Business Case Analysis: Everyone talks about it, Few Know What It Means

Business Case Center Stage

At business meetings everywhere, it seems like business case analysis is center stage. Everyone is talking about the business case for good reasons:

Cash flow management is crucial for meeting short term oblications

Even though everyone talks about the business case, surprisingly few know what that means.

  • First, the business climate today has a low tolerance for management error.
  • Second, the need for rock-solid accountability is increasing.
  • Third, the competition for scarce funds is intense.
  • Finally, managers must now show why the course they choose is the best course. And, they must show this in business terms.

As a result, most important business decisions today require a business case.

Business Case Analysis: Who Needs It?

Nevertheless, while everyone talks about the business case these days, surprisingly few know what this really means. Consequently, those who master case-building skills have a real advantage over their professional colleagues. As a result, they have the advantage in business areas such as the following. Continue reading “Business Case Analysis: Everyone talks about it, Few Know What It Means”

Understanding Branding and How Brands Work

The value of strong branding is apparent to everyone familiar with names such as Coca Cola, Apple, IBM, BMW, Ericsson, Armani, Louis Vuitton, and Disney.

Understanding Business Strategy

The firms that carry 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 spent 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.

Brand Equity

Sellers with real brand equity can charge premium prices for products that their competitors must sell for less. Apple, for instance, currently sells a charging cable and plug package for US$39. Other sellers with weaker brands sell essentially the same items for about $10.

That is brand equity at work. Brand equity, of course, means higher margins. Ka-ching!

Brand Loyalty

Brand loyalty may be the ultimate payoff for strong branding.This is the propensity of customers to buy the brand again and again. Brand loyal customers buy their brand over and over, even when other brands are more accessible or less expensive.

Loyal customers hold to their own brand, even in the face of advertising or marketing pressure from competitors to do otherwise. It is easy—apparently—to create brand loyalty for some kinds of products and services: Cigarettes, baby food, and “fast food” brands seem to have this characteristic.

With other products and services, however, customers always seem ready to change providers the moment a cheaper offering turns up elsewhere. Mobile phone service providers and automobile service station  owners know this problem very well.

In any case, businesspeople of all kinds know that strong brand loyalty means greater customer demand, higher competitive win rates, and lower cost of selling.  Ka-ching! Ka-ching! Ka-ching!

Visit the Article

For those who face the need to understand and implement branding for their own companies, Solution Matrix Ltd. announces an expanded version of the feature article:

Brands, Branding, and Brand Awareness

The article is a complete introduction to the subject for those working in all areas of business—especially those who must find answers to questions like these:

  • How do we establish our brand?
  • How do we strengthen our brand?
  • And, how do we know if we’re winning or losing the branding challenge?

Businesspeople know that the field of branding  is awash with similar-sounding terms that confuse even professional marketers: Brand awareness, brand franchise, brand recognition, brand recall, brand loyalty, brand equity, and brand love—to name a few.

Brand, Branding, and Brand Awareness is meant to help you cut through the confusion and emerge with a clear grasp of important branding concepts.

We invite you to visit the article online. We look forward to your feedback and comments.

Take Action!

Visit the feature article, BusinessBrand, Branding, and Brand Awareness

Learn and practice the premier approach to case building at a  Solution Matrix  Business Case Seminar. Learn more about case building and case design from the Business Case Guide, or the most frequently cited business case authority in print, Business Case Essentials.

By Marty Schmidt. Copyright © 2004-2017.
Published by Solution Matrix Limited.
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Business Case Risk: Will We Really See These Results?

When You Deliver Case Results, Business Case Risk Comes With the Turf.

Business case results come with uncertainty.

The business case predicts financial results, but these predictions come with uncertainties.

Good business case analysis will not eliminate business case risk—uncertainty about the results of business decisions. Good business case analysis can, however, reduce the uncertainty to a minimum, measure what remains, and provide the tools for minimizing risk as the action goes forward.

