Creating a Business Case

Phase 1: Strategic Context

The purpose of the Strategic Context phase is to establish the case for change and clearly define the need for the investment. To do this effectively, the following key questions should be addressed at the outset of every business case:

Where are we now?

Describes the current business environment.

Where do we want to be?

Describes the business objectives.

What is the business need?

Describes the problem or opportunity facing the organization and the associated proposed investment.

What has triggered the need for change?

Describes the drivers for change.

What are we trying to achieve?

Describes the business’ desired outcomes.

Describes how the proposed investment maps to the departmental framework, to its goals, priorities, outcomes, and policies, as well as to those of the government.

Phase 1 Step 1

Figure 2 : Business Case Model - Step 1
Figure 2: Business Case Model - Step 1

Figure 2 - Business Case Model - Step 1 Text Version

1 Business Needs and Desired Outcomes

The first step in developing a business case is to identify the need (problem or opportunity) facing the sponsoring organization and the desired business outcomes. To do this effectively, due consideration should be given to the broader organizational context, which includes the current business environment, strategic business objectives, and drivers for change, along with an analysis of how the desired business outcomes align with the overall organizational objectives, structure, and policy framework. Relating the investment proposal to strategic considerations will help clearly define the business need and, ultimately, demonstrate the value of the investment to the organization.

1.1 Strategic Environment

1.1.1 Organizational Overview

To build a strong rationale for a proposed investment, the current business environment needs to be described. The Organizational Overview of the sponsoring department, agency, or entity should include:

1.1.2 Business Need

This subsection contains a clear articulation of the business need in the form of a well-structured statement that addresses the problem or opportunity. This statement should be no more than one or two sentences. The statement should be structured in a manner that first identifies the core issue, followed by the investment proposal (in general terms) required to address it.

This statement is the investment’s primary descriptor and will be referred to many times throughout the business case.

Best Practices:
Typically, the business need can be best articulated by identifying the gap between “Where we want to be” (as suggested by the business objectives), along with the associated desired business outcomes, and “Where we are now” (existing arrangements for services). This highlights the problems, difficulties, and inadequacies of the status quo.

1.1.3 Drivers for Change

This subsection identifies the drivers that have triggered the investment proposal. Both internal and external drivers of change should be identified and clearly linked to the business need. The following is a select, not exhaustive, list of typical drivers of change:

1.1.4 Business Outcomes

This subsection describes the business outcomes (high level). An output is a deliverable of the investment, such as a product or service, whereas a business outcome is the expected result or benefit that the organization is striving to achieve at the end of an intervention or change. Fundamentally, business outcomes are the reason for undertaking an activity, initiative, or project and are therefore critical to a successful business case. As such, defining outcomes at the outset will contribute significantly to demonstrating the business value to be derived from the investment.

At this point, a simple list of the desired outcomes linked to the business need is sufficient. One way to identify the business outcomes is through adoption of the outcome management (OM) approach to benefits realization.

OM is a strategic approach that ensures initiatives are designed around departmental and governmental outcomes and the investment’s desired outcomes are achieved. The first stage of the OM approach involves the identification of desired outcomes.

For details on OM, please see Outcome Management Guide and Tools on the Secretariat website.

Best Practices:
Business outcomes should be clearly defined, measurable, and developed with stakeholder involvement.

1.2 Strategic Fit

To make a robust case for change, the business case should demonstrate how the proposed investment fits within the broader strategic context and contributes to organizational goals and objectives. This subsection maps the investment proposal to the organizational framework.

First, there should be reference to the legislative mandate that provides the sponsoring organization with the authority to address the current business need. In some cases, consideration of whether the scope of the investment fits within legislative boundaries may be required. If the proposed investment either impacts or has the potential to impact a piece of legislation, full details should be provided, including discussion of the processes necessary to address the effect. The requirements for new legislation (or amendments to existing legislation) are complex and need to be determined very early in the process.

Second, there is a need to ensure that the proposed investment is aligned with established departmental and governmental policies. As with legislation, any potential impact on policy should be identified and dealt with appropriately. The following constructs are integral to the GC’s management principles:

The business case and its proposed investments should be compliant with the principles laid out in these management constructs. For example, each investment should show evidence of alignment between the desired business outcomes of the activity, initiative, or project and those of the organization. Typically, this linkage will lie somewhere within a program area at the appropriate level of the organization’s Program Activity Architecture (PAA) within the departmental MRRS.

Similarly, alignment with the departmental business architecture and existing or planned projects and programs should be demonstrated. Furthermore, how project management and oversight will be integrated with current governance structures should be identified.

