If you thoroughly validate your business cases and projects before approval you can both save millions and generate extra millions.

Thoroughly validating your business cases and projects before approval can save millions and generate millions extra

Submitting business cases for approval can be a game.The costs and benefits are managed to generate sufficient return on investment (ROI) to get the project approved, but not too much so as to not impose too great a delivery onus on the project and governance teams.

Meanwhile, millions are being wasted on projects that should never be approved, could be delivered for a fraction of the approved cost, are missing many of their benefits or are deliberately under (or over) stated in their costs.

To prevent this wastage you need a thorough validation process that takes an objective, independent analytical view of the proposal and the delivery project.

This validation process needs to ask:

  1. Is the value real?
  2. Under or overstated?
  3. Achievable?
  4. Worthwhile?
  5. Available?

Validation transforms the ‘business case approval process’ into a capital optimization process that can save millions or discover millions in extra available value. And you can start applying it immediately.

Business cases tend to be ‘reviewed,’ ‘evaluated,’ or ‘assessed.’

What they need to be is ‘thoroughly validated’ – thoroughly pulled apart, questioned, challenged and critiqued with no stone left unturned.

The mere thought of putting some senior executive’s sponsored investment through a thorough validation process fills many with horror and raises a key political question – is your organization brave enough to avoid committing the ‘capital crime’ of wasting capital or does it only want to go through the motions of investment proposal evaluation?

Don’t be fooled by your current approval processes, this ‘going through the motions’ situation can be disguised under a lot of activity. For example, one major bank had a multi-stage evaluation process that assessed the risks, financials and technical feasibility of each investment proposal before it went to the executive committee for approval. The executive committee would sometimes return proposals for further work but, ultimately, never rejected a proposal.

Yet, when we validated six proposals recently approved by this committee we found:

  • One was fine, a good investment
  • One was obviously ‘off the rails’ and should have been stopped, not approved
  • One was proposing a solution that clearly did not solve the problem stated
  • One was investing in a 15-year old technology strategy without questioning if this strategy was still relevant for the future
  • One we estimated could have achieved its goals for less than one-tenth of its proposed costs
  • One had been classed as ‘mandatory’ and so had escaped scrutiny altogether – so no one had questioned its approach, costs or whether there were opportunities to generate additional benefits from the necessary investment.

This is hardly a ringing endorsement for an evaluation process that involved over 20 people each month. Amazing as it may seem, this evaluation process (which was more sophisticated than most organizations’ evaluation processes) never required anyone to read the whole business case end-to-end to see if it had integrity and made sense. Everyone read their bit of it and the executives only read a summary. So no one assessed the project to see if it was set up to and capable of delivering the value as defined in the business case.

The validation process can be very unpopular with powerful executives. You will not find it in ‘How to win friends and influence people”! This is why many organizations have outsourced the validation process to experts who have no up or downstream involvement in the portfolio and are independent of political pressures (however, they do need the continued full support and backing of the CEO against all of the pressures that will be brought to bear).

Validation needs to assess both the business case and the project/program itself to answer the fundamental question — “Is this the optimum available value for this investment, and will we actually realize it?”

This fundamental question leads to a series of more detailed questions

  • Have all of the available benefits been identified?

    Or are available benefits being withheld for other projects when they could be realized through this project at no additional cost?

  • Have all of the likely costs been identified and reasonably estimated?

    Or have the costs been understated to be upped later once the investment has been approved, or overstated to give the project team a comfortable cost cushion?

  • Is the rationale for the investment clear – and is it relevant?

    There are many projects that can be done, but only those that need to be done and that advance the firm’s strategy should be done. A worthwhile investment can be found to be not relevant to the strategic direction or out-scored in terms of priority by other more worthwhile investments. The decision to ‘not to proceed at this time’ can be applied even to ‘good proposals’.

  • Is all of the investment necessary?

    Can we eliminate high cost/low value elements with little-to-no impact on the overall outcomes and benefits of the investment?

  • Can we achieve essentially the same outcomes and value for a fraction of the cost with a totally different approach?

    We once replaced a $5 million/eight months-to-delivery solution with a $17,800 solution delivered in two weeks – and this is not an exceptional instance.

  • Is the project appropriately set up to deliver the agreed desired business outcomes and enable the associated business benefits and value?

    Have they defined their business outcomes, benefits and value? Is the project focused on delivering this value or merely focused delivering a project (there is big difference here in terms of the actual value liable to be realized)

  • Are the project and governance teams up to the task?

    Only on small projects can a ‘hero’ project manager pull the project over the line singe-handed. On larger projects and programs, the project and governance teams need to be equipped, skilled and experienced to successfully deliver the size, scale and complexity of the project. Replacing the Project Sponsor is not an uncommon outcome of answering this question.

  • Do we, as an organization, have the "capability", the wherewithal to successfully deliver this investment and its value?

    It is easy to start a project but the value comes from its successful delivery – and many projects can be too complex to be successfully delivered by the organization. Any ‘value delivery’ capability deficiency needs to be identified up front so that either the investment is reshaped to be within the organization’s capability to deliver, or the organization needs to quickly uplift its value delivery capability to meet the demands of the project investment.

These are only some of the questions that need to be answered to know whether or not the proposed investment is worthwhile, optimal, relevant, do-able and likely to succeed — all questions that need to be answered before an investment is approved.

Initially some executives will not like the answers when their investment proposal is assessed as inadequate and is, as a result, delayed or even cancelled. But what happens over time is that the quality of thinking and preparatory work that goes into investment proposals improves dramatically so that many of the potential problems that can cause downstream delays and extra costs are eliminated before the proposal is submitted for validation.

This improvement in the quality of investment proposals directly leads to improved project investments and increased value delivery — which is the aim of the game. And these gains can start from the day you start thoroughly validating investment proposals.

As you can see ‘Validation’ is not an approach for the meek as it will ruffle feathers. It needs the total support of the CEO to ensure that ALL proposals are validated including ‘mandatory’ and ‘pet’ projects despite the inevitable protests of powerful executives.

The payoff can be astounding. You can see from the example of the six validated proposals above that five should not have been approved in their proposed state. (After 12 months, one of these projects had failed and four were in difficulty – but the likelihood of this outcome was clearly visible at the business case stage).

Millions can be saved – not only the proposed costs of doomed-to-fail projects, but also the additional costs too often approved later to ‘finish the project’.

In another organization — the validity of a nine-module solution was questioned to find that only four modules were relevant to the organization – a finding that halved the proposed cost and reduced the time to deliver by six months. In addition, by reducing the size and complexity of the project, the validation results increased the likelihood of the successful delivery of the projected value.

Millions can be gained – as missed benefits can be identified to be delivered for the same cost.

It is sometimes necessary to be cruel to be kind. The massive business performance impacts of poor capital investment and value delivery (as spelt out in TOP’s “The Capital Crime” book) demand that processes are put in place to thoroughly validate investment proposals.

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If there is one process that can be introduced to each organization’s value delivery process to have the most immediate positive impact on the total net value delivered it would be the ‘validation process.’

Validation is an essential element of any prioritization process

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Topics: Capital Investment, Project Validation

Further Reading



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Revision History

First published: Simms, J. (July 2012) as "The Need To Validate Your Projects And Business Cases"

Updated: Chapman, A. (March 2020), Revisions and Corrections