Captain’s Log, Entry 7982.1—Thanks to all the public discussion on total cost ownership TCO, most business people now understand this: There can be a large difference between the price of something and what it costs to own. Nevertheless, when presented with TCO analysis results, many are still skeptical. They ask: Is TCO analysis for real?
At the same time, conflicting marketing claims and other forms of TCO misuse no doubt account for the TCO metric’s poor reputation. As a result, many senior decision-makers do not fully trust TCO figures. Most agree with the total ownership cost concept as legitimate. However, they also know that analysts can manipulate TCO results. In fact, most know that TCO results depend on so many factors that it means little to speak of “the TCO” for any asset. John Dobbs of Novell said it best:
“The only valid TCO data are your own data.” Continue reading “Is TCO Just Smoke and Mirrors? Total Cost of Ownership”
Captain’s Log, Entry 7945.7—The value of strong brands and branding is clear to everyone familiar with names such as Coca-Cola, Apple, IBM, BMW, Ericsson, Armani, Louis Vuitton, and Disney. The companies that own these names have built successful brand names over many years. Their brands now work as powerful assets for market pricing and selling. Why do they spend so much and work so hard to build strong brands? And, why do they pay so much attention to protecting their brands from misuse, damage, or slander?
The answer, of course, is that strong branding pays off at the bank. The financial payoff stems from customer qualities that every company founder, officer, and marketer aims for: strong brand equity and strong brand loyalty.
Continue reading “Build Brand Loyalty, Enhance Your Image, Charge Premium Prices”
Captain’s Log, Entry 8166.1—Your business case critic comes with the turf. You can avoid a potentially damaging critique at your business case review if you take steps to prevent it. Anticipate the critic and prepare for the expectable criticisms.
No matter when or how you prepare your business case, there will be a sinister, uninvited guest in the room when you present it for review: the business case critic. You can’t bar this person from the meeting and speaking to everyone present.
Know for certain the critic will be there, working against you. This person “comes with the turf,” whenever you project future business results. The critic’s name is The Credibility Question. Your critic is the moving force behind questions like these: Continue reading “Expect Serious Critics at Your Business Case Review. Be Prepared!”
Captain’s Log, Entry 7542.1—Business Case Analysis is center stage almost everywhere for business planning and decision support. Nevertheless, few really know how to analyze and build convincing business case proof. Learn why business case results are trustworthy only when they include: Cash flow forecasts, Quantitative risk analysis, and Reasoning that “makes the case” for action. Cash flow forecasts alone are not a business case.
Decision-makers rely on business case analysis to build the understanding and confidence they need to take action. You know this already if you have recently submitted a funding request or project proposal. You know this also if you serve on committees for budgetary planning, capital spending, or strategy. Continue reading “Attention Case-Builder! Question Time is Coming!”
Captain’s Log, Entry 7937.5 — Cost accountants know that traditional costing can skew the measure of product production costs. Thus, many firms turn instead to Activity-Based-Costing for a truer picture of product costs and gross profits. However, ABC is notoriously labor-intensive. Many ask: Is ABC worth the extra effort?
Every company that produces and sells products must understand product costs accurately and in detail. This kind of information is essential for planning operations, pricing, and evaluating business margins. For product cost data, management relies on the firm’s cost accountants. But how, precisely, do the accountants develop this information? Continue reading “Activity-Based Costing: Is ABC Worth the Extra Time and Effort?”
Captain’s Log, Entry 8132.3—Can you produce business case results showing anything you want to show?
“Figures don’t lie but liars figure.”
– Attributed to Mark Twain and others
One reason that business case results do not always receive support, no doubt, is this. Many believe that case results can be made to show anything the author wants them to show.
Is that belief really valid? Continue reading “Business Case Figures Don’t Lie! However, …”
Captain’s Log, Entry 7659.1—Your business case audience members will decide for themselves whether or not your case results are credible.
Captain’s Log, Entry 8183.5—The most important step you can take to ensure business case success is to recruit and use effectively a cross-functional, cross-organizational Reference Group. Never approach case-building as a “Do It Yourself” project.
The moment it is clear that decisions or plans call for a business case, an insidious, deadly temptation begins to operate on the project manager, product manager, consultant, or salesperson responsible for delivering the business case. Even CFOs are not immune. The tempter sends this pernicious message:
“Do it Yourself!”
The temptation has a seductive logic. If you build the Continue reading “Business Case Credibility: Capitalize On Your Second Team”
Captain’s Log, Entry 8172.5—Non-financial outcomes from an investment or action deserve value and a place in the business case—when they help meet important business objectives.
Non-financial benefits belong in the business case when they contribute to meeting business objectives.
Important benefits from action are sometimes hard to value in financial terms. Case builders struggle especially in assigning value to non-financial outcomes—the so-called “intangibles.”
Are these benefits soft benefits? Or, real business benefits that belong in the business case? Continue reading “Do Soft Benefits Belong in a Serious Business Case?”
