writing a business case
TRANSCRIPT
www.fhyzics.com | [email protected] | 900-304-9000 | 900-305-9000 | 900-306-9000
Writing a Business Case
EEPTM of International Institute of Business Analysis [IIBA®], Canada
Download “Fhyzics” app from
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PresenterVenkadesh Narayanan, BSME, MBA, CBAP®, PMI-PBA®, CBPP®,
CPRE-FLPrincipal Consultant
Former Indian Civil Servant [IRAS 2001 Batch]LinkedIn Profile
This webinar is brought to you by IIBA® Chennai Chapter
29-Oct-15
Thank You Note
Mr. Kannan SanthanamPresident
IIBA® - Chennai Chapter
BA-TODAY.COMThe Business Analysis Magazine
Knowledge Areas
Foundation Chapters
GaNeCaSA
PRABaSCo
PCDCVaVePOSA
PQRST
VaPeTOPA
5
6
46
5
6
56-46-56 = 32 Tasks
BABOK® V2 Overview
Enterprise Analysis
Business Proposal (N-P-O)
EA Activities
Business Case
BC Review
BC Approval & Project Launch
Define Business Need
Assess Capability Gaps
Determine Solution Approach
Define Solution Scope
Define Business Case
BABOK® V-2 : Enterprise Analysis
Vision-Goal-Proposal-Business Case-Project
Setting The Stage
At the end of this session,1. You will become a master in writing business cases2. In any business case presentations you will be the
winner
Setting The Stage
At the end of this session,1. You will become a master in writing business cases2. In any business case presentations you will be the
winner
But you will learn the necessary
ingredients of a BC
Not the question of winning or
losing
Setting The Stage
Template Creativity
Pragmatic
Pragmatic: dealing with the problems that exist in a specific situation in a reasonable and logical way instead of depending on ideas and theories - http://www.merriam-webster.com
Docu
men
t
Proc
ess
People
The BC Writer's Mind Set
Cost + Risks Benefits + Risks
Direction for the Organization
When one sets himself on a wrong road,It is not possible to reach the right destination
At least not at optimal cost!
A 2009 survey of information technology-related investment success by the Standish Group shows that 44 percent of all projects are somewhat challenged; while they may be completed and operational, they may be over budget, not on time, or providing fewer features and functions than originally specified. Twenty-four percent of projects get cancelled somewhere during their lifecycle, leaving the corporation with no results but only costs. These percentages are certainly improved from 1995, where 53 percent were challenged and 31 percent cancelled, but it still only leaves a success rate of less than one third. Various other studies over the past 30 years have confirmed this picture.
Survey from Standish Group
Capacity Vs. Capability
Scenarios Capability Capacity Decision1 No NA Go ahead2 Yes No Go ahead3 Yes Yes Return
KIN Phone from Microsoft – A Case
KIN Phone from Microsoft
• In order to support the younger market to use the social networking sites Microsoft designed KIN phones.
• After a two-year development project, they were manufactured by Sharp and sold through Verizon Wireless in USA.
• After just 2 months in the market in the first half of 2010, Microsoft pulled the plug. It is rumoured that only 503 phones were actually sold. Also the overall project costs of designing, producing and marketing the KIN phone were reported to be around US$1 billion.
KIN Phone from Microsoft
• The failure can probably be attributed to tough competition, which made a new entry difficult.
• Many people never even heard about the KIN phone, showing a lack of marketing and suggesting also a lack of senior management support.
• Reports also indicate that the phone lacked some basic function required by users (such as calendar or the ability to run games).
• The high cost of the data and texting plans may also have been a factor.
Definition of a Business Case
Business Case describes a document delivering a cost-benefit justification for an investment proposition; it may also be called a benefit analysis, a ROI study, a payback investigation, or a value finder.
One Sentence Business Case
In order to improve ___________ we are doing __________ ,Which is worth __________ and can be measured by ______ .
Business pain point
Proposed investment
Net present value
Bottom-up metrics
Business Case Impact & Process
Business Case Box Selected RejectedCorrect Investment Excellent
BenefitsOpportunity
LostWrong Investment Disaster Risk Avoided
Understand Analyse Costs
Discover
benefitsEvaluat
e Present Measure
Questions to Stakeholders
1. What goals and priorities does the stakeholder have?2. What past experience does the stakeholder have with
similar investments?3. How can the stakeholder benefit from the investment?4. What expectations about the project does the
stakeholder have?5. What input is required from the stakeholder during the
business case phase and during implementation?6. What questions and doubts does the stakeholder have
about the suggested investment?
Main Components of a Business Case
Benefits
Risks
Stra
tegi
c Fl
exib
ility
Optio
ns
Cost Stages
Decommissioning
Operation
Commissioning
Pre-commissioning
Pre-business case
Cost Types
Hidden Costs – come up after the investment is approval and were not thought about during the initial business case.
Knock-on Costs – are often underestimated when changes in one part of the organization have effects on other parts of the organization.
Soft Costs – (e.g. productivity decrease during transition) are difficult to estimate; but they are directly attributable to the investment.
Cost Types
Sunk Costs – have irreversibly been incurred before the investment idea came up; not to be included into the business case.
General Overhead Costs – are typically not included, as a business case builds on marginal costs and benefits.
Opportunity Costs – are related to missing other mutually exclusive investments. Should be mentioned in the business case, but must not be included in NPV calculation.
Cost Types
Sunk Costs
General Overhead
Costs
Opportunity Costs
Hidden Costs
Knock-on Costs
Soft Costs
Always to be included into NPV calculation of business caseNot to be included into NPV calculation of business case
Investment Characteristics
By Scope
Response Option
Large and
Small
Must-do
Diversi…n
Expansion
Cost-Saving
R&D or Corn-seed
Independent investments
By dependency
Mutually exclusive investments
Contingent investments
Time Value of MoneyA dollar today is worth more than a dollar tomorrow
$100$110
$121Compounding
Discounting
Time Value of Money
Future Value Function
FV = x * (1 + r)n
x – denotes the investment valuer – denotes the interest raten – denotes the number of future periods
Benefit Taxonomy
Features vs. Benefit
• Feature only represents an element of functionality• Benefit relates to the business outcome• Feature is what we use and benefit is what we get• Feature and benefit have cause-and-effect relationship• Feature yields the benefits• Features need not have to be part of the business case• But benefits must be listed in the business case
Return on Investment (ROI)
Profitability Index (PI)
Benefit-Cost Ratio (BCR)
Hazards & Risk
Fortuna – The Roman goddess of randomness
Hazards are things that can go wrong and cause harm to the investment project.
Risk is the chance, that the investment project could be harmed by a hazard.
Risk Identification | Assessment | Treatment
Business Risks | Financial RisksTechnical Risks | Implementation Risks
Structure of a Business Case Report
PrefaceTable of ContentsExecutive Briefing
Recommendation | Summary of Results | Decision to be TakenIntroduction
Business Drivers | Scope | Financial MetricsAnalysis
Assumptions | NPV-CF StatementCosts | Benefits | RisksStrategic Options | Opportunity Costs
Conclusion
Question & Answer
www.fhyzics.com | [email protected] | 900-304-9000 | 900-305-9000 | 900-306-9000
Thank You
28/10/2015 V1.0
This webinar is brought to you by
IIBA® Chennai Chapter
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