Risk and sensitivity analysis are key to reaching these objectives.

Senior business managers say, increasingly, that the margin of tolerance for management error is shrinking, visibly and tangibly. In the current business climate, therefore, there is new urgency to questions like these: Continue reading “Business Case Risk: Will We Really See These Results?”

Business Case Competency: What’s Your Maturity Level?

Everyone involved with your business case is likely to have serious questions about the case building process. As a result, project manager, outside consultant, and senior leaders all want to know what they are in for! And they want to know if the results are going to be worth the effort. Note especially that the answers have to do with the group’s business case competency maturity level.

You might expect the answers to depend on such things as the scope of the project or action under analysis, or the size of the funding request. Answers are in fact easy to predict, but they usually depend little on those factors. Those involved in building the case will want to know, specifically:

  • How long will it take to build the business case?
  • How many labor hours should we budget for case building?
  • Will case results give decision makers the understanding and confidence they need to take action?

Continue reading “Business Case Competency: What’s Your Maturity Level?”

When Projects Must Finish On Time, Track With Process Control

When You Simply Must Finish On Time: Project Tracking With Process Control
projects-simply-must-finish-time

For time-critical projects, project tracking with statistical process control gives project managers critical advantages:

  • Firstly: Early warning of a likely late finish or early finish.
  • Secondly: Up-to-the minute comparisons of project plans with actual progress.
  • Thirdly: Visual updates on schedule gains and losses, easily understood by everyone.

Read the original IEEE article: Statistical Process Control for Project Progress Charting online.

Track Progress With Statistical Process Control

The progress chart is similar to statistical process-control charts for manufacturing. Because the chart puts current performance into historical context, it shows everyone immediately how the progress compares to the original plan. Continue reading “When Projects Must Finish On Time, Track With Process Control”

Activity Based Costing: Is ABC Worth the Time and Effort?

Cost accountants know that traditional costing can skew the picture of real production costs for individual products. Some businesses turn instead to Activity Based Costing for a truer measure of costs.

The income statement gross margin, for instance, is in fact an average for all products (or entire product lines). The real gross margins for individual products can tell a very different story: A high overall GM can obscure the fact that the company is actually taking a loss on some products.

Why Adopt Activity Based Costing?

Management is moved to adopt ABC by the desire to improve costing accuracy—get closer to the true cost and true profitability—of individual products and services. They are also moved by a desire to understand better the true costs and ROI from projects or other initiatives.

Companies try ABC specifically to

  • Identify products that are truly unprofitable.
  • Find the true costs of products so as to support pricing policy.
  • Reveal truly unnecessary costs that can be eliminated.

Continue reading “Activity Based Costing: Is ABC Worth the Time and Effort?”

Annual Report Insiders Guide: What Are They Telling Me?

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.

Companies send an annual report to shareholders before their annual meeting.

The Annual Report enables company officers to comment on the company’s strategy and plans—and not incidentally, send some strong marketing messages.

Yes, the mandatory financials, notes, and auditor’s opinion are all there. These are usually in black and white and small print. But these are sandwiched between many glossy pages with striking images, creative typography, colorful graphs, and artful prose from the Board, CEO and other officers.

For more in-depth coverage on reading and understanding annual reports, please see the article Annual Reports.

In response to the non-mandatory gloss, report readers naturally ask: “What are they trying to tell me?” Or, more to the point, “What are they trying to sell me?” And, “Do I buy it?” Continue reading “Annual Report Insiders Guide: What Are They Telling Me?”

Your Business Case Critic: De-Clawing the Cat

You don’t want nasty surprises from the hostile business case critic at your own case review.  Then don’t surprise your audience!

Prepare for the Worst!

De-Clawing the Cat your business case critic.

