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.Others went through a different kind of failure. They got “thumbs up” from decision-makers, but then suffered when actual business results turned out to be quite different from predictions.
What went wrong? What was missing? Why did the business case fail?
These professionals represent a wide range of industries and government organizations, and they built business cases to support many different kinds of proposals for projects, programs, products, acquisitions, and other actions. Nonetheless, the cases all have several characteristics in common.
Firstly, Case Fail From Lack of Self Evident Validity
When a business case comes under review, an uninvited guest always comes along with it: the credibility question. The case predicts the future, after all, and every business case audience will have questions like these:
- How do we know that we’ll actually see these results?
- How do we know that different options for action are compared fairly?
- What’s the likelihood that gains will turn out to be less than predicted?
Good-looking projected results alone do not address these questions. And, for most critical audiences, they do not “make” the case.
A strong case anticipates questions like these by conveying self-evident validity. Putting your cost model and benefits rationale in the case report, for instance, removes doubts about the completeness of cost coverage or the legitimacy of benefits. A proper risk-sensitivity analysis helps assure your audience that uncertainty is minimized and all the important risks are known and measured. For more on building these elements into your case, see Business Case Essentials.
Secondly, Case Fail From Unrealistic Assumptions
We are now working with an energy company in the US Midwest that is now in the fourth year of a two-year ERP (Enterprise Resource Planning system) initiative. Four years ago, they decided to move the company’s different software systems to a single integrated system from a leading ERP vendor. The sales proposal came with a strong “business case.” The case projected payback in 18 months and a four-year ROI of over 240%.
Now, four years later, the company has yet to see a positive ROI on its investment. To date, this ERP system has been twice as costly as first expected. Why?
Among other things, the business case assumed that integration, installation, and “roll over” to the new system would go smoothly. It didn’t. The ERP system comes, for instance, with a steep learning curve for users. It took much longer than expected to build user proficiency. The firm engages in serious process analysis and process changes, in order to take advantage of ERP system capabilities. That should have been anticipated but it wasn’t. The company’s “home-grown” software environment did not cooperate with the new system during the phase-in of individual ERP modules, as they had hoped.
Nobody there talks much about the original business case projections.
Unrealistic or risky assumptions, in other words, may enable the case to succeed at one level only to fail later. To minimize the risk of that kind of failure, case builder, and case reviewer alike should ask:
- What are the most important assumptions underlying the case?
- Which assumptions have the largest impact on business results?
- How much will results change if assumptions change?
And, most importantly:
- Are these assumptions realistic?
Thirdly, Case Fail Due to Missing Standards
Companies and organizations that score high in business case competency have standards for case content and structure. Standards can show:
- Essential case content. This may include business objectives and a cost model.
- How to minimize and measure risk in projected results
- Methods for costing or valuing business impacts
- Case building process needs, such as the use of a reference group.
Without standards, reviewers do not know what to expect or look for in the case, while case builders cannot be sure they meet requirements. And, standards bring consistency to business case practice. In brief, standards guide for case builders and they help reviewers know what they should look for.
Where to Go From Here: Take Action!
First-time and veteran case builders alike can start with our article online Business Case Analysis. After that, learn case design and development from the Business Case Guide or the best-selling Business Case Essentials. Download these resources and more from The Master Analyst Shop! Or, take the 3-day fast track: Learn and practice the premier case building methods at a Business Case Master Class Seminar.
To learn more on the IIBA International Institute of Business Analysis click here. For info on the IBF Institute of Business Forecasting click here. See also the Forbes Guide to GAAP Generally Accepted Accounting Principles click here. For a brief summary of Six Key Principles of Decision making click here.
By Marty Schmidt. Copyright © 2023.
Solution Matrix Limited, Publisher.