Best Practices:
The business case should demonstrate alignment with the strategic objectives within the sponsoring organization’s PAA.

1.3 Detailed Description of the Business Need

A detailed description of the business opportunity is composed of the following five core elements:

1.3.1 Problem/Opportunity Statement

The Business Need subsection above (see 1.1.2) explains how to formulate this statement. Along with the problem/opportunity statement, the following elements (sections 1.3.2 to 1.3.5) contribute to the detailed description of the business need.

1.3.2 Prioritized Requirements (High Level)

Once the problem/opportunity statement has been articulated, the next step is to specify the key requirements to fully address the business need. The requirements are simply an elaboration of the business need and should provide sufficient detail for options to be reasonably compared. The complexity and scope of the business need will dictate the amount of detail to provide; however, it is important that the problem/opportunity statement remain separate.

The requirements should be phrased in clear and concise language. Consider a work breakdown structure where the top level describes the investment—or, in this case, the problem/opportunity statement—and the next level provides further detail broken down by the type of requirements or particular characteristics of the business need.

While there are many ways to describe the requirements, it is important that the message be clear and fact based so that the intended audience can easily understand the concept.

While all the elements of a business case are important, there is no problem to solve or opportunity to be gained until a logical flow of information illustrating the current state of affairs, objectives, needs, and requirements is provided. The following table illustrates the sequential flow of key elements that define the business need for an investment.

Example: Defining the Investment

Business Environment

What the current state or status quo is.

Business Objectives and Outcomes

What we are seeking to achieve.

Business Need

The required changes to the current state.

Key Requirements

What to address in order to overcome the current state or status quo and achieve the investment objective.

The business need and requirements development process is a collaborative effort that can involve a wide variety of internal and external stakeholders. By the end of the requirements process, all parties should agree on the overall need and the actual requirements to address the business objective(s) fully. While the method employed to develop key requirements may vary from one organization to the next, it should nonetheless include the following three fundamentals:

1) Collaboration
Identify the appropriate types of resources and stakeholders to participate in defining the business need and requirements. Stakeholders should have significant involvement in the planning process, as their input is critical to establishing a clear understanding of their needs and those of organizations affected.

2) Elicitation
Support the stakeholder team by asking the right questions at the right time. Consideration may be given to employing a resource with strong engagement skills and experience, but external to the activity, initiative, or project so as to provide an objective viewpoint. Asking the right questions increases the likelihood of properly defining the business requirements.

3) Validation
Regardless of the approach used to define the business requirements, validation and approval of the requirements is the first major milestone in the development of a business case. It is where all parties agree on the overall need and the actual requirements to address the problem/opportunity statement fully. Furthermore, it signifies a unified project team all focussed on the same objective.

Before the business need is fully defined, it is good practice to prioritize, in consultation with the appropriate stakeholders, the requirements as follows:

Example: Key Requirements

Number

Core

Desirable

Optional

Requirement 1

 

 

 

Requirement 2

 

 

 

Requirement 3

 

 

 


Prioritizing the key requirements is an important step in business case development because the degree to which a specific option satisfies the requirements can be a deciding factor when identifying the preferred option.

The business case will be further enhanced if the business requirements are supported by documentary evidence, such as evaluations, feasibility studies, test cases, and interviews.

Regardless of the method employed to determine key requirements, it is important to demonstrate what the method was and describe how the requirements were developed. To withstand scrutiny, key requirements should be clear and concise and the underlying methodology for their identification should be solid.

1.3.3 Assumptions

To be able to identify the key requirements, a certain number of assumptions are necessary. List and describe all of those assumptions and the potential impact they could have on the investment if not addressed. By definition, an assumption is to be taken at face value without proof; therefore, the list of assumptions should be reasonable.

If possible, provide any supporting quantifiable information; however, at this point, do not include any quantitative data such as return on investment or cost estimations. These are key decision-making criteria used later in the business case’s rigorous option analysis and should be able to withstand scrutiny. Though not subject to the same level of scrutiny, assumptions should nevertheless be realistic and accurate, otherwise the overall credibility of the business case can be negatively affected.

The main focus of the business case is the evaluation of a proposed course of action based on a rigorous analysis of viable options to address the identified business need. A key element in the investment decision process is the availability and source of funding. Any assumptions related to funding should be clearly acknowledged, as this could have an influence on the actual investment decision.

All assumptions with the potential to significantly affect the investment (whether positively or negatively) as well as their direct impact (whether positive or negative) should be identified, as shown in the example table below.

