This post emphasizes why the delivery of sustainable change initiatives requires the ability to adopt sustainable business cases, how to approach business cases organizationally, and the tools and techniques for writing them.  This is part of a series to help raise awareness around sustainable change delivery.

When you can measure what you are speaking about, and express it in numbers, you know something about it;

But when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind;

It may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the state of science.

Lord Kelvin (1824– 1907), British physicist and member of the House of Lords

Over the past few decades, I have come to the realization that sustainable business cases are one of the key instruments for empowering sound, risk tolerable, sustainable and beneficial change.  Regrettably, they are also a key success factor frequently ignored or poorly invested in.  If investing in sustainable business case models is not a priority, then you and your organization are probably limited to the two options highlighted in the title graphic above… Do you feel rich (are you going to spend your way to success) or do you feel lucky (hope for the best)?

This dilemma ties into the frequently quoted, but empirically unproven, statistic that roughly 70% of change initiatives fail… but how do we know if they succeeded or failed?  What are the criteria against which projects are evaluated?  The simplest and most comparable vehicle for their evaluation is the sound and useable business case.

In assessing success or failure one can ask: Did the initiative have value (worth), based on the costs, benefits and risks associated with it over its lifecycle, and was it strategically relevant?

Hindsight is all very well, but how then is one to know, in advance, whether a change initiative is likely to succeed or fail?

In attempting to answer this question, I like to ask executives the following questions, specifically around their business cases:

• Were they confident about signing a particular business case soon after being presented with it?
  • If not, it was likely that they and their direct reports had not been appropriately engaged in the process of developing the business case.
  • If not, the business case probably did not reduce the uncertainty and provide the support necessary for making an informed decision
• What was the primary intent of the business case?
  • If it was just to get money for starting the change initiative, it was probably doomed to failure.

The PRINCE2 definition of the purpose of a business case is useful: “to establish mechanisms to judge whether the project is (and remains) desirable, viable and achievable as a means to support decision making in its (continued) investment” (The Office of Government Commerce, p. 21, 2009).

Exhibit 1.0, below, offers a perspective on the organizational business case competencies required for successful and sustainable change delivery.  Although it may look intimidating and overly excessive, each business case requirement needs to be tailored to each situation.

Business Cases Help Inform Decisions

If organizations are to invest resources, such as time, money and people, while constraints continue to escalate, some due diligence up front becomes a fiscal responsibility.  The GPM Global Blog will be discussing each of the competencies identified in Exhibit 2.0 over time.

The following was modified from Douglas Hubbard’s book “How to Measure Anything: Finding the Value of Intangibles in Business” (page 8) and discusses decision-making and how relevant information (measurement) supports it:

• Decision makers usually have imperfect information (i.e., uncertainty) about the best choices when making decisions.
• Decisions should be modeled quantitatively because quantitative models have a more favourable track record than unaided expert judgment.
• Business Case Models inform uncertain decisions.
• For any decision or set of decisions, there is a large combination of things to measure and different ways to measure them— but perfect certainty is rarely a realistic option.
• In other words, management needs a method for analyzing its options so as to reduce uncertainty when making decisions.

I would argue that business cases employ various techniques, as indicated above in Exhibit 1.0, to reduce uncertainty about investment decisions, and provide a framework for prioritization and comparison.

Business Case Development

With the rationale for business cases presented, the next set of questions involves how can organizations manage business cases and how can they be developed?

Exhibit 2.0 comes from the UK Treasuries Better Business Case (BBC) 5 Case Model.  This demonstrates an organizational life-cycle for business case development.

Exhibit 3.0, below, indicates the life-cycle for business cases throughout a change delivery project.  It is important to emphasis that as opposed to justifying the investment, a business case is employed to evaluate, monitor, update, and justify the investment’s cost / benefits / risks and the justification to continue the initiative throughout the asset’s life-cycle.  The later approach will encourage a reasonable opportunity for success.

Exhibit 4.0 offers another approach, developed by Solution Matrix, which presents their 6D development framework for business case development focusing on the specific project business case.

