
• A Business case should describe the proposition in terms of:-− Scope and out of scope− Objectives− Options− Schedule− Risk− Investment and return.
• In short, it should describe the reason and justification for initiating a project and explain how the organisation will get there.
April 12, 2023 37
Identifying Benefits
• Deliverables or outcomes
• Cashable v non cashable
• Efficiency
April 12, 2023 38
Business Case
Features of a good business case− Description of benefits – quantified− Cost benefit analysis− RoI
• The business case is a logical argument to spend money and Benefits Management creates a compelling reason for the Sponsor / Champion to act
Is it worth spending this amount to achieve this result?
April 12, 2023 39
Benefits Management
• Assigning benefits− Benefits manager− Service managers
• Metrics − Financial− Non-financial− Proxies
April 12, 2023 40
PMBOK: Project Initiation
1. Product description2. Strategic Plan3. Project selection criteria4. Historical information
1. Project Selection Methods
2. Expert Judgement
1. Project charter2. Project Manager identified/assigned3.Constraints4. Assumptions
Inputs Tools and Techniques Outputs
April 12, 2023 41
Business Case Activities
Scope Definition and Agreement The scope and requirements of the engagement are confirmed. The required outputs are agreed. The scheduled is established. Requirements Analysis, Definition and Agreement Business, functional, technical and implementation requirements are identified, analysed and documented. Any existing processes and systems impacted by the proposed investment are analysed. Solution Architecture Specification and Design A logical solution is designed to meet the defined and agreed requirements.
Solution Implementation Options and Selection The options for implementing the solution – package acquisition and customisation, existing system upgrade, system development – are analysed. Suitable suppliers are identified. An options or options are recommended. Implementation Plan Roadmap A realistic plan to implement the solution is creating, incorporating resource requirements and constraints and includes risk, assumptions and dependencies. Financial Analysis The full costs to implement and operate the solution are quantified. The tangible savings are identified.
April 12, 2023 42
Presenting a Business Case
Strategic Fit Options Evaluation and Identification
Procurement and Implementation
Whole-Life Costs Plan for Achievement
Business need and its contribution to the organisation's business strategy Key benefits to be realised Critical success factors and how they will be measured.
Cost/benefit analysis of realistic options for meeting the business need Statement of possible soft benefits that cannot be quantified in financial terms Identify preferred option and any trade-offs
Proposed sourcing option with reasons Key features of proposed commercial arrangements Procurement approach/strategy with supporting details
Statement of available funding and details of projected whole-life cost of project (acquisition and operation), including all relevant costs Expected financial benefits
Plan for achieving the desired outcome with key milestones and dependencies Contingency plans Risks identified and mitigation plan External supplier plans Resources, skills and experience required
April 12, 2023 43
Exec Summary
Name of project
Responsible Board Member
Project owner
Project manager
Objective
Value Drivers
Market launchEstimated cumulated
investmentsPresent Value
April 12, 2023 44
Region/maturity of market* Targeted region … Description of maturity of
market ...
Competitors* Main competitors (incl.
market shares)
Customers/needs* Targeted customers and
their key needs ... Current market
volume(as of …)
Future market volume (growth / market potential by ...)
Opportunities
...
Threats
...
Products/substitutes* Description of
products/services Possible substitutes
(existing / expected)
*) Current status
Market Opportunity
April 12, 2023 45
Threats
... …
Opportunities
… ...
marketOpportunities and Threats
April 12, 2023 46
Description and Analysis of Proposed Offering/Sales Sources
What are our products/ services?
Who are our customers?
What demand is met?
How is the money earned (revenue driver, pricing) ?
Text
Text
Text
Text
Our offer
April 12, 2023 47
Weaknesses
... …
Strengths
… ...
Our offer
Strengths and Weaknesses of Proposed OfferingKey Differentiation Factors Compared to Competitors’
April 12, 2023 48
Key Success Factors of Product/Service Offering
<Success factor 1>
<Success factor 2>
<Success factor 3>
<Success factor x>
Text
Text
Text
Text
Our offer
April 12, 2023 49
Strategic Fit and Risk Assessment
Corresponding strategic objectives ...
… are reflected in initiative ...
Potential strategic conflicts or risks ...
… are mitigated by ...
•...•…•...
•...•…•...
•...•…•...
•...•…•...
Strategy/Risk
April 12, 2023 50
Sales drivers project/product/service
(a) Number of Customers*
(b) Average quantity per customer* (c) Average price per unit*
(d) Sales volume (mn €) *
xxx
xxx
xxx
xxx
2008
Market share xxx
xxx
xxx
xxx
xxx
2009
xxx
xxx
xxx
xxx
xxx
2010
xxx
xxx
xxx
xxx
xxx
2011
xxx
<Bubble to add important remarks>
*) Generally: (a)*(b)*(c)=(d); (c) in line with pricing model
xxx
xxx
xxx
xxx
2012
xxx
Sales drivers
April 12, 2023 51
Cost drivers: Name of project/product/service
FTE
...
...
...
xxx
xxx
xxx
xxx
2008
xxx
xxx
xxx
xxx
2009
xxx
xxx
xxx
xxx
2010
xxx
xxx
xxx
xxx
2011
Bubble to add important remarks
xxx
xxx
xxx
xxx
2012Quantities or mn €
Cost drivers
April 12, 2023 52
Differentiation of project scope and handling of project risks
Project
Potential project risks and mitigation
<Risk 1> ... mitigated by …
<Risk 2> ... mitigated by …
<Risk 3> ... mitigated by ...
Aspects not in project scope
…
...