There are some things you just don’t want to hear at your business case review. You want, after all, to build confidence that your proposal represents a good business decision. At a case review, however, certain remarks from a business case critic can undermine that confidence—if you are not prepared for them. Continue reading “Your Business Case Critic: De-Clawing the Cat”

Your Business Case Credibility: Bring on the Second Team

Effective use of a second team or Reference Group can be the single most important step you take to build in business case credibility. 

Build in business case credibility with a second team

Create a second team to build in Business Case  credibility.

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 sales person responsible for the case. Even CFOs are not immune. The temptation sends this pernicious message: Do it Yourself, or Do it with your own staff.

The temptation has a seductive logic. If you build the business case yourself, you can be sure to end up with the right results. If you bring in outsiders, there’s no telling what you might come up with. And, it isn’t easy to get the time and contributions of people outside your own organization. After all, whats in it for them? Its better, the temptation says, to do it yourself.

Take the Unnatural Response

That logic is the natural first response of most people facing the need to produce a business case. In our business case seminars and publications we strongly urge case builders to take the unnatural response: recruit and use a group of people outside their own immediate organizations to help design, build, and review the business case. These are not the people do most of the hard, detailed case-building work. This is an advisory group. We call this group a Reference Group.

I learned, more than a decade ago, that effective use of this group can be the single most important step anyone can take to build in business case credibility and guarantee business case success.

A Lesson From the IT Directors Dilemma

Several years ago, I worked with the Director of Information Technology (IT) at a large commercial bank who had a problem: twice in a twelve-month period he had proposed a major IT project to the banks Executive Committee, and twice the Committee had said No to his proposal. Now he was preparing a third, final attempt.

The reason for the Committees No? Those proposals projected good financial results, but the Executive Committee did not fully believe them. One Senior Vice President had been especially negative in previous reviews. In his opinion, predicted benefits were soft benefits, total costs were underestimated, and there was little chance that everything could be installed and working on time. He expressed these views energetically during the earlier reviews, no doubt swaying opinions on the Committee and generally souring the atmosphere each time.

Forming the Reference Group

The project team for the banks business case was already formed when we started the final case project. These people would do most of the time-consuming hard work?digging into databases, budgets, business plans, vendor proposals, and the like, as well as interviewing internal specialists, external experts, IT users, and customers. Most of these people were on the Directors staff. Our first action, however, was to recruit a second team for the business case project?a Reference Group. This team played a critical role in improving the quality of the case and, more important, establishing credibility.

Team members were recruited with an eye to the history of the two earlier proposals that had failed. The highly critical Senior Vice President was the first person we recruited for the second team. We also went after high-level managers from Corporate Finance, Human Resources, and Marketing, as well as several branch managers and two members of the Presidents Strategy and Planning Group. The ten-member Group met three times during two-months of case building. By contrast, the project team poured many times more person-hours into the project. Both teams were essential to building a successful case, but the Group was indispensable for ensuring that case results were understood and believed by the Executive Committee.

A good Reference Group, properly led, brings credibility and accuracy in at least six ways.

1. The Group Provides Cross-Functional, Cross-Organizational Input

The Group can be a valuable source of information and guidance for the case designer. This is vital when the subject of the case has cross-organizational impact, or when the costs are focused in one organization but the benefits are realized more broadly.

Product proposals, technology proposals, and infrastructure proposals often fit that description. So do many other actions in a complex business environment. If the subject is bringing a new product to market, or closing a corporate site, or entering a new market, for instance, cost and benefit impacts may cross boundaries of many kinds?organizations, management levels, budget categories, and planning periods. In such cases, the Group can help define case boundaries and help fill in the cost model more completely and with more authority than a project team from a single organization or function.

