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PRINCE2 - Business Case part 1



What is it?

The Business Case is the corner stone of any project under PRINCE2®. It must be viable before a project will be approved by the Project Board. It does not just exist at the start of a project but features all the way through. If at any point the Business Case fails the project must be stopped.

The Business Case should be considered in a broad sense. If you are purchasing a piece of equipment it is not just the cost of this but its impact on many other areas, for example:

  • The affect on personnel
  • Training
  • Procedural changes
  • Accommodation changes
  • Operational costs
  • Public relations etc.

The Business Case is influenced by the following elements:

  • It describes the reasons for the project and the justification for undertaking it. This is based upon estimated costs, risks and the Business benefits and savings.
  • The Business Case does not take a narrow view but considers the affect on a wider area if the project were to go ahead and be successful.
  • The sole reason for any project is driven by the business need. It is continually reviewed against the definition as outlined in the Business Case. If it fails to meet this criteria the project will be terminated.
  • The depth of analysis for the Business Case will depend largely on two aspects. The impact on the organisation and the proposed level of investment.
  • Clearly, there may be some link with the level of investment and the organisational impact. The higher these are perceived the greater will be the level of information required to justify the project.

What does it contain?

The Business Case must contain enough information so that the Project Board can make the necessary decisions. It will be supported by other documentation. The full Product Description appears in the templates file with the full package as 'business case.doc'.

Reasons

This is the rationale for the existence of the project. Why is it needed? This information should be contained in the Project Mandate. If this is not the case more work is required at the 'Starting up a Project' stage.

Options

The Project Board requires assurance that more than one option was considered for the project outcome. These should be described and the primary one put forward for use in reaching the project outcome. There report should contain the reasons for the choice.

Benefits expected

Each benefit must be indicated that would arise from the completion of the project. Each of these must be measurable so that progress can be monitored. The information should indicate how the measurement would be attained. Compare these with SMART targets.

In order to see a benefit there has to change. Hence, any benefit must be measures against the current status.

The Executive will define the benefits.

It may not always be easy to define the benefits in a 'positive' manner in absolute terms. Sometimes it is easier To begin discussion with a 'negative' approach. For example:

'If we do not carry out this project we would lose out in the following areas', for example:

  • Reduced market share
  • Higher costs due continued poor efficiency
  • Non compliance with legal requirements
  • Reduced public support
  • Poor compliance with green policies etc

Risks

Summarises the key risks to the project that may affect the outcome. The Risk Log will contain details of how they will be managed. Note that there will be many potential risks that could have a very serious outcome to the project. However, these need to be considered in the light of the possible occurrence. The impact may be high but the probability of it occurring may be extremely low.

These aspects are discussed in much more detail in the 'The Complete Risk Management package'.

Cost and timescale

This information is contained in the Project Plan. If an accurate assessment is not ready you will need to provide a good estimate that would be refined later.

Investment appraisal

This is where the company must assess the potential profit from the project over a number of years. Either a fixed number of years must be chosen or the assessment would be done over the useful life of the product. This will weigh up the income generated against the costs incurred. Those costs would be:

  • Development
  • Operational
  • Maintenance
  • Support

This situation is compared against the 'not doing the project'.

It is important to try to indicate benefits in a measurable way. This is often easy for 'tangible' benefits, for example, improved efficiency means less defects and reduced rework costs. However, intangible costs, usually expressed emotionally, can be harder to define. For example:

  • Staff will be happier

This can be translated as less days sick, less staff turnover, increased performance. All of these can be measured and converted to cost savings.

Evaluation

Evaluation of the claimed benefits is important. If, for example, the increased benefits equally contribute to the overall Business Case there will be reduced risk of failure if one of them fails to materialise. If, however, the Business Case depends heavily on one benefit there must be focus here to support and protect it against failure. In this case 'sensitivity analysis' may prove useful.

  • GAP analysis

This stands for 'Good, Average, Poor'. Just stating one level of benefit can be a risk and may not be very realistic. By putting forward 3 options you will gain a more realistic feel of the possible benefits.

So these refer to:

Good: what you are expecting (hope) to happen Average: what may happen if things go well Poor: the worst case scenario.

The latter case will have increased costs associated with it that will offset the risk of lower performance. Depending on the view of the Project Board the decision making process may be straight forward or complicated by uncertainty.

Non - PRINCE2 information

Business case

A business benefit is most likely to be monetary in the sense of making a profit. This could also be interpreted as reducing current costs making an existing activity more profitable or indeed affording a profit. It is possible, that the business benefit may not yield immediate profits but establish a presence in a particular market.

Note that when you consider the reasons for a project it is not the same as a justification. There may be a customer or market need for a particular product but if you cannot produce it within a profitable project there will be no justification.

This product contains EVERYTHING in the publications:

Managing Successful Projects with PRINCE2 - 2005 edition
Managing successful Projects with PRINCE2 – 2009 edition
Directing Projects with PRINCE2.
plus:
The Complete Project Management package.

And much more besides - at a fantastic price.