Captain’s Log, Entry 8175.5—Make no mistake: Every business case is meant to prove something. Case authors may as well open with the line: I’m going to prove my project proposal is a good business decision. Or, I’m going to prove financial justification for my proposal. Or, we are acting responsibly when we take action!
Case builders intent on proving something often go on to produce the return on investment (ROI), internal rate of return (IRR), or net present value (NPV) they expect from their proposals. Their financial metrics may be attractive, but for some reason, they just don’t “make the case” with CFOs, review boards, or other senior managers. There may be doubts all around that anyone can prove anything with a business case. Continue reading “Does Business Case Proof Really Prove Anything?”
Captain’s Log, Entry 8186.1 — Why did the business case fail? It may predict excellent results yet still fail to “make the case.” Everyone asks: Why did the Business Case Fail?
In our business case seminars, we see project managers, IT directors, salespeople, and others who have just had a painful experience: Their business case analysis failed.
Some of them predicted great cash flow, high ROI, and short payback, but still got a thumbs down from top leaders.
What Went Wrong?
Your business case does not have to fail. Continue reading “Why Did My Business Case Fail? What Went Wrong?”
Captain’s Log, Entry 8191.3—Business people everywhere are hearing something like this from management: The business case is not optional! When do you know you need a business case? You know it when you hear messages like these:
- We can’t afford to fund every new project or development proposal anymore. We have to find a better way to prioritize proposals, decide which to continue, and which to drop.
- Starting this year, any request for non-budgeted funds is nonstarter without a strong cost/benefit analysis behind it.”
- Government policy says we have to have to show financial justification before going forward with major capital projects.”
In brief, the business case is no longer optional in more and more places. Continue reading “The Business Case Is Not Optional It’s Mandatory!”
Captain’s Log, Entry 8079.4 — The modern Annual Report to Shareholders does not look like a dreary financial report. Instead, it looks more like a glossy marketing brochure. In fact, annual reports do have a marketing purpose.
Yes, the mandatory financials, notes, and auditor’s opinion are all there. These are usually in black and white and small print. But the “financials ” have to sandwich in between many glossy pages with striking images, creative typography, colorful graphs, and artful prose from the Board, CEO and other officers Continue reading “Annual Report Insider’s Guide: What Are They Trying to Tell Me?”
Captain’s Log, Entry 8039.5—In some minds, a successful business case is a case that brings CFO approval for a funding request. For those submitting proposals, CFO success is what matters!
For many case builders, CFO approval is the very definition of business case success. However, participants in our Business Case seminars tell us that this kind of success can have a short life.
A business case that wins CFO approval is a case that will soon be put to the test. CFOs and others who decide funding requests know that they, themselves, will bear accountability for the actions they approve. For them, approving an action is not “success,” when predicted results do not arrive as promised. Continue reading “Does The CFO Approve? How to Get a Yes! From the CFO”
Captain’s Log, Entry 8100.3—Business people everywhere are hearing something like this from management: The business case is not optional!
When do you know you need a business case? You know it when your management sends messages like these:
- We can’t afford to fund every new project or development proposal anymore. We have to find a better way to prioritize proposals, decide which to continue, and which to drop.
- Starting this year, any request for non-budgeted funds is a non-starter without a strong cost/benefit analysis behind it.”
- New government policy says we have to have to show financial justification before going forward with major capital projects.”
In brief, the business case is no longer optional in more and more places.
It’s a Requirement, Not an Option
Make no mistake: Building a serious business case takes energy, effort, and work. However, all kinds of proposals must have solid business case support. Continue reading “Your Business Case Delivers Proof, Builds Confidence, Lowers Risk”
Captain’s Log, Entry 7697.3—Some managers see the business case simply as a tool for securing project authorization and funding. Experienced project managers, however, understand that a principle-driven case has substantial additional value to exploit throughout the project lifecycle.
A principle is a fundamental truth or proposition that serves as the foundation for a system of belief or behavior or for a chain of reasoning.
Very few business cases built today qualify as principle-driven cases. A principle-driven case manifests in short, concise documents that don’t need exhaustive descriptions to take into account every eventuality. Case building with a principle-driven approach is efficient, and case usage is clear and straightforward. And, principle-driven cases have proven uniquely effective in improving project performance and delivering business value for the organization.
Continue reading “The Principle-Driven Business Case: Pursue Principles, Not Process”
Captain’s Log, Entry 8194.9—What does it take to build high-level business case competency in real-world business? Training? Templates and software? Directives? The answer is All of the Above. Business Case competency for the organization calls for a program, not a point-solution.
“We are going to stop making bad decisions and we are going to stop now!”
The statement was the opening line at the Vice President’s weekly staff meeting. It sounded like the voice of a leader who is decisive and impulsive by nature: Continue reading “Business Case Competency: Think Program, Not Point Solution”
Captain’s Log, Entry 7345.3 — Business case analysis predicts future cash flows and risks. Know that when you deliver business case results, business case risk comes with the turf. Learn how to minimize uncertainty and measure what remains.
