In this post we would like to explain our perspective on what makes a successful, digital focused business cases.
I have led or sponsored a number of large business cases in both the public and private sectors with values of $600m, $450m and recently $463m. And I have sponsored both the business case and delivery of large project cases of circa $17m, and smaller cases ranging from $500k to $2m.
In the case of large, transformational programme cases, there is a very well prescribed ‘Treasury, Better Business Case’ framework for public sector cases and an expectation that the framework will be applied. However, I have found that the concepts and principles have a good level of applicability to private sector cases as well.
The Treasury BBC business case process expects the completion of 5 individual cases - the strategic case, the economic case, the commercial case, the financial case and the management case.
This blog post is primarily about how these cases can be used as headers for a smaller public sector or private sector case for digital investment, i.e. as a means of ‘checking off’ that each aspect of why your organisation should invest in the initiative has been thought through.
This is the opportunity to explain the imperative for making this investment. E.g. Will the investment establish strategic capabilities that don’t currently exist in your organisation? Will the investment lead to benefits for the organisation? Or is the investment simply necessary to address risks / remove technical debt? What are the imperatives associated with making the investment?
This is the opportunity to look at the wider set of non-financial benefits (or benefits that are difficult to quantify in Profit & Loss terms) that will come about from the investment, to compare options and to reach a conclusion about which is the best option that you would like to take forward. The economic case provides the opportunity to assess options against each other qualitatively (using multi-criteria analysis), and quantitatively, by assessing broader economic benefits in dollar terms, where possibl is the opportunity to look at the wider set of non-financial benefits (or benefits that are difficult to quantify in Profit & Loss terms) that will come about from the investment, to compare options and to reach a conclusion about which is the best option that you would like to take forward. The economic case provides the opportunity to assess options against each other qualitatively (using multi-criteria analysis), and quantitatively, by assessing broader economic benefits in dollar terms, where possible.
This section outlines the commercial considerations, it can be very brief if there are no significant considerations. For larger implementations, a vendor strategy / procurement strategy should be identified, and clarity should be provided about how you will create the competitive tension required to get the best deal out of the marketplace.
This section should outline the capital required, operating expenditure required and the financial implications of both (the ‘whole of life cost’ over the life of the programme). Good practice is to also undertake a ‘net present value’ analysis by calculating an NPV over benefits (e.g. expressed in revenue) minus costs (capital and operating values) over the term of the investment. The NPV essentially discounts the net cashflow (e.g. revenue minus cost) over the term of the investment to current dollars. We will publish a seperate blog post on how the NPV calculation works for anyone who is interested. Generally speaking, when comparing projects or programmes, if financial return is the main driver for investing, projects with a higher NPV value are more attractive than projects with a lower NPV.
This section should provide a strong indication about how the project or programme will be structured, governed and managed to ensure that the benefits outlined in the earlier sections are realised.
Using / populating these sections to complete a business case demonstrates a broad understanding of why the organisation should make the investment, what the payback is and how the resulting programme or project should be managed. The effort that is put in should be tailored so that it is commensurate with the level of investment required - a $500k to $2m investment probably requires a circa 10-15 page business case, whilst a $400-600m programme requires several business cases and the detailed business case is likely to run to 150-200 pages, inclusive of core apprentices.