2. The Group Brings Critical Expertise to the Table

The Reference Group can bring other critical expertise and information to the table:

  • Line managers help in costing and valuing operational impacts in their own areas.
  • Financial experts can connect the business case subject with the organizations long-range business plan (a vital connection, when assigning value to strategic benefits). They can explain budget issues, financial constraints, and how spending decisions are made.
  • Human resource specialists can help assess the personnel impacts of a proposed action: job levels required, average salary and overhead costs, training requirements, hiring costs, for example. HR expertise is especially welcome when decision alternatives include, hire from within, hire externally, and outsource.
  • Senior managers from the highest levels can help identify and prioritize organizational objectives?business performance objectives, financial objectives, operational objectives, and still other objectives. This provides a solid basis for estimating benefit values and for recommending actions.

In brief, the case will be a better case with cross-functional, cross-organizational input from the  Group. That much of the teams role is obvious. Other roles for the team are less obvious but may be even more important.

3. The Group Spreads the Sense of Ownership

The Reference Group can be the vehicle for spreading a sense of ownership for your business case widely beyond the case-building project team. It is a simple reality that people who help build something naturally begin to feel some ownership for it. In meetings and discussions, team members contribute to case design and development. Inevitably, it becomes their case coming up for review instead of just your case.

A shared sense of ownership is desirable: People do not want what they work on to fail.

4. The Group Signals Methods, Rationale, and Expectations

Do not assume that your audience will automatically appreciate your business case on its own merits simply from reading the finished document or listening to a presentation of results. A case is not successful until it is communicated successfully, and a complete business case has a lot to communicate.

In order to properly evaluate a case, your audience must understand several important elements fully. They must understand:

  • Which assumptions are most important. This means understand which assumptions play the major role in controlling results.
  • Your cost model. This provides the rules for deciding which costs are relevant for the case.
  • Your benefits rationale—the logic that legitimizes benefits for the case.
  • Important risks and contingencies.

(Read an overview of these case essentials in the best selling books , Business Case Essentials or the Business Case Guide).

It is not easy to grasp these points with a single reading of a report or a short presentation by the author. The author can meet some of this challenge by using the Reference Group as a communications channel during the case-building project. It is better not to wait until the final results are in, to begin communicating important methods and rationale behind them.

5. The Reference Group helps Communicate

Why is complete communication so important? Case results depend on many arbitrary judgments and assumptions, and these are natural targets for criticism. They are targets especially if you reveal them only in the final presentation or completed document.

When bringing your case into a competitive or critical setting you do not want to have to announce and defend the arbitrary elements of your case at the same time. This means that your second team can be an effective channel for communicating several points long before the final results are in.

  • Case design
  • The rationale for including certain benefits
  • Important assumptions

When review day comes, critics may still argue your interpretation of case results. However, you leave them little room to question your methods or data.

6. The Group Can Turn Damaging Criticism Into Constructive Contributions

Finally, you may need to use the Reference Group as a vehicle for handling people who are seriously difficult critics of your proposal. The Senior Vice President I mentioned is an example. If you face people who fit that description, you may want to bring one or more of them onto the Group at the outset. As members of the team, these critics will have objected and contributed everything they have to say before the final review. Through careful management of team meetings, you can show them, respectfully, that they are on the record.

Not every critic belongs on this team, of course. There are some people who—to put it plainly—simply do not respect the respect you give them. However, when your critics actually do contribute to case design, they may even develop some sense of ownership for the case. This should lead to fewer critical surprises late in the game.

The Outcome

I went to the IT Directors final presentation to the Executive Committee and you will probably not be surprised to hear he won their approval. By creating and using cross-organizational second team, we effectively de-clawed the cat, so to speak.  And, as a result, the Director established an authority and credibility that would have been impossible to achieve had he stuck to the Do it yourself temptation.

 Take Action: Build In Credibility!

See Business Case for a complete introduction to building and business case analysis.

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Learn and practice the premier case building methods at a Business Case Seminar.  Learn case building from our books, the Business Case Guide and the best selling authority, Business Case Essentials.

By Marty Schmidt. Copyright © 2004-2017.
Solution Matrix Limited, Publisher.
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