Captain’s Log, Entry 7279.3—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.
Business case results forecast cash inflows, outflows, risks, financial metrics and KPI impacts. A compelling rationale turns these results into convincing proof: your project is a sound business decision.
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.
Cases Succeed and Cases Fail
To the Project Manager seeking funding, business case success means getting a “Yes” for the funding request and authorization to begin the project. Corporate officers and PMO Leaders have different criteria for declaring a business case successful or unsuccessful. They see the case from the point of view of the organization that will realize business benefits and also pay the costs of project funding. To them:
A successful business case . . .
- Gives decision makers the confidence they need to take action.
- Differentiates clearly between projects that should be funded and those that should not.
A business case is unsuccessful when . . .
- Leads to no decision, no action
- Funds a Project that should not be funded.
This is known as a Type I error: Deciding erroneously that taking action is the correct decision. This results in project investment costs that return nothing.
- Denies funding to a project that should be funded.
This is known as a Type II error: Deciding erroneously that action should not be taken when in fact action should be taken. This results in a missed opportunity and a large opportunity cost.
Objective: Authorize Projects That Succeed and Capture the Value
Exhibit 1. Engineering company business case successes and failures, before and after business case certification training.
From the organization’s point of view, the objective is to capture value from cases that authorize successful projects, and to minimize costs that follow from unsuccessful cases.
Exhibit 1 shows how one large Swedish engineering company achieved this objective by sending engineering project managers and PMO leadership through Business Case Certification Training for building the Principle-Driven business case. Outcomes of business cases completed in the year before certification training are compared to case completion records in the year following certification training. Exhibit 1 shows:
- Increased efficiency resulted in more case-projects (200 vs. 100).
- Post-training case builders still produced a few unsuccessful cases and a few Type I and Type II errors, but the rates of such failures decreased substantially after training
- The percentage of cases that were unsuccessful dropped from 30% to 10%.
- The rate of Type I errors decreased from 15% to 6%.
- The Type II error rate fell from 6% to 2%.
Success Has Value, Failure is Costly
Exhibit 2. Average labor costs per business case, before and after business case certification training.
The organization pays the cost of all case building labor, regardless of whether the case results in a successful outcome or not.
Records from our client database show that cases built from a principle-driven case building framework require substantially less time and case building labor than cases built with the alternative approach, a procedural-based case building process. Exhibit 2 shows this impact for the Swedish Engineering firm.
What’s a Principle-Driven Business Case?
For the organization choosing a case-building approach or case-building framework, it is helpful to distinguish between (1) Principle-driven approaches, on the one hand, and (2) Procedural-driven approaches on the other hand.
A principle-driven approach defines and designs case building steps specifically to pursue essential case building principles. Methods are chosen and shaped so as to achieve target objectives for principles such as
- Strategic Alignment
- Risk Management
- Project Control
Exhibit 3. Project methodologies without principles risk Project Managers taking decisions outside of governance and the best interests of the organizations.
The focus on principles in business cases building should reduce the risk of business benefits not being transparent—benefits that are claimed, but absent a clear source, and absent credible reasons to believe they will arrive.
On the other hand, when business case benefits are transparent, the risk of impact by the Winner’s Curse decreases. The Winner’s Curse occurs when proposals compete for approval, and the selection committee chooses the case projecting large benefits that are not really quantifiable, over the case where benefit source and benefit reality are honestly established.
By contrast, a procedural-based approach chooses methods and prescribes task outcomes in terms of deliverables for each step (case content). Ninety five percent of the case building methodologies that are promoted and used in business are procedural-based approaches (Team analysis).
Nevertheless, in our 20+ years experience helping organizations of all sizes and types achieve business case competency, Solution Matrix Ltd finds consistently that only the principle-driven approach delivers business benefits, cost savings, and project performance metrics of the magnitudes shown in Exhibits 1 and 2.
The principle-driven business case is truly the secret weapon of highly successful organizations.
Take Action! Deliver Success!
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By Marty Schmidt. Copyright © 2004-2019
Solution Matrix Ltd, Publisher.