It is recommended that each assumption be tested to assess its level of accuracy, reliability, and probability.

If the key requirements were developed based on assumptions that were not validated, the level of accuracy of the business case as a whole may be questioned.

Example: Assumptions Affecting Investment

Number

It is assumed that:

Effects on investment:

Reliability Level: High/Medium/Low

Assumption 1

 

 

 

Assumption 2

 

 

 

Assumption 3

 

 

 

1.3.4 Constraints

List and describe the specific constraints that place limits or conditions on the investment, especially those associated with, but not limited to, any of the following examples:

Because constraints can come from either external or internal factors, having the capacity to identify constraints therefore implies that an analysis of the proposed project environment has been conducted.

External factors can include, but are not limited to, the following:

Internal factors can include, but are not limited to, the following:

Constraints should be classified by category as follows:

Example: Constraints

Number

Category:

Constraints:

Constraint 1

 

 

Constraint 2

 

 

Constraint 3

 

 

1.3.5 Dependencies

Any dependencies identified at this point should be related to the overall business need, the requirements, or the solution and not to any specific option. The description of the dependency should highlight the manner in which a particular initiative or entity (internal or external) associated with the investment relies on a specific enabling action, as shown in the table.

Example: Dependencies

Number

Element:

Is dependent upon [action] from [entity]:

Dependency 1

 

 

Dependency 2

 

 

Dependency 3

 

 


It is important that a clear and consistent connection be made between assumptions, constraints, and dependencies in relation to risks and issues. This information is both useful in the planning stage and during the analysis.

Best Practices:
Caution should be taken not to use an assumption as a deciding factor when determining the preferred option.

1.4 Scope

Following the definition of the business need (problem or opportunity), the boundaries of the investment need to be defined. The scope of a business case further clarifies the business outcome by pinpointing an investment’s characteristics and boundaries.

1.4.1 Boundaries

Boundaries explicitly identify what is to be included within the scope of the investment and what is to be excluded from the investment (see Boundaries table below). Establishing the boundaries of the investment not only narrows the focus to what the investment entails but also serves to communicate and solidify stakeholder expectations.

Example: Boundaries

Number

Included:

Excluded:

Boundary 1

 

 

Boundary 2

 

 

Boundary 3

 

 

Best Practices:
When describing the limitations of the investment, provide a sufficient level of detail. Omitting information could result in a negative impact on either the investment or its stakeholders.

A clear understanding of the investment’s constraints should be obtained when defining the project’s scope. Any issues or risks associated with the project’s timing and funding and uncertainty surrounding the mandate should be recognized at this point in the process.

1.4.2 Stakeholder Analysis

Stakeholders should be actively involved in the business case process. They should be fully engaged when defining the business requirements and the business outcomes. Whether internal or external, stakeholders have interests that may be positively or negatively affected by the implementation of the investment so their involvement is vital.

When describing the stakeholder environment, consider what types of stakeholders will be involved, what their roles will be, and what contributions they will bring to the realization of the investment.

Internal stakeholders are groups of resources from within the sponsoring organization that affect or are affected by the proposed investment.

Contributing stakeholders can be either primary or secondary stakeholders. Primary stakeholders either directly benefit from a project’s efficiency, revenues, or competitive advantage or are those implementing the new project. Secondary stakeholders either have a dependent relationship with the primary stakeholders or are affected by their actions.

Other elements to consider within the stakeholder analysis include the following:

A well-executed stakeholder analysis demonstrates the specific contributions stakeholders will make to the project or the benefit to be received from their involvement. It also highlights specific areas of accountability and clearly communicates the expectations in a transparent manner. There should be no ambiguity regarding roles and responsibilities in the stakeholder analysis. This will also simplify the process of obtaining stakeholder sign-off in the Project Charter.

Milestone Achieved
Business needs and desired outcomes have been identified.


Summary
After completing Phase 1 of the business case, you should be able to answer the following questions:

  • Where are we now?
  • Where do we want to be?
  • What is the business need?
  • What has triggered the need for change?
  • What are we trying to achieve?
  • What is the strategic fit?


Phase 2: Analysis and Recommendation

The Analysis and Recommendation phase is the point in the business case process where the following key questions should be answered:

How will we get there?

Presents the viable options and associated costs and benefits that will undergo detailed analysis and the evaluation criteria that ultimately will be used to determine an overall recommendation.

What is the best option?

This question could be answered by a financial appraisal to ascertain funding, affordability, and cost balancing in relation to benefits and risks.