Those proposing business investments and actions rely on robust business case analysis (BCA) to predict the likely outcomes. However, business case risk is always present.
Everyone knows, however, that not even the most rigorous BCA cannot eliminate business case risk—uncertainty about the results of business decisions. Through BCA can, however, cut uncertainty, measure what remains, and deliver tools for managing risk as the action goes forward. Continue reading “Business Case Risk: Will We Really See These Results?”
Captain’s Log, Entry 8169.4—Everyone involved with the business case wants to know upfront how many hours and how much labor the case will require. They also want to know if the results will be worth the time and effort. Answers to these questions depend directly on the Business Case Maturity Level of the organization.
Business Case Maturity Level matters because everyone involved with your business case is likely to have serious questions about the case-building process. As a result, the project manager, outside consultant, and senior managers all want to know what they are in for! And they want to know if the results are going to be worth the effort.
Continue reading “Maturity Level for the Business Case Matters. What’s Your Level?”
Captain’s Log, Entry 7560.3—Professionals in Government or Non-Profits who must produce a business case or cost/benefit analysis face a special challenge. That challenge is completely unknown to their counterparts in private industry. They must prove that proposed actions deliver tangible, measurable business value. That’s not always easy to do, when you’re not in “business.”
Businesspeople in Government and Non-profits ask questions like these:
How do you . . .
- Write a business case if you are not in business?
- Find financial benefits for a government organization besides cost savings?
- Use financial metrics such as NPV, IRR, or ROI when you don’t have financial benefits?
Continue reading “What’s A Government Business Case? Government is Not in Business!”
Captain’s Log, Entry 7286.4 — Business Case, Business Plan. Do the Terms Mean the Same Thing? It’s a question you may have to answer many times for your colleagues. In brief, the case is organized around an action, while the plan is organized around the business.
Many people ask: What’s the difference between a Business Case, on the one hand, and a Business Plan on the Other? Surprisingly few people in business are prepared to answer such questions in clear terms.
People often use the terms interchangeably or ask for one of them when they mean the other. Why? Continue reading “Business Case vs Business Plan: Do You Know the Difference?”
Captain’s Log, Entry 8180.3—Prepare for the Worst—your critic. If you don’t want nasty surprises from the hostile business case critic at your own case review then don’t surprise your audience!
There are some things you just do not want to hear at your business case review. You are trying, after all, to build confidence that supporting your proposal is a wise business decision.
At your case review, however, certain remarks from business-case critics can dismantle that confidence—if you are not ready for them. One hard-hitting question from a devious skeptic can undermine the credibility you work so hard to build—unless you know in advance how to turn it to your advantage.
Continue reading “Your Business Case Critic: How to De-Claw the Cat”
Captain’s Log, Entry 7833.3—How long should a business case analysis take? How much labor does the case require? Is there a business case for building the business case? Those involved in doing the work and their managers naturally want to know: Is it worth the time and labor it takes to build and deliver them?
A serious business case analysis may require serious project effort, especially when the subject of the case has major impacts in a complex business environment, and when the subject has not been analyzed before. Participants in our say that professional labor requirements can easily range anywhere from several person-days at the low end to several person weeks on the high end. Continue reading “Where’s the Case For Building Your Business Case?”
Captain’s Log, Entry 7924.4 — Avoided costs and opportunity costs can all play an important role in business planning, budgeting and decision support. Nevertheless, some financial specialists do not grant these costs legitimacy for the business case. Is this exclusion justified?
I spoke recently with a project manager whose project funding proposal had just failed.
The Project Management Office—and the company CFO in particular—turned thumbs down on the manager’s Stage-0 business case. Why? Where was the red flag? Avoided costs! Continue reading “Opportunity Cost, Avoided Cost. Are They Real?”
Captain’s Log, Entry 8034.3—The internet is awash with sellers asking you to believe their own ROI figures. You know this very well if you are currently shopping for costly assets. Vendors know that ROI and TCO are central in purchase decisions for large IT systems, vehicles, production machines, and lab equipment. Should you believe the vendor’s predictions?
Vendor-produced ROI figures are also center-stage when sellers submit customer ROI and TCO figures along with the sales proposal. Many vendors seem to believe that sale closing will follow faster when they show customers the attractive ROI and TCO results they can expect. Continue reading “Should You Trust the Vendor’s ROI and TCO Promises?”
Captain’s Log, Entry 7827.3—Sometimes a late project finish is unthinkable. Project managers can apply process control methods to project tracking to help avoid a late finish. Process control for the project provides (1) Early warning of a likely late finish, (2) up-to-the-minute comparisons of actual progress with planned progress, and (3) visual updates on schedule gains and losses, easily understood by everyone.
The process control project progress chart (also known as a Schmidt Chart) is similar to statistical process control charts for manufacturing quality control. Because the chart puts current performance into historical context, everyone with an interest in the project can see immediately how actual progress compares to the original plan. Continue reading “Project Tracking When You Must Finish On TIme”