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Developing a Business Case for Technology Investment

By Sharon Flemings, Principal Consultant at Insightful Solutions

Before investing in any business endeavor, a wise business person develops a business case to determine whether the investment makes business and financial sense. It’s no different when considering an investment in technology. But just how do you build a business case?

A business case is the first step in investment planning for any project, and is intended to outline the need for change by presenting a compelling story to achieve a specific goal (note the word “compelling”). It is also used to garner support for, participation in and commitment to the project, and to present the financial analysis supporting the need for change.

While project approval is generally considered the goal of the business case, it is also a valuable tool for the project team to think through the implications and impacts to the business. The document should be used as a reference throughout the project to ensure the business goals outlined are realized by the end of the project.

While the content of a business case can vary widely, there are four sections which are “mandatory” to make a decision about a specific investment. Additional supporting information is generally useful, but the four sections are:

Purpose
This section provides background information on the problem, opportunity or idea under consideration. It outlines the current situation, describing why the situation exists, and what has previously been done to address the situation, identifies the impacted stakeholders, and addresses the current situation within the context of the strategic business goals of the organization. The stronger tie to the organizational objectives, the more likely the project is to win approval.

Benefits
Benefits to be derived from the project are outlined, and clearly identify what you are going to increase, reduce, eliminate, or improve. Include all benefits you can identify—both tangible and intangible. In addition, think strategically and tactically about benefits which can be realized, as well as globally—outside your own department and geographically.

When developing the list of benefits, quantify as much as possible (most benefits can be quantified). Make sure your data is solid when developing the figures for improvement, gathering data from multiple sources, if possible, to support your claim (someone is likely to call you out on your figures!).

Financial Investment
The financial analysis is certainly a critical component of the story. If your opportunity or idea will not provide adequate financial return, you should reconsider submitting your project for approval.

The financial analysis should include at least the Payback period and the Return on Investment (ROI). It is best to calculate the “Net Present Value” (NPV) first then use the NPV results when calculating the Payback and ROI—your calculations will be more accurate.

Risk
When putting together a business plan, it is critical to understand the risks to both the organization and the project. Business risks include financial impacts, market share impacts, and potential damage to customer perception and/or customer service. Project risks may include loss of stakeholders with key knowledge or project roles, insufficient budget, regulatory changes, and selection of inappropriate technologies.

Identify all potential risks and perform a risk assessment. For each high risk item develop a risk mitigation strategy and document the risk triggers—the specific events or situations which will cause you to execute the mitigation strategy. (Remember risk mitigation strategies without specific triggers will never be executed!)

Take a final look at your business case to ensure you have not under-stated or over-stated the expected results. Include benefits and risks of dependent functions—those upstream and downstream processes which interact with your area.

Once you are successful in having your project approved, measure the results and use that information when creating your next business case. Continuous learning in building business cases will strengthen your ability to identify improvement opportunities in your organization, and in developing the justification for their approval.



Sharon Flemings, Principal Consultant at Insightful Solutions, Inc. is a Certified Management Consultant (CMC®) and Business Analyst with over 20 years experience in a variety of industries. She works with executives to deliver results leading to improved customer service levels, increased revenues and enhanced operational performance. Learn more at www.insightfulsolutionsinc.com. For a free business case template, visit www.insightfulsolutionsinc.com/Resources/Business_Case_Template.dot.