What is a Business Case?

The Business Case is a collection of the minimum information required to facilitate a decision to perform some activity that will somehow impact the product, its customers or the business.

It does not have to be a formal document, however when a decision is being made by one or more other people, capturing the information required is often provided in a standardised format.

It should contain only the information necessary for the business to make a decision. The Business Case is the one place where all relevant facts are documented and linked together into a cohesive story that has to convince the decision maker.

A business case tells a story about how a value exchange is intended to be created that will generally result in a net positive investment for the business or the people who are providing the funding. Remember though that a business case will always be a professional guess, based on the best information that can be gathered in the time available.

In an organsiation a businss case is a critical check point for many activities, and, if done well, will help align other parts of the organsiation to achieving the desired goals. If the business case is overlooked or done carelessly it can create confusion or waste, as low value activities are invested in.

The hardest part of developing a business case is to have all of the information available before a single Go/No Go decision is made. This can create lots of delay since the gathering of information about the target customer, market size, competitors, revenue models, solutions options, project costs, operational costs and more can be time consuming.

At Brainmates we align the business case development to different parts of the Brainmates Product Development Process.

Business Case Fundamentals

A business case needs to answer a number of key questions to be useful

  1. How will value be created for the business?
  2. What are the costs to the business of creating that value?
  3. Will the value created for the business be significantly greated than the costs incurred by the business.
  4. Is this the best thing the business can be spending it’s resources on or are there better / safer investments available?

Unless it contributes the to story of the questions above, then no other information should be required in a business case. It is important to avoid adding other information, like detailed customer requirements or solution designs, that do not help make a decision to proceed or to prioritise the activity.

Business Case Mistakes

It is common for a business case to begin with a pre-determined solution in mind. Solutions ususally have a known or easy to estimate cost, so the business case starts with costs but then goes in searh of the benefits. Where the cost of failure is very low this can be a fast way to run an experiment,  but if the cost of failure is high then this approach can be a disaster.

Develop a business case in stages to build confidence

When a new idea arrives on your desk it it may have no supporting infomation so the development of the Business Case may feel like an uphill climb. Where do you start to develop that confidence as quickly as possible?

1) How will value be created for the business?

From a product management perspective the business case process should start by understanding who the target customer is and what benefit is being created for that customer. By creating a benefit for a customer we are creating an opportunity to exchange value with that customer.

In the Brainmates Product Management Framework this starts with a guess in the Ideate stage. The guess will be an assumtion about what the customer benefits might actually be and hwo these may convert to a positive outcome for the business.

“What! A guess! I thought that a business case had to be accurate!” I hear you say. Well I agree with you but all ideas have to start somewhere and to begin with we start with a guess. We will test this guess in next stage.

With our starting guess we need to Explore the idea with the outside world. The fastest way to validate or invalidate an idea that depends on a target customer actually having a problem worth solving is to go and find a customer and see if you they will tell you about the problem.

If you can’t find them or they never mention the problem, then the chances of your ideas sucess have taken a massive blow. The good thing is that you haven’t really spend much time or effort yet so failure is cheap.

On the other hand if you find customers everywhere that fit the description and they are all suffering in the same way then you have uncovered a Market Opportunity.

Finally we need to work out if addressing the Market Opportunity can create any benefit for the business. Here we need to understand how many customers are willing and able to exchange something of value (Money, time, effort, attention, etc) to have their problem solved. At this point we are generally looking for a finacial benefit of a significant enough size to warrant an investmetn of funds to find and deliver a solution.

During these phases there are a couple of decisions points on which the business has to make a decision to continue or to stop the development or perhaps move in another direction.

Questions that the business needs to consider are:

  • Will we explore this Market Potential?
  • Is the Business Opportunity valid?
  • Which solution will we implement? Or, does the solution derive a profit for the business?
  • Will we continue with the implementation?

At every decision point a “Business Case” is completed and archived with the decision that was made. For the next decision point the former Business Case becomes the base and a new document is created. For the different decision points during the product development cycle different documents are required:

  • “Business Case 1”: Market Potential Paper
  • “Business Case 2”: DRAFT Business case
  • “Business Case 3”: Preliminary Business Case
  • “Business Case 4”: Baseline Business Case

In the Day-to-Day Product Management phase the Baseline Business case will be used to test the actuals against the assumptions made (the Baseline Business Case). Based on this analysis a decision should be made to continue with the product as is, enhancement the product further or in the worst case, potentially withdraw the product from the market.

The Document Structure

To be able to make a proper decision the documents must only contain the minimum amount of information. In the Idea phase for instance, the information will be high level. In the Product Strategy phase more research and analysis is done and this results in better information upon which the next decision can be made. The accuracy and depth of the information will differ for the different documents but the overall structure of the Business Case should be the same:

  • Summary
  • Market Potential and the Market
  • Financials
  • Risks and Issues
  • Recommendations

To avoid the Business Case becoming too big it is recommenced to incorporate the outcomes and highlights in the Business Case with a link to the research, analysis and background information. The Business Case will only have the important information but the supporting research, analysis and background information can always be looked into.

To Summarise

The Business Case facilitates business decisions. The Business Case is the one place where all relevant facts are documented and linked together into a cohesive story. This story tells people about the what, why, how, when, where, and how much. Just like the product development a Business Case goes through different phases resulting in different strongly related documents:

  • “Business Case 1”: Market Potential Paper
  • “Business Case 2”: DRAFT Business case
  • “Business Case 3”: Preliminary Business Case
  • “Business Case 4”: Baseline Business Case

All these documents have the same structure but a different level of depth and accuracy.

Do you have any other pointers? Please share them with us.

If you would like to know more about creating Business Cases, Brainmates has two training solutions that you may be interested in.

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