April 12, 2023 53
Budget/resources (mn €, man days)
Milestone(interim result)
Responsibility
Delivery date
Project phases, milestones and required budgets/resources
• Project Phase 1
• Text
• Text
• Text
• Text
• Project Phase 2
• Text
• Text
• Text
• Text
• Project Phase 3 ...
• Text
• Text
• Text
• Text
Depedencies• Text • Text • Text
Implementation
April 12, 2023 54
Summary of Strategic fit
XXX
XXX
...
...
Comments: Strategic Planning
April 12, 2023 55
How should the Business case and Benefits be measured and managed during the project’s delivery?
April 12, 2023 56
Project and Benefits LifecycleR
oles
and
Res
pons
ibili
ties
Project Management Roadmap
Delivery:Technical Design
Build, Test, Deploy
Delivery:Technical Design
Build, Test, Deploy
Analysis, Design and
Implementation Planning
Analysis, Design and
Implementation Planning
Scoping and Initiation
Scoping and InitiationService RequestService Request ClosureClosure
Project Initiation Document
Business and IT impact Analysis
Service Request response
Service Request response Approval?
Request for Project
approval
Project Planning document
Status Reports
Project Close Report
Approval?
Schedule
Approval?
Service Request
Business Requirements
System Design Spec
Technical design
Technical Requirements Change Control
Operational Design Spec
Lessons Learned- Project archiving
- Customer satisfaction- Financials
Project Manager
Business Analyst
Solution Architect
Describe problem/opportunity
Determine Identify priority and benefit
Determine Business impact
Assess Business requirement
Co-ordinate SR Response
Determine resources, cost and schedule to
develop Bus requirements and
technical requirements
Identify initial solution
Options, feasability analysis
approach and resourcing
Draft Project initiation document
Determine resources, cost and schedule to
develop detailed requirements and
preliminary design and implementation plan
Identify preferred solution from
options (Products, Architecture, impact on
current systems). Support PM in defining project approach and
resourcing
Develop Business requirements
catalogue. Develop initial Business case. Determine Business acceptance criteria.
Support PM in defining project approach and
resourcing
Business Analyst
Project Manager
Solution Architect
Build/Configure
Test DeployHandover to support
Costs Quality Scope
Vendor evaluation and selection
Milestones
Proc
ess
PMC
ontr
ol
Stage Payments
Business Analyst
Finalise solution designConfirm adherence to IT
standards and policyAssess TCO and
support PM in planning project
Project Manager
Write Functional Specification.
Verify system design meets Business requirements.
Confirm Business case is valid
Solution Architect
Project Manager
Ensure technology deliverables are
verified and approved in line with
BNM policyAct as Technical design authority
Solution Architect
Manage Project and all Project resourcesReport to ITGB
Represent Business users and
ensure that Business
requirements are met
Business Analyst
Business Users
IT Team
Draft Project planning document
Confirm resources, cost and schedule to
implement. Manage vendor evaluation and
selection
Business Sponsor
Lead Business feedback on
lessons learned
Business Analyst
Project Manager
Lead IT feedback on Lessons learned
Lead Project down
Solution Architect
April 12, 2023 57
Change Management
• Change requests should assess Business case impact.• The approval of scope changes, budget changes,
schedule changes should be mapped back to the Business case
• For Larger projects and programmes, stage gate Business case reviews as part of key phase end milestone reviews
• Consider changes in the wider Business environment (e.g. the current recession), as drivers to re-assess the in flight portfolio
• Consider changes in products and solutions as drivers to re-assess the in flight portfolio− E.g. Vendor consolidation, changes in Vendor product strategy− E.g. New products that might improve solutions/invalidate
previous architectures− Changes in Organisation structure or composition
(mergers/takeovers/sales/joint ventures)
April 12, 2023 58
Benefit Realisation
• Most Business cases have a time horizon which extends over a period from 1 – 5 years.
• So Benefits are often fully realised only after the project has been closed.
• Who measures the effectiveness of the investment when the project is gone?− Project Management Office− Business Management− IT Management− Project Manager
April 12, 2023 59
Project Management Office and Benefits Management
• PMO’s are often located in IT, not embedded in the Business
• Terms of reference for PMO are often quite narrow− Focus often on methodology, resourcing, governance
and reporting− Is there an appetite to extend the PMO into this
role…
April 12, 2023 60
Conclusion: Recap of Seminar Objectives
• Why is Benefits management an important competency for organisations?
• What is a Business case, how do you write one?
• How should the Business case and Benefits be
measured and managed during the project’s delivery?
• Some differing perspectives…..
April 12, 2023 61
Some Closing Thoughts
• What are the Critical Success Factors for Benefits Management?− If they arent in place what does this mean?
• Should Benefits management be part of the PM’s remit?− If not the PM then who?
• Should Benefits realisation be placed in a more general Management framework− Cobit?− PMM Maturity assessment?
April 12, 2023 62
The Success of Benefits Management in Organisation and projects is
• Linked to the ability of the organisation to− Clearly define strategy and business goals− Determine priority of activities− Measure costs and success of implementation
• So to be truly successful Organisations must− Understand their customers needs− Understand and quantify revenues by customer and product− Understand and quantify their cost base (activity costing/unit
costing)− Understand their relative competitive position− Have processes and policies in place to support a Benefits led
culture when introducing change
April 12, 2023 63
Relationship to Other Management Disciplines
PMBOK
Application Area Knowledge and Practice
General Management Knowledge and Practice
……..Is Benefits Management a
core competence of a Project Manager?
………Should the PM be involved?
April 12, 2023 64
COBIT
April 12, 2023 65
Maturity Models
