The lost art of the Business Case.

I remember being told that the best food you will ever eat will be what your mother cooks.  It is said that your taste-buds are far more sensitive as a kid and that is why you remember your first strawberry, or perhaps your first cinnamon doughnut so vividly. 

Perhaps the same goes for Business Cases -  or more simplistically cost/benefit analysis.  Maybe I remember the business cases written in my graduate job with an Oil Company in London more vividly than they were justified?  Perhaps large organizations have always been susceptible to spending vast amounts of money with no thought about return.  But was that always the case? 

So fast forward 25 years from my graduate role and I'm presenting to an audience in Sydney about maximising benefits from initiatives.  It's an interactive session so after some word association about makes of cars I put up five headings:  Strategy, Change, Projects, Benefits & Value.   It looks so obvious, almost baiting the audience for the outcome I want for the presentation but No!. Under Projects we have words associated with the process of Project Management, resource management, schedule, critical path, etc.   The doing rather than the reason for doing.  

So it's good for the presentation and I can draw  attention to the fact that this audience (and perhaps the industry?) doesn't associate delivery of benefits and value (benefits-cost) with project delivery.  Has project delivery become more concerned about the delivery of documents rather than the delivery of outcomes?

A few weeks later and I'm training some BAs from a local Bank.  I pose a different question about Cost/Benefit analysis, and ask who knows what a hurdle rate is?  Blank stares!  I swallow my next question about WACC and then state that the hurdle rate is the minimum return from an investment that the market is expecting.  Undertaking initiatives less than the hurdle rate effectively reduces the value of the share price and company overall.  I think I'm speaking another language!

So when did Project Management become less about the outcome and more about the process?  Many corporate Project Frameworks I've seen are flawed.  While the underlying guidance (PRINCE2, etc.) makes it clear that projects should always be viable, in reality the business case is treated as governance; a document to be approved rather than the rationale for doing the initiative in the first place.  A set and forget, and definitely not the guiding document as to whether the project should be continued while it is inflight.

Here is an excerpt from a Project Framework I saw recently:

Initiate phase:  Develop Final Business Case and seek approval

Execute phase: Define detailed requirements.

Are we expected to do a cost/benefit analysis and seek approval on a project from a few high level Stakeholder Requirement Statements?  No need to revisit the business case once the detail around the requirements has been developed further?

So let's make something clear:  the only reason to undertake Projects and Programs is to deliver Value.  In its simplest form this is the excess of benefits minus costs. 

If you can't deliver Value from a Project or Program don't do it - and if new information is provided through the life of the project that means the original perceived value cannot be delivered in excess of the hurdle rate, then look at ways to either change the project to make it more viable, or stop the project when value has been maximised or losses minimised.

Also - ensure you maximise the return from the project portfolio overall by being very selective on which initiatives are started and ensure that they continue to be justified though the life of the initiative. 

Another simple test is to ask yourself the question:  "If this was my money would I spend it in the way being proposed?".  If the answer is No! then don't start the initiative an focus your scarce resources onto higher value adding activities.

You will never get the chance to taste your first strawberry again but following these simple steps will ensure that the results of your initiatives are always valuable.