While all phases in the business case development process are necessary, the Analysis and Recommendation phase is considered the heart of the business case.

This focus of this phase is on the following:

Phase 2 Step 2

Figure 3 : Business Case Model - Step 2
Figure 3: Business Case Model - Step 2

Figure 3 - Business Case Model - Step 2 Text Version

2 Preliminary Options Analysis

Having set the context and established a case for change, the next stage in the development of a business case focuses on the main options available for addressing the business need.

Although describing the preliminary range of options at this point does not require a detailed analysis, a comprehensive list of options—sometimes called a “long list”—should be produced and screened to demonstrate due diligence in the selection process. Once the screening is complete, details regarding the decision to either accept or reject an option for further analysis should be presented. The objective is to narrow the field of alternatives down to a reasonable number of viable options—sometimes called a “short list”—for rigorous analysis. It is considered a best practice to include a minimum of three viable options for analysis, with one being the status quo option.

The preliminary options analysis involves the following steps, which are covered in detail in the next sections of this guide:

2.1 Evaluation Criteria

Best Practices:
Define the evaluation criteria that will be used for screening and analysis of the options and will ultimately determine an overall recommendation.

To compare various options, evaluation criteria need to be identified and they should be strategically and contextually relevant. Evaluation criteria should be defined by the organization, and weighted if required, based on the business need and investment type. The evaluation criteria will invariably differ from investment to investment, both in content and relative importance. It is highly recommended that the evaluation criteria be developed in collaboration with the relevant stakeholders and senior management.

The following three types of evaluation criteria are to be used for options analysis throughout the business case:

1) Screening criteria (deal breakers):

The screening criteria used in this section function as “deal breakers.” A deal breaker is an option that does not adequately address specific criteria; it should be ruled out immediately. For an option to be considered viable, it must meet all of the screening criteria. The degree to which each criterion is met will ultimately prove to be a deciding factor in the selection of one viable option over another (which will be done during the comparative analysis in the Justification and Recommendation section later in the business case).

2) Essential evaluation criteria (minimum requirement):

3) Desirable evaluation criteria (non-essential):

The following table illustrates sample screening criteria to which investments could be subjected:

Example: Screening Criteria

Screening Criteria

Description

Strategic fit and business needs

  • Meets agreed-upon investment objectives, desired business outcomes, related business needs, and service requirements.
  • Is aligned with the organization, provides synergy, and supports other strategies, programs, and projects.

Potential achievability

  • Is likely to be delivered in view of the organization’s ability to assimilate, adapt, and respond to the required level of change.
  • Matches the level of available skills that are required for successful delivery.

Potential affordability

  • Meets the sourcing policy of the organization and likely availability of funding.
  • Matches other funding constraints.

2.2 List of Possible Options

Best Practices:
Identify, describe, and explore every possible option that can address the business need.

When determining the list of options, identify the widest possible range of options that could potentially meet the business needs described in the problem/opportunity statement. The options should have a clear relationship to the organization’s true needs. At this point, a focus on specific products or methods might exclude potential options that could produce the same benefits at a lower cost or an increased set of benefits for the same cost.

Strategy:
Options should be generated by working groups (brainstorming exercises) composed of senior managers (business input), stakeholders and clients (user input), and other specialists as required (for example, technical input).

Opportunities can be addressed in different ways and to different extents. In many cases, there could be options that concentrate on service delivery, on leveraging existing processes or systems across the GC, or on altering current procedures. These options may require little or no new investment or may require extensive change. The preliminary options analysis should evaluate, where possible, every feasible method or process.

Options can come in many forms and it is important to explore all possible categories of options. Identify and list as many reasonable options as possible within each category. While the result may give a long list of options, it demonstrates due diligence in exploring possible options. The following table illustrates how feasible options may be determined by category:

Example: Possible Options

Category of Choice

Description

Status Quo

Shows how an organization would perform if it did not pursue the investment proposal or otherwise change its method of operation (also known as the base case).

Implementation

Explores various means of implementation, such as:

  • Delay—implementing the investment at a future date rather than as soon as possible;
  • Full or Big Bang—implementing 100 per cent of the investment; and
  • Phased—implementing the investment over time based on success.

Service Delivery (Outsource)

Explores the option of the business need being addressed, in part or in whole, by an external service provider or through partnership.

Re-engineering

Explores the option of leveraging existing business processes or applications within the organization or those of other GC departments to address the business need. Details of how that option was discovered (i.e. environmental scan) should be included.

Build

Explores the option of building the asset, e.g. a laboratory, a building, or a system.

