When you know you need a business case, you may want to begin looking for business benefits and costs immediately. However, that is the first step on the road to meaningless results. Business benefits exist only by design.
Costs and benefits exist only by design!
Reaching objectives has value. Business Benefits and Costs are best defined in terms of business objectives.
That isn’t always what people in a hurry want to hear. Sometimes there’s a real sense of urgency. The financial justification or the ROI really does have to be complete yesterday or else heads will roll. Never mind the academic niceties: this thing has to get done!”
I receive calls from business people in this frame of mind. They start by explaining they are building a business case for this or that proposal, or decision. Invariably they ask immediately
Which benefits should I include?
Which costs belong in the case?
The best answer to these questions at that point is:
Wait! You’ve got the cart before the horse. First you have to design the case.
The fact is that two different analysts can each build a case for a the same proposed action, and they can deliver two sets of results (projected costs and benefits) that are very different, yet both are “correct.” The two analysts simply worked to different design plans.
A Statement of Business Benefits and Costs Doctrine
Many people have the idea that once they state the proposal action (“Server system upgrade,” “Environmental protection proposal,” or “Training site selection”), the costs and benefits are properties of nature out there waiting to be measured—like the temperature outdoors or the height of Mt. Everest. Here, however, is a fundamental truth for all but the very simplest of business case projects:
Costs and benefits do not exist—they have no definition—until you design the case.
You can take it as a statement of business case doctrine. That is why two different case designs can be “correct” yet produce different results. The reasons for this can be explained in the context of the 6D Business Case Framework, the focus of our business case seminars and books such as Business Case Essentials.
Design follows Definition. Business Benefits Depend on Design
Case building begins with case definition. Define in fact stands as the first stage in the 6D Business Case Development Framework. Cases can address many different subjects, for many different reasons, but almost all start with a two-point definition:
- A statement of business objectives that the action addresses.
In conclusion, stating these two points clearly and agreeing these points with management, essentially defines the case.
Only when the definition is in place can the case Design stage begin. Case design ultimately determines which costs and which benefits belong in the case, but on the way to that point the case builder free to structure design elements in many different ways.
Different case builders, different design elements
Different case builders may differ, for instance in their statements of design elements such as:
- Firstly: The boundaries and scope of the case. These describe whose costs and whose benefits belong in the case and the time period in view.
- Secondly: Scenario design and financial metrics that address the questions the case is supposed to answer.
- Thirdly: A cost model to provide the rules for which costs belong in the case and which do not.
- Fourthly: A benefits rationale, for making benefits legitimate for the case. The benefits rationale also shows how to assign value to all benefits, financial and non financial benefits.
Without these design elements, ten different analysts can come up with a ten different business case results. In that case, no one knows which to believe. It’s not clear if the results answer the questions driving the case analysis in the first place.
In a nutshell these design elements are the rules for deciding what goes into the case and what does not, the basis for making benefits legitimate, and the only way to show credibly that the case compares different proposal actions fairly. And, without them, there is no way to answer the question above:
Which costs, and which benefits belong in this case?
As a result, without these design elements, there is no way of knowing what the case results mean
Business Benefits and Business Costs: Take Action!
Learn and practice the leading business case building methods at a Business Case Master Class Seminar. Learn case design from our ebooks, the Business Case Guide or the best selling authority in print, Business Case Essentials.