All of these frameworks are excellent models.  The UK Treasury’s BBC offers useful organizational strategies related to business case development for corporate investments, as opposed to a focus on business cases for individual projects.  It represents an excellent methodology or process for managing the overall life-cycle and development.  The PRINCE2 outline is useful for positioning the life-cycle of business cases within projects.  In contrast, the Solution Matrix 6D Framework provides an excellent structure for designing and presenting an actual business case to executives.

Business Case Content

UK Treasury’s Better Business Case (BBC) 5 Case Model

Exhibit 5.0 highlights the UK Treasury’s Better Business Case (BBC) 5 Case Model.  There are four interpretations of this:

• UK Treasury’s Better Business Case (BBC) 5 Case Model
• Welsh Government BBC
• The New Zealand Treasury BBC
• APMG International Better Business Cases™ Certification

I particularly like the emphasis on commercial viability and optimizing value for money, which many organizations do not pay sufficient attention to.

Business Case Essentials

Exhibit 6.0 provides the outline recommended by the Business Case Essentials – A Guide to Structure and Content, Fourth Edition by Dr. Marty J. Schmidt.  I liked the approach and design provided by this guide as it provides most of the information that executives require.  Dr. Schmidt also makes available some excellent business case modelling excel spreadsheets.

Business Case Modelling

There are three excellent resources for identifying how to develop business case economic models.  An important consideration though is that these models are intended to provide a quantifiable analysis to help executives make decisions.  They are used as part of the methodology to develop the scenarios and design the expected assumptions and research to justify the investment.  The actual definition of the business case is written in very clear business language for the executives to understand and evaluate the actual business justification for the potential investment.

1. Applied Information Economics

Douglas Hubbard‘s work on risk management (The Failure of Risk Management) and decision support measurement (How to Measure Anything) are invaluable.  He has designed an approach called Applied Information Economics (AIE) that takes into account the following six disciplines:

Although specifically intended for decision support modelling and measurement, the AIE provides an exceptional methodology and toolkit that are employable in business case development as well.  The AIE method is elaborated in Exhibit 7.0.

2. Engineering Economics

I took Dr. Paul Giammalvo’s AACE Certification course in Jakarta in 2013 and learned about the importance of Engineering Economics for costing and scheduling, and from that extrapolated its importance in business case modelling.  An excellent text discussing this is Engineering Economy, 16th Edition, by William G. Sullivan, Elin M. Wicks and C. Patrick Koelling.  This text includes the following foundational tools and techniques:

• Cost-Estimation Techniques;
• The Time Value of Money;
• Evaluating a Single Project (MARR, Present Worth, Future Worth, IRR, Payback etc.);
• Comparison and Selection among Alternatives;
• Replacement Analysis;
• Benefit-Cost Ratio;
• Breakeven and Sensitivity Analysis;
• Probabilistic Risk Analysis (Monte Carlo, Decision Trees, Real Options); and,
• Multi-attribute Decision Making.

3. The Green Book

The UK Treasury Green Book provides excellent guidance for major programmes and initiatives, and works well with the BBC 5 Case Model (HM Treasury, 2015):

The Green Book provides guidance for central government produced by the Treasury on how publicly funded bodies should prepare and analyse proposed policies, programmes and projects to obtain the best public value and manage risks.

It also covers the evaluation of policies programmes and projects after they have been implemented to find out how well they have achieved their original objectives and how well they have delivered within their original budgets and planned timescales.

The Green Book guidance on assessing public value and risks applies to proposals and decisions about both spending public money and to changes in regulation.

The contents page of the Green Book is presented below showing the range of information covered:

Conclusion

The Business Case is a wonderful catalyst for bringing together a number of competencies, processes, structures, tools and techniques.  More than anything, the Business Case provides a basic model for the predicting, providing decision support, monitoring and evaluation of success.  If it takes into account the long-term sustainable benefits, risks and costs it becomes exponentially even more powerful and relevant.

This series is all about raising awareness around sustainable change delivery and the integral elements, disciplines and competencies associated with it.  In the graphic below, each of these elements is identified in terms of their integration in empowering for sustainability.  These elements form the basis of the GPM® Global’s P5™ Standard for Sustainability in Project Management, the GPM® Global Training Programs, and the GPM® Global Portfolio, Program, & Project Sustainability Model (PSM3™) for organizational assessment.

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