Creating a PRINCE2 7 Business Case
Let us take a look at what will be covered in this Business Case Practice
- The purpose of the Business Case Practice
- What is a Business Case?
- What is meant by the terms Output, Outcome and Benefits? You will be able to give an example after this section
- Types of Business Case
- The path to creating a Business Case. This includes the steps Develop, Verify, Maintain and Confirm and who is responsible for each step
- The four points in the project where the Business Case can be verified
- The approach to confirming the benefits and how the Business Management Approach is used during and after the project
- The typical contents of the Business Case
- The Business Case roles and responsibilities.
Creating a PRINCE2 7 Business Case in the real world
Before I heard of PRINCE2, I had the opportunity to be a Project Manager on a number of projects and I did not see a real Business Case document in most of them. However, someone somewhere in the organization had requested the project and found some budget to pay for this.
Did they write a Business Case document? Perhaps they did, or perhaps this was just decided at a management meeting where one person presented the reasons why they needed a product, got permission, and agreed on a budget with the rest of the management team.
If you are a Project Manager, ask to see the Business Case for the project. You will learn what questions to ask about the Business Case by reading this Practice. If you work for a supplier that is generally contracted out to clients, then you may not get access to the Business Case, but you should have an idea of the potential value (benefits) of the project for the client.
Suppliers are supposed to have their own Business Case. Again, I have never seen this in paper format, but it usually goes something like this: If the cost to hire a permanent employee is €30 per hour, then the supplier needs to charge €50 per hour. If the client pays €50 per hour (+- 5%), then the supplier’s Business Case is valid.
The Business Case knowledge provided by PRINCE2 7
The purpose of the knowledge in the Business Case Practice is to provide a structure to judge whether the Business Case is desirable, viable, achievable and worth the continued investment that is made during the project.
Let us look at that statement again and break it up.
- Provide a structure: Provide guidelines to follow
- Desirable: Determine if this product is really needed
- Compare the benefits against the dis-benefits
- Viable: Is it possible to do? Are we capable of delivering?
- Achievable: Is it possible to deliver the benefit?
- Worth the continued investment: Will it be worth the investment made during the project? If not, then the project must be stopped.
Business Case Justification:
“Business Justification” is a popular term in a number of methods and is now used by PRINCE2. Business Justification means that there is a valid business reason for doing the project and it remains valid throughout the project. As you may remember, Business Justification is also one of the 7 principles of PRINCE2.
The Executive is responsible for creating the Business Case. It is created at the start of the project and maintained during the project by the Project Manager. The Senior User is responsible for specifying the benefits and these are included in the Business Case.
It contains the following information:
- Reasons for doing the project as you would expect
- Estimate Costs and Timescale
- Benefits and dis-benefits
- Overview of risks
What does a Business Case do for the project?
The Business Case gathers the information to allow the management to judge if a project is desirable, viable and achievable and therefore worthwhile to invest in. The Business Case is normally developed at the start of the project unless it is provided by Corporate or Program Management.
Once created, it is then maintained throughout the life of the project. A good question to ask here is “Why is the Business Case maintained and what does this mean?”
Let me give you an example to explain this. Your company will invest €100,000 in a Sales application and it expects to have a return on its investment in 20 months due to reduction of two administrative persons. Less administrative work will be required, as clients will be able to order and view all account information online instead of via the telephone. This sounds like a good project.
However 3 months into the project, you find out the following: Two of your bigger clients don’t wish to use web-based applications in their purchasing department, so you will need to keep one administration person.
Therefore, the return on your investment will change, as it will take 32 months instead of 20 months to recoup the cost of the project. The Business Case needs to be updated with this information.
Here is another example. You find out during the project that integrating your CRM application with your stock system to provide real time information will not go as planned.
In fact, you need to spend €30,000 to upgrade the stock system software to do this. Again, this will affect your ROI and you must update the Business Case.
As Project Manager, you want to show that the project is still worth doing (if you think it is), but you will recommend to the Project Board to stop the project if not.
As you can see then, the Project Manager is constantly asking “Is the continued investment in this project still worthwhile?”
How to best describe what you get from a project?
PRINCE2 uses the terms “Output, Outcome and Benefits.” These terms help to describe what we get from a project. My objective here is to explain what these terms mean and, also, how they differ from one another.
I don’t like definitions that hang in the air and prefer to use a focused question to help explain something. So I will start with the 3 simple questions to help explain Output, Outcome and Benefits.
Question to uncover Output:
What is the product that will be delivered by the project?
Question to uncover Outcome:
What can the users do better with this product?
Question to uncover Benefits:
List the measurable improvements of using this product?
Output, Outcome and Benefits
Outputs: The Outputs of a project are the products that the users will use. These are also known as specialist products and the project is set up to create these products.
Outcome: You may have heard the expression “outcome is a result of change”. From a PRINCE2 project point of view, we say that an Outcome is the result of the change derived from using the project’s outputs.
Benefits: PRINCE2 says that Benefits are the measurable improvement, resulting from an outcome that is perceived as an advantage by one of the stakeholders. Try to see Benefits as the measurable advantages of using the product. Benefits can be realized during the project, but most benefits are usually realized after the project has closed and sometimes a long time after.
Now let us use an example and say that a company installs a new Sales (CRM) system.
Output Question: What is the product that will be delivered by the project?
- This will be the Sales system.
Outcome Question: What can the users do better (different) with this product?
Some answers could be:
- Sales orders are processed quicker and more accurately
- Client can assess data online and track orders
- Easier for administration staff to track orders
- Easier to get reports from the system
Notice how all the answers are very vague, and there is no mention of percentage (%) faster.
Benefits Question: What are the measurable benefits of using this product?
Some answers could be:
- 40% cost-reduction in handling client data
- 15% increase in sales as users can order online
- Overall revenue increased by 12% annually
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