Buy

Explores the option of purchasing the asset or service outright and managing the product or service internally.

Lease/Rent

Explores the option of leasing or renting the solution or service.

It is important to note that a potential option may involve a combination of categories. For example, consider the outright purchase of a solution where business delivery remains with the GC but the technology to support it is outsourced.

2.2.1 The Status Quo

It is important to include the status quo option (also known as the base case) as it will act as the baseline for the upcoming analysis. The status quo option will show how an organization would perform if it did not pursue the investment proposal or otherwise change its method of operation. In some cases, it might be the only acceptable alternative.

The status quo option should predict the long-term costs and benefits of maintaining the current method of operation, taking into account the known external pressures for change, such as changes to legislation, service, budgets, staffing, or business direction.

2.2.2 Describing the Option

The description of each preliminary or potential option is to be kept at a high or cursory level. The characteristics used to describe each option should be consistent across options because the preliminary evaluation and screening will be conducted based on those characteristics. It is best to limit the number of descriptive characteristics, providing the audience with only enough information to understand what each preliminary option entails.

The following table illustrates how to describe the options:

Example: Option Description

Option Number and Name

Example: Option 2—Implement regionally

Category of Choice

The type of option (status quo, implementation, service delivery,
re-engineering, build, buy, or lease/rent)

Description

Brief summary of the option

2.3 Screening of Options

Best Practices:
Assess how well each option meets the screening criteria. Determine whether a particular option should be discounted immediately or considered for further analysis as a viable option.

There may be a large range of options that could be considered as potential solutions. This long list of options should be filtered down to a smaller list of viable options that are feasible to implement. A screening process will help to ensure that the analysis proceeds with only the most promising options identified. By its conclusion, the screening process should include the reasons for selecting or rejecting particular options.

Options should be ruled out if they do not meet the screening criteria (deal breakers) that have been identified by the organization, as described in 2.1 Evaluation Criteria.

Options may be ruled out on the basis that their success depends too heavily on unproven methodologies. Care should be taken not to confuse options that will not work with options that merely appear less desirable. Options that are simply undesirable will be discounted when the costs and benefits begin to be measured.

Consider presenting the screening summary in the table format shown below. The table provides a simple and straightforward approach for identifying the options, assessing a broad range of relevant options (the long list), and determining whether each option is “in” (meets the screening criteria) or “out” (does not meet the screening criteria). Be prepared to provide evidence to support the summary indicators.

Example: Screening Summary Table

Option Number and Name

Option 1:
Status Quo

Option 2:
Implement regionally

Option 3:
Centralize

Option 4:
Outsource

Screening criterion:
Strategic fit and business needs

No

Yes

Yes

Yes

Screening criterion:
Potential achievability

No

Yes

Yes

Yes

Screening criterion:
Potential affordability

Yes

Yes

Yes

No

Summary

Retained as baseline

Viable

Viable

Discounted

2.4 Rationale for Discounted and Viable Options

Best Practices:
Develop the short list of viable options based on the assessment performed in the screening of options and provide the reasons for retaining or discarding each option.

Once the screening is complete and the options have either been ruled out or considered for further analysis, each decision is to be clearly explained—and justified—to demonstrate due diligence in the selection of viable options.

It is important to note that if too many options are considered viable, the effort needed to conduct a rigorous analysis may simply outweigh the available capacity to complete the business case. In this situation, introducing additional screening criteria may provide a means of filtering the list of viable options down to a reasonable number.

If no options are deemed viable, consideration should be given to the effect of maintaining the status quo or revisiting the business need and desired outcomes.

In the case where only one viable option is deemed viable aside from the status quo option, ensure that the supporting evidence discounting all other options is sound and can withstand scrutiny.

As shown in the Option Findings table below, the options considered viable should be clearly identified and few in number. If too many options are deemed viable, consideration should be given to strengthening the evaluation criteria. The status quo option (base case) must be retained as a viable option.

Example: Option Findings

Options

Screening Summary

Rationale

Option 1:
Status Quo

Retained as baseline

(Reasons for inclusion or exclusion of the option for the next stage)

Option 2:
Implement regionally

Viable

 

Option 3:
Centralize

Viable

 

Option 4:
Outsource

Discounted

 

At this point, the viable options should be evident and most likely will not differ too widely. The common elements among the viable options should be recognizable and will serve to set the stage for the preferred option (or types of options being considered), the realm of anticipated costs, and the likelihood and degree to which the evaluation criteria and investment objectives will be addressed.

Milestone Achieved
Preliminary options analysis has been completed.

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