Missed Value = Lost Value
If your project has a potential value of $10 million and you only identify $5 million as the benefits, your organization has missed out on $5 million of benefits. It too is likely to be annoyed if it realizes that, for the same level of investment and effort, it could have realized twice the value.
Currently there is not much chance of this happening because most business case benefits identification processes would never identify the $10 million!
But TOP's Value Equation does. When we generate or review a business case we (re)establish the full value proposition/equation – often doubling, trebling or more the identified value. We achieve this massive increase in benefits value even when we eliminate the previously claimed benefits that would never be realized by the project as it has been defined.
All the time the benefits are not fully identified – in more than 95% of cases – the business misses out on the opportunity to realize this value. Often it takes little-to-no more effort to realize the $10 million than it took to realize the $5 million. The loss is just a total waste.
But actually it can be worse. Because the additional $5 million of benefits are not identified they are not targeted or planned for and may, therefore, be eliminated from the realms of possibility by the design and delivery of the solution. It is not as if they are just sitting there waiting to be realized at some future date (as many managers seem to assume) they can have been unnecessarily - albeit inadvertently - eliminated.
As more and more project-related publications are acknowledging — we do projects to get the benefits and the business case is the place where the benefits are identified. Therefore you’d think that benefits would be center-stage in all business cases. Not so and, at times, apparently not even on the radar. This is because the approach to and thinking behind the business case is too often project and cost-focused and not value-focused.
For example, here’s a description of the business case’s role with our comments in brackets:
“The business case is predominantly a project charter that forms the foundation of the ongoing management of the project. It is not simply a means of obtaining funding. Therefore, a business case is required for all projects, even when the justification is overwhelming." (Largely agree so far.)
"Business cases should be kept to the minimum size required to clearly articulate the reason, purpose and plan for the project." (Err, Value anywhere here?)
"Unnecessarily large business cases often result in them not being read and therefore not clearly understood by key stakeholders.” (Clarity comes from content not size. Short documents can be incomprehensible. Most stakeholders will never be expected to read the business case anyway.)
This description is based on ‘project delivery’ thinking — what do we need to do to get the project going and, in this case, get executive and stakeholder buy in?
But the business case is not a ‘project delivery’ tool, but a ‘value delivery’ tool.
Its role is to define the potential business value and show how it can be successfully delivered. It is a major control document because it spells out the obligations of the Sponsor (to deliver the value proposition) and the Organization (to deliver the resources).
Subsequent changes to the project and its scope can impact the business case and its value equation — and changes to the value equation parameters (e.g. changes to interest rates, sales volumes) can impact the value and viability of the project. The business case is, therefore, a ‘live’ document in that it tracks the answer to the question, “Is this project still worthwhile and viable?”
The generation of the business case should also do another thing — enable the optimization of the project so as to deliver the highest value for the lowest practical cost. This is another reason why the business case is part of the ‘value delivery’ process and, therefore, needs to be developed with a value delivery mindset.
In terms of value delivery the business case is more than just a “foundation of the ongoing management of the project” it is the principal value delivery control document – i.e. “the foundation of the ongoing management of the business value’s delivery.”
Once you get your thinking into the world of ‘value delivery’ the purpose of the business case becomes clear and it changes the statement to become:
“Business cases should be kept to the minimum size required to clearly articulate the reason, the total value available and its lowest practical cost of delivery.”
Notice the difference in language and, consequently, the difference in what is important, what needs to be tracked and how the business case will be used.
A good project delivery business case can be a poor value delivery business case and directly lead to lost value and missed opportunities — which should never be the result of a business case.
The choice is yours — project delivery or value delivery; value and opportunity loss or value optimization?
There is a world of difference between these two approaches to business cases – and a world